English translation

Summary of Financial Statements for the Fiscal Year Ended December 31, 2018
[Japanese GAAP] (Non-consolidated)
February 7, 2019
Company Name

SymBio Pharmaceuticals Limited

Listing: Tokyo Stock Exchange

Securities Code4582

URL: https://www.symbiopharma.com/

Representative

Representative Director,
President and Chief Executive Officer

Fuminori Yoshida

Contact Person

Corporate Officer, Head of Corporate
Planning & Admin. Division and Chief
Financial Officer

Kenji Murata

TEL +81-3-5472-1125

Ordinary Annual General
Meeting of Shareholders

March 28, 2019

Date of Dividend
Payment (plan)—

Scheduled Date to File
Securities Report

March 28, 2019

Supplementary materials for the financial statements: Yes

No

Holding of earnings performance review:

No (For securities analysts and institutional investors)

Yes(Amounts of less than one million yen are rounded down.)
1. Business Results for FY 2018 (January 1, 2018 to December 31, 2018)(1) Operating Results
Net Sales(Percentages indicate year-on-year changes.)

Operating Profit (Loss)

Ordinary Profit (Loss)

Profit (Loss)

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

3,835
3,444

11.4
45.4

(2,656)(3,947)——(2,748)(3,976)——(2,752)(3,977)——FY 2018
FY 2017

Earnings (Loss) per
Share
FY 2018
FY 2017

Ratio of Ordinary
Diluted Earnings per Ratio of Profit (Loss)
Profit (Loss) to Total
Share
to Equity (ROE)
Assets (ROA)

Ratio of Operating
Profit (Loss) to Net
Sales

Yen

Yen

%

%

%

(41.38)(79.78)——(77.8)(102.6)(52.4)(71.5)(69.2)(114.6)(Reference) Equity in earnings:

FY 2018
FY 2017— million yen— million yen(2) Financial Position
Total Assets

Equity Ratio

Net Assets per Share

Millions of yen

Millions of yen

%

Yen

6,239
4,252

4,901
3,239

70.1
63.6

53.06
50.00

FY 2018 (as of December 31, 2018)
FY 2017 (as of December 31, 2017)(Reference) Shareholders’ equity:

Net Assets

FY 2018 (as of December 31, 2018)
FY 2017 (as of December 31, 2017)

4,371 million yen
2,702 million yen(3) Cash Flows
Cash Flows fromOperating Activities
FY 2018
FY 2017

Cash Flows from
Investing Activities

Cash Flows from
Financing Activities

Cash and Cash
Equivalents at End of
PeriodMillions of yen

Millions of yen

Millions of yen

Millions of yen(2,324)(3,816)

(26)
(77)

4,272
1,164

4,821
2,947

―1―

2. Dividends
Annual Dividend per ShareFY 2017
FY 2018
FY 2019 (Forecast)

1st QuarterYen

2nd Quarter
Yen

—
—
—

0.00
0.00
0.00

Total Dividends

3rd Quarter Fiscal Year End
Yen
Yen

—
—
—

Payout Ratio

Full Year
Yen Millions of yen

0.00
0.00
0.00

0.00
0.00
0.00

%

—
—

—
—
—

Ratio of
Dividends to
Net Assets%——

3. Earnings Forecasts for FY 2019 (January 1, 2019 to December 31, 2019)
Operating Profit(Loss)Net Sales
Millions of yen

Full Year

4,465% Millions of yen

16.4(3,587)(Percentages indicate year-on-year changes.)
Earnings (Loss) per
Profit (Loss)
Share

Ordinary Profit(Loss)% Millions of yen% Millions of yen

%

Yen

—

—

—

(43.88)(3,612)(3,616)

Notes:(1) Changes in accounting policies, changes in accounting estimates, and restatements after error corrections(a) Changes in accounting policies due to revision of accounting standards:

Yes・ No(b) Changes in accounting policies due to other reasons:Yes・ No(c) Changes in accounting estimates:

Yes・ No(d) Restatements after error corrections:

Yes ・ No

(2) Number of issued shares (common stock)(i) Total number of issued shares at the end of
the year (including treasury shares)

FY 2018

82,398,924 shares

FY 201754,049,224 shares(ii) Total number of treasury shares at the endof the year

FY 201875 shares

FY 201775 shares(iii) Average number of shares during the year

FY 2018

66,511,113 shares

FY 201749,857,917 shares(Note) Refer to “Per share information” on Page 55 for the number of shares that forms the basis for calculating earnings (loss)
per share.
* Summaries of financial statements are not subject to audit through certified public accountants or auditing corporations.
* Explanation regarding the appropriate use of earnings forecasts and other matters(Notes on forward-looking statements)
All forecasts presented in this document, including earnings forecasts, are based on the information currently available tomanagement and assumptions judged to be reasonable. Actual results may differ substantially from these forecasts due to various
factors. Regarding the assumptions on which the Company’s earnings forecasts are based and their usage, please refer to“Overview of Business Results, etc. (4) Future outlook,” on Page 8 of the attachment.

―2―

Index of the attachment
1. Overview of Business Results, etc. ........................................................................................................................................................ 4(1) Overview of business results for the fiscal year under review ......................................................................................................... 4(2) Overview of financial position for the fiscal year under review....................................................................................................... 7(3) Overview of cash flows for the fiscal year under review ................................................................................................................. 7(4) Future outlook .................................................................................................................................................................................. 8(5) Basic policies concerning profit distribution and dividends ............................................................................................................. 8(6) Business risks ................................................................................................................................................................................... 9
2. Status of Corporate Group ................................................................................................................................................................... 16
3. Management Policies ........................................................................................................................................................................... 16(1) Basic policy of company management ........................................................................................................................................... 16(2) Key performance index .................................................................................................................................................................. 16(3) Pipeline .......................................................................................................................................................................................... 16(4) Medium- to long-term strategy....................................................................................................................................................... 18(5) Issues to be addressed by the Company ......................................................................................................................................... 19(6) Other important matters concerning the Company’s management ................................................................................................. 21
4. Basic Views on Selection of Accounting Standards ............................................................................................................................. 21
5. Financial Statements and Primary Notes ............................................................................................................................................. 22(1) Balance sheet.................................................................................................................................................................................. 22(2) Statement of income ....................................................................................................................................................................... 24(3) Statement of changes in equity ....................................................................................................................................................... 25(4) Statement of cash flows.................................................................................................................................................................. 27(5) Notes to going concern assumptions .............................................................................................................................................. 28(6) Significant accounting policies ...................................................................................................................................................... 28(7) Notes to financial statements.......................................................................................................................................................... 29(Balance sheet)................................................................................................................................................................................. 29(Statement of income) ...................................................................................................................................................................... 29(Statement of changes in equity) ...................................................................................................................................................... 31(Statement of cash flows)................................................................................................................................................................. 33(Financial instruments) .................................................................................................................................................................... 34(Derivative transactions) .................................................................................................................................................................. 38(Retirement benefits) ....................................................................................................................................................................... 39(Stock options) ................................................................................................................................................................................. 40(Deferred tax accounting) ................................................................................................................................................................ 53(Asset retirement obligations) .......................................................................................................................................................... 53(Segment information) ..................................................................................................................................................................... 54(Affiliated party information) .......................................................................................................................................................... 55(Per share information) .................................................................................................................................................................... 55(Significant subsequent events) ....................................................................................................................................................... 56
6. Other .................................................................................................................................................................................................... 57(1) Change in officers .......................................................................................................................................................................... 57(2) Other .............................................................................................................................................................................................. 57―3―

1. Overview of Business Results, etc.
(1) Overview of business results for the fiscal year under review(Business Results for the fiscal year under review)
Progress in the Company’s business for the fiscal year under review is as follows.
(i) Domestic[Start of preparations for the establishment of the Company’s own salesforce]
On October 16, 2018, the Company announced the start of preparations to establish its own salesforce for the sale of
TREAKISYM® in Japan. The Company has in place a business partnership agreement with Eisai Co., Ltd. (“Eisai”) signed inAugust 2008 and expiring in December 2020. The Company considered a number of options for developing the business after
December 2020, including business partnerships with other companies. However, the Company has now concluded thattransitioning to its own salesforce will best serve the interest of patients and maximize business value. Ahead of the transition tosuch a salesforce in early 2021, the Company will consider the personnel required for an ideal organizational structure andformulate a detailed investment plan for system configuration and preparation of a logistics and distribution infrastructure. In thisway, we aim to engage in activities to provide high-quality information and realize a system for providing products, as well as
moving toward our topmost management objective of achieving profitability in the fiscal year ending December 31, 2021 andachieving sustainable growth thereafter.
[Anticancer agents: SyB L-0501 (lyophilized powder formulation), SyB L-1701 (ready-to-dilute (“RTD”) formulation), SyB
L-1702 (rapid infusion (“RI”) formulation), and SyB C-0501 (oral formulation) (generic name: bendamustine hydrochloride,
trade name: TREAKISYM®)]
The Company markets TREAKISYM® in Japan through its business partner, Eisai. The Company obtained manufacturing andmarketing approval for first-line treatment of low-grade NHL and MCL in December 2016, for recurrent/refractory low-grade
non-Hodgkin’s lymphoma (Note 1) (low-grade NHL) and mantle cell lymphoma (MCL) in October 2010, and for chronic
lymphocytic leukemia (CLL) in August 2016. Following this indication expansion, TREAKISYM® is steadily increasing its
market share in the area of first-line treatment by replacing R-CHOP, the conventional standard treatment, at medical clinics andhospitals. Further, the combination treatment (BR therapy) of TREAKISYM® and rituximab was newly included in the
Guidelines for Tumors of Hematopoietic and Lymphoid Tissues 2018 edited and published by the Japanese Society of
Hematology in July 2018, becoming recommended as a choice for standard treatment. With this development, TREAKISYM®
has been effectively establishing its foothold as the standard treatment for malignant lymphoma. In-market sales at NHI pricebasis for the fiscal year ended December 31, 2018 posted an increase of 11.6% year on year.
In addition to the three already-approved indications, the Company has started a Phase III clinical trial for TREAKISYM®
targeting recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL) and is currently working on patient enrollment towardobtaining approval. The trial is in response to serious need at clinics and hospitals as there is currently no reliable standard
treatment. Patient groups have petitioned to the regulatory authorities for the approval of BR therapy. With a view to providing
new therapeutic alternatives and maximizing product value, the Company began the Phase III clinical trial in August 2017 and isdiligently working to accumulate cases after completing enrollment of the first patient in January 2018.
In addition to these initiatives toward the approval of additional indications, the Company moved forward to further promote
the product life cycle management of TREAKISYM®. In September 2017, it entered into an exclusive license agreement with
Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.) (“Eagle”), under which Eagle licensed to the Company rights underEagle’s intellectual property to develop, market, and sell Eagle’s TREAKISYM® liquid formulation (RTD and RI liquid
formulations) (Note 2) in Japan. This will further enable the Company to extend the product life until 2031 through patent
protection and maximize the value of TREAKISYM®, while bringing significant benefits to patients and healthcare providers byeasing their burdens. The Company has already consulted with the Pharmaceutical and Medical Devices Agency regarding
approval for the RTD formulation and is currently preparing an application. Clinical trials primarily aimed at confirming thesafety of the RI formulation began in November 2018.
Further, the Company acquired approval for the partial revision to the manufacturing and marketing authorization in July 2018.
As a result, TREAKISYM® can now be used in combination with not only rituximab but also obinutuzumab (Note 3) (launched inAugust 2018) for the treatment of CD20 positive follicular lymphoma (FL), a common histologic type of low-grade NHL,
allowing the Company to provide patients with a new treatment therapy. In September 2018, the Company applied for the―4―approval of partial revision to the manufacturing and marketing authorization of TREAKISYM® regarding its use as a pretreatment for regenerative medicine products.
In addition to the intravenous formulation currently under development and on sale, the Company is exploring the potential of
TREAKISYM® through the development of an oral formulation as the treatment for solid tumors and autoimmune diseases, withan aim to solidify its business through a platform of TREAKISYM® products. Amid such initiatives, the Company commenced a
Phase I clinical trial for progressive solid tumors in January 2018, with the aims of examining the recommended dosage andadministration schedule as well as tolerability and safety of the oral formulation of TREAKISYM®, and identifying potential
target tumor types. After completing enrollment of the first patient in May 2018, the Company is currently working toaccumulate cases. Meanwhile, with a view to evaluating the effect of oral administration of TREAKISYM® on the immune
system, the Company concluded a joint research agreement with Keio University in May 2018 to conduct a pre-clinical trial toverify the therapeutic effect of this product in the treatment of systemic lupus erythematosus (SLE), a form of autoimmune
disease with extremely high medical need. The pre-clinical trial is currently underway.
(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 ofJapanese 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 Japan and 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.

[Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oral formulation), 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) which do not respond to the current standard treatment with hypomethylating agents,
which relapse after treatment under the current standard of care, or which are intolerant to hypomethylating agents. The
Company is responsible for clinical development in Japan and in December 2015 began the trial. Forty patients were enrolled asof December 31, 2018, and patient enrollment is proceeding. Based on the results of the interim analysis completed in January
2018, the independent Data Monitoring Committee (DMC) recommended that Onconova continues the trial with patient
enrollment increased in accordance with statistical criteria in an adaptive design previously agreed upon with the U.S. Food andDrug Administration (FDA). Based on the results of the trial, the Company is planning to apply for approval in Japan at the sametime as in the U.S. and Europe.
As for the oral formulation of rigosertib, Onconova has completed Phase I/II clinical trials in the U.S. for the target indicationof first-line HR-MDS (in combination with azacitidine (Note 4)) and has been conducting a Phase II clinical trial for the target
indication of transfusion-dependent lower-risk MDS. The Company started a domestic Phase I clinical trial in June 2017 toconfirm the tolerability and safety of the oral formulation of rigosertib for Japanese patients. The first patient was enrolled in
October 2017 and patient enrollment is proceeding favorably. After completion of this trial, the Company plans to promptly
conduct a Phase I clinical trial for combination therapy with azacitidine and to take part in a global Phase III clinical trial for
combination therapy with azacitidine for the first-line treatment of patients with higher-risk MDS, which Onconova currently
plans to conduct. The Company also plans and prepares to apply for approval of the oral formulation of rigosertib in Japan intiming alignment with the U.S. and Europe. With respect to the development for the indication of transfusion-dependent lowerrisk MDS, the Company will continue to consider participating from Japan in view of the status of development by Onconova.
(Note 4)

About azacitidine (Vidaza®, marketed by Nippon Shinyaku Co., Ltd.): This hypomethylating agent (for injection) wasapproved in 2011 upon successful confirmation of extended 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 preleukemic state, and decrease in tumor suppressor gene due toexcessive methylation of DNA is thought to be related to the disease. Hypomethylating agents such as azacitidine are―5―thought to suppress progress to leukemia by restoring tumor suppressor gene with a deterrent effect against
methylation of DNA.
[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 USbased 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 interest of patients, determined to temporarily suspend new patient enrollment
for SyB P-1501 from April 21, 2017 due to its concern as to the continuity of The Medicines Company’s business regarding the
product.
The Company later initiated arbitration against The Medicines Company on October 11, 2017 under the rules of theInternational Chamber of Commerce, seeking damages of 82 million U.S. dollars (approximately 9.0 billion yen) arising fromThe Medicines Company’s repudiation of the license agreement. The Company claims that The Medicines Company failed toprovide the Company with adequate assurance of performance of its contractual obligations under the license agreement in lightof its decision to discontinue commercialization activities regarding the product and withdraw from markets in the U.S. andEurope, and that such failure by The Medicines Company is a material breach of the license agreement. Furthermore, theCompany terminated the license agreement on November 30, 2017, based on the fact that breach of the license agreement by The
Medicines Company was not remedied within the stipulated time, and terminated the development of SyB P-1501 on February 9,
2018.
Arbitration proceedings against The Medicines Company are still ongoing.
[New drug candidates]
The Company continues to actively seek new drug candidates and in-licensing opportunities globally, aiming to expand bothprofitability and growth potential over the medium- to long-term, and discussions with multiple potential licensors are ongoing.
In May 2016, the Company established a wholly-owned subsidiary, SymBio Pharma USA, Inc. (head office: Menlo Park,
California, U.S., “SymBio Pharma USA”), as the Company’s planned strategic base for overseas business development.
Acquiring rights to new drug candidates through SymBio Pharma USA as the base of global business will be part of theCompany’s continued transformation into a global specialty pharmaceutical company with capability to develop andcommercialize new drugs in the U.S., Japan, Europe, and other major global markets.
(ii) Markets outside Japan
SyB L-0501 is also marketed in South Korea, Taiwan, and Singapore, and product sales of SyB L-0501 in these countries
progressed favorably at a level exceeding the Company’s forecasts.
(iii) Business results
As a result of the above, net sales totaled 3,835,530 thousand yen for the fiscal year ended December 31, 2018, primarilyreflecting product sales of TREAKISYM®. Product sales showed a year-on-year increase of 10.6%. Accordingly, overall net
sales rose 11.4% year on year.
Selling, general and administrative expenses totaled 3,828,941 thousand yen (a year-on-year decrease of 23.1%), including
research and development (“R&D”) expenses of 1,832,746 thousand yen (a year-on-year decrease of 39.3%) primarily due tosuch factors as expenses related to intravenous and oral formulations of TREAKISYM®, and expenses associated with clinical
trials on the intravenous and oral formulations of rigosertib, and other selling, general and administrative expenses of 1,996,195
thousand yen (a year-on-year increase of 1.8%).
As a result, an operating loss of 2,656,072 thousand yen was recognized for the fiscal year ended December 31, 2018 (anoperating loss of 3,947,061 thousand yen for the previous fiscal year). In addition, the Company recorded non-operating expenses
totaling 94,854 thousand yen, primarily comprising foreign exchange losses of 54,103 thousand yen, share issuance cost of
29,650 thousand yen, and commission fee of 11,100 thousand yen, and non-operating income totaling 2,196 thousand yen
primarily due to dividend income of insurance of 1,501 thousand yen and interest income of 525 thousand yen. This resulted in
an ordinary loss of 2,748,730 thousand yen (an ordinary loss of 3,976,784 thousand yen for the previous fiscal year) and a loss of
2,752,533 thousand yen (a loss of 3,977,862 thousand yen for the previous fiscal year).
Segment information has been omitted since the Company operates within a single segment, which includes the research anddevelopment, manufacturing, and marketing of pharmaceutical drugs and other related activities.

―6―(2) Overview of financial position for the fiscal year under review(Analysis of assets, liabilities, net assets, and cash flow)
Total assets as of December 31, 2018 stood at 6,239,423 thousand yen, an increase of 1,987,138 thousand yen from the previous
fiscal year end. This was primarily due to increases of 1,874,296 thousand yen in cash and deposits, 171,310 thousand yen inmerchandise and finished goods, 26,414 thousand yen in consumption taxes receivable, 17,135 thousand yen in software in
progress, and 12,386 thousand yen in advances paid, offsetting decreases of 78,154 thousand yen in accounts receivable–trade,
15,844 thousand yen in forward exchange contracts, 14,637 thousand yen in software, 14,420 thousand yen in lease and guarantee
deposits, and 12,983 thousand yen in long-term prepaid expenses. Total liabilities stood at 1,337,623 thousand yen, an increase of
324,741 thousand yen, owing mainly to rises of 172,770 thousand yen in accounts payable–other, 121,718 thousand yen inaccounts payable–trade, 16,436 thousand yen in income taxes payable, and 16,427 thousand yen in forward exchange contracts.
Under net assets, the decrease of 2,752,533 thousand yen in retained earnings (accumulated deficits) due to the recording of aloss was offset mainly by an increase of 2,210,903 thousand yen in capital stock, and a rise of 2,210,903 thousand yen in legal
capital surplus. As a result, total net assets grew by 1,662,397 thousand yen from the previous fiscal year end, to 4,901,799
thousand yen. The equity ratio consequently rose 6.5 percentage points from the previous fiscal year end, to 70.1%.
Cash and cash equivalents (“cash”) as of December 31, 2018 stood at 4,821,355 thousand yen, an increase of 1,874,296
thousand yen from the previous fiscal year end. This was mainly due to a cash increase resulting from the issuance of new shares,
despite recording a loss before income taxes.
(Cash flows from operating activities)
Net cash used in operating activities amounted to 2,324,547 thousand yen, compared with 3,816,793 thousand yen in cash usedby these activities in the previous fiscal year. Factors having a positive effect on cash included an increase of 155,185 thousand
yen in accounts payable–other, share-based compensation expenses of 122,944 thousand yen, an increase of 121,718 thousand yen
in accounts payable–trade, a decrease of 78,154 thousand yen in notes and accounts receivable–trade, foreign exchange losses of
47,032 thousand yen, depreciation of 34,699 thousand yen, share issuance cost of 29,650 thousand yen, and 11,100 thousand yen
in commission fee. Principal factors having a negative effect on cash were a loss before income taxes of 2,748,733 thousand yen,
an increase in inventories of 171,310 thousand yen, an increase in consumption taxes receivable of 26,414 thousand yen, and anincrease in advances paid of 12,386 thousand yen.
(Cash flows from investing activities)
Net cash used in investing activities amounted to 26,180 thousand yen, compared with 77,507 thousand yen used in these
activities in the previous fiscal year. The principal factor having a positive impact on cash was proceeds from collection of leaseand guarantee deposits of 13,747 thousand yen, while the purchase of property, plant and equipment used 31,932 thousand yen.
(Cash flows from financing activities)
Net cash provided by financing activities was 4,272,056 thousand yen, compared with 1,164,230 thousand yen provided bythese activities in the previous fiscal year. Proceeds from issuance of shares resulting from exercise of share acquisition rights
provided 4,278,712 thousand yen, and proceeds from issuance of share acquisition rights provided 23,100 thousand yen, while
payments for issuance of common shares used 29,755 thousand yen.

(3) Overview of cash flows for the fiscal year under review
10th Term
11th Term
12th Term
13th Term
14th Term
Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended
December 2014 December 2015 December 2016 December 2017 December 2018
Equity ratio (%)

90.7

82.9

73.5

63.6

70.1

Equity ratio on a fair market value
basis (%)

155.1

150.8

165.1

278.4

250.9

Debt redemption period (years)

―

―

―

―

―

Interest coverage ratio

―

―

―

―

―

Equity ratio: Equity (total shareholders’ equity)/total assets
Equity ratio on a fair market value basis: Total market value of common stock/total assets
Debt redemption period: Interest-bearing debt/cash flows from operating activities
Interest coverage ratio: Cash flows from operating activities/interest payments―7―

(Notes) 1. Total market value is calculated based on the number of shares issued, excluding treasury shares.
2. Debt redemption period and interest coverage ratio are not available due to negative cash flows from operating
activities.

(4) Future outlook
The Company expects net sales of 4,465 million yen in the fiscal year ending December 31, 2019, a 16.4% increase from thefiscal year ended December 31, 2018, mainly as a result of growth in sales of TREAKISYM® in Japan. Meanwhile, in R&D, theCompany will continue to pursue the development of TREAKISYM® for recurrent/refractory diffuse large B-cell lymphoma (r/r
DLBCL), the RTD and RI liquid formulations of TREAKISYM®, and the oral formulation of TREAKISYM®, as well as
intravenous and oral formulations of rigosertib.
With the aim of further enhancing corporate value over the long term, the Company will continue to consider in-licensing new
drug candidates and will continue to advance the development of its current pipeline as a whole. To this end, the Company
anticipates R&D expenses of 2,508 million yen (1,832 million yen in the fiscal year ended December 31, 2018) and selling,
general and administrative expenses of 5,053 million yen (3,828 million yen in the fiscal year ended December 31, 2018),
including R&D expenses.
Key development milestones for the Company’s current pipeline are as follows.
[TREAKISYM®]
Regarding recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL), the Company will continue to accumulate patient
enrollments in the Phase III clinical trial that is already underway.
The Company is making steady progress on both the RTD and RI liquid formulations of TREAKISYM®, which was in-licensed
from Eagle Pharmaceuticals, Inc. In the case of the former, the Company is currently preparing approval applications, and clinical
trials aimed primarily at confirming formulation safety are underway in the case of the latter.
Regarding the oral formulation of TREAKISYM®, the Company will continue to proceed diligently with a Phase I clinical trialthat is currently in progress.
[Intravenous and oral formulation of rigosertib]
As for the intravenous formulation of rigosertib, the Company is currently accumulating patient enrollments in Japan as part of
the global Phase III trial, and will continue to actively pursue development.
As for the oral formulation of rigosertib, after safety has been confirmed through the domestic Phase I clinical trial as amonotherapy, for which patient enrollment is currently underway, the Company will make preparations to ensure that it can
promptly participate in a global Phase III clinical trial for combination therapy with azacitidine, which is currently being plannedby Onconova Therapeutics, Inc.
As a result of these planned activities, the Company anticipates net sales of 4,465 million yen, an operating loss of 3,587 million
yen, an ordinary loss of 3,612 million yen, and a loss of 3,616 million for the fiscal year ending December 31, 2019.

(5) Basic policies concerning profit distribution and dividends
The Company has not distributed dividends to date.
Although the Company has recorded product sales of its first product, TREAKISYM®, other pipeline products are still at theinvestment stage. Therefore, it is our policy to prioritize allocation of funds to strengthen our financial position and continue R&D
activities rather than to distribute dividends. However, we recognize that the return of profit to shareholders is an importantmanagement issue and will continue to consider the distribution of profits based on future business performance and financial
conditions.
The articles of incorporation state that the Company can pay an interim dividend, based on a corporate resolution by the Boardof Directors, on June 30 every year as the record date. The Company can also distribute surplus by designating a record date inaddition to year-end and interim dividends. The decision-making body for the interim dividend is the Board of Directors, and forthe year-end dividend the shareholders’ meeting.

―8―(6) Business risks
Described below are major issues that may lead to potential risks in the Company’s business activities. Issues that are notnecessarily considered significant by the Company are also disclosed in view of our commitment to actively provide information toinvestors and shareholders as these issues may carry weight in making investment decisions or in understanding our businessactivities. The Company is fully aware of the potential risks, and will make utmost efforts to prevent such risks from materializing,but should they occur, we intend to take appropriate action. However, we realize that investment decisions regarding our stock
should be made carefully by evaluating the following matters, as well as other matters mentioned in other sections of thisdocument. We would add that the following descriptions do not purport to cover all possible risks associated with investment inour stock. The future perspectives mentioned below reflect our understanding of our business circumstances as of the date of
publication of this document.
(i) Risks associated with pharmaceutical development in general
The Company’s main business is to in-license new drug candidate compounds created by pharmaceutical and bio venturecompanies, and to develop these into pharmaceutical products. The R&D field of pharmaceuticals is replete with strong
competition, including pharmaceutical giants. In addition, specialty pharmaceutical companies, including the Company, emulate
each other in quality and speed within the sector. The process from development to manufacturing and marketing involves many
regulatory hurdles, necessitating a vast amount of capital input over a long period of time in business operations. Their future
prospects involve uncertainty and these risk factors are associated with the Company’s present and future business activities.
a) Uncertainty involved in pharmaceutical development
The pharmaceutical development process leading up to the launch of a drug generally requires a large amount of expenditure
over a prolonged period. The probability of success is low. At each stage of development, it is not uncommon to makedecisions on discontinuing or delaying product development. In pharmaceutical development, the different stages ofdevelopment have to be conducted in phases, and at each phase a decision is made regarding whether or not development
should continue. It is not unusual for a decision to be made to stop development in mid-process. The probability is low for
development to progress successfully through to product launch. Even after a product is successfully developed and launched,reevaluation is conducted periodically or irregularly to confirm efficacy and safety of the product in light of academic
standards in medical and pharmaceutical areas at the time of reevaluation. In cases where efficacy is not confirmed or serious
side effects could lead to further damage to the health of patients, there remains a risk that approval for the product may be
revoked due to concerns over efficacy and side effects (see (f): “risk associated with side effects”). To reduce and disperse
these risks, the Company aims to have several drug candidates in its development pipeline and to prioritize insofar as possible
the in-licensing of drug candidates with confirmed POC (Note 5) in human subjects. For small specialty pharmaceutical businesssuch as the Company, the impact of removing a single drug candidate from the development pipeline is highly material andcould have a significant impact on the Company’s financial position, business performance, and cash flow.
(Note 5)

Proof of concept (POC) means confirming the efficacy and safety of a new drug candidate in clinical trials andverifying its practical potential.

b) Uncertainty of income
In order to generate income from the drugs in development, the Company must succeed at all stages of new drug candidate
development, obtain the requisite approvals from regulatory authorities, and successfully manufacture and market the producteither on our own or in partnership with a third-party. It is not assured that the Company will succeed in these activities, oreven if we do succeed, we may not be able to ensure the margin of profitability needed to continue the business. A Phase III
clinical trial is underway for the lyophilized powder formulation of TREAKISYM®, a product currently in the development
pipeline that is designed to treat recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL). The Company is presently
preparing approval applications for the TREAKISYM® RTD liquid formulation and has begun clinical trials primarily aimed at
confirming the safety of the TREAKISYM® RI liquid formulation. With respect to rigosertib, we are currently conducting a
global Phase III clinical trial in Japan with the intravenous formulation for the target indication of recurrent/refractory higherrisk MDS and a domestic Phase I clinical trial with the oral formulation as a monotherapy with consideration of targeting theindication of first-line treatment of higher-risk MDS. We are promoting the development of these compounds, aiming tosuccessfully launch the products onto the market to obtain income. In some cases, we may consider entering into an alliancewith other pharmaceutical companies in development and marketing so as to expedite the inflow of income. Notwithstanding―9―

our efforts, the drug candidates in our pipeline will require a considerable amount of time under development before they reachthe marketplace. There is no guarantee that they will make it onto the market as viable products, or that an alliance agreement
can be signed with other pharmaceutical companies. We are of the opinion that the selection of indications and the methods ofalliance and marketing identified thus far promise sufficient future profitability after considering the market size and marketing
performance of approved drugs. However, should we prove to be wrong in our assessment, or should there be any change inthe conditions on which the assessment is based and we fail to promptly adapt to such changes, there could be a significant
impact on our financial position, business performance, and cash flow.
c) Uncertainty in legislation and regulations requiring compliance, and the health insurance system
The pharmaceutical industry, the Company’s core business, is subject to various regulatory restrictions in individual
countries, which are imposed by laws and administrative guidance related to pharmaceutical drugs as well as other relevant
legislation regarding all aspects of business operations (research, development, manufacturing, and marketing). We formulate
our business plans in accordance with the Pharmaceuticals and Medical Devices Act (PMD Act) of Japan and other current
legislative regulations as well as the health insurance system, together with drug pricing guidelines that derive from thislegislation. Notwithstanding, there is a possibility that these regulations, regulatory systems, and pricing will change before theproducts that we are developing reach the marketplace. If any major change does occur, there may be a significant impact on
our financial position, business performance, and cash flow.
d) Risk concerning development and marketing overseas
We conduct our pharmaceutical business in Asian and other countries globally, not exclusively in Japan, where we anticipate
the expansion of healthcare needs in accordance with economic growth in these strategic business areas. In overseas markets,as in Japan, pharmaceutical development and marketing generally require very large expenditure and are associated withvarious business risks. To reduce investment expenditure and business risk, we out-license the development and marketingrights of some of our drug candidates to other overseas companies. Before out-licensing the rights we possess, we select alicensee after careful due diligence; we conduct monitoring when necessary after out-licensing the rights. The development andsales of out-licensed products are subject to business conditions of the licensee or any changes in the regulatory andcompetitive environment in respective countries, and may fall below initial expectations, resulting in lower than anticipatedmilestone revenue or royalty income. In such cases, there may be an impact on our financial position, business performance,and cash flow.
e) Competition in the pharmaceutical industry
The pharmaceutical industry is an intensely competitive sector. A large number of both Japanese and foreign pharmaceuticalcompanies and research institutions, including giant multinational pharmaceuticals, compete in the arena. Technologicalinnovation is progressing rapidly. Many competitors have a comparative advantage over the Company in terms of technology,
marketing, and financial position. Thus, these companies may more efficiently produce and sell competitor products, which are
more effective than the Company’s developed products. This means that what transpires in the competitive landscape withregards to development, manufacturing, and marketing operations may have a significant impact on our financial position,business performance, and cash flow.
f) Risk associated with side effects
Unexpected side effects may occur from the use of pharmaceutical products, from their clinical trial stage to post-marketingstage. If serious and unexpected side effects occur, compensation claims may be brought against the Company, or dependingon the situation, there is the risk of a delay in clinical trial timelines or even discontinuation of product development. In thecase where such side effects could lead to further damage to the health of patients, there is the risk of cancellation of approvalor discontinuation of sales. Regarding compensation claims, the Company has in place the liability insurance necessary tominimize the financial damage should such claims arise. However, this does not exclude the possibility that the compensation
awarded exceeds the amount insured. If this should occur, it could have a significant impact on the Company’s financial
position, business performance, and cash flow.
g) Product liability
The development and manufacturing of pharmaceutical products involves product liability risk. If in the future any productsthat we have developed cause damage to health or any adverse events are discovered during clinical trials, manufacturing,―10―

sales, or marketing of the drug, the Company will be subject to product liability. This may have a significant impact on the
Company’s financial position, business performance, and cash flow. If a product liability suit is filed against the Company, theCompany’s corporate image could be damaged, leading to a loss of confidence in the Company and the drugs it develops,
impacting future business.
h. Risks related to manufacturing and supply stability
After bringing products under development to market, the Company must ensure a stable supply of those products.
However, technological or legal issues at a business partner to whom the Company has outsourced production could interrupt
or substantially delay the supply of products, as could a fire or other disaster that causes a suspension of operations. Suchsituations could have a significant impact on the Company’s financial position, business performance, and cash flow.
(ii) Risk in business operationsa) Risk concerning the Company’s business model
The Company does not own research and manufacturing facilities. Instead, the Company has adopted a business model toraise income and profit from such activities, mainly targeting orphan drugs (Note 6) in the areas of oncology and hematology, inlicensing drug candidates from pharmaceutical and bio venture companies with POC established through human subjects, anddeveloping and marketing pharmaceutical products in Japan, Asia (China, Hong Kong, South Korea, Taiwan, Singapore, etc.),
and other countries globally. In developing and marketing the pipeline products, the Company plans to engage in alliances withother pharmaceutical companies. However, there is no guarantee that the Company can continuously in-license drug candidate
compounds that satisfy in-house criteria and secure these partner companies. In addition, as the Company mainly targets
orphan drugs for in-licensing (Note 7), it may not be able to generate expected sales turnover. Furthermore, in the event thatdevelopment at a licensor is delayed or fails, there may be impact on the corresponding development in Japan. These factors
could impact the Company’s financial position, business performance, and cash flow. Needless to say, intense competition
within the pharmaceutical sector and changes in the Company’s financial position may force the Company to revise its
business model. Should this occur, there may be a significant impact on the Company’s business.
(Note 6)

The rare-disease field is one in which the number of patients requiring drugs is small. Drugs for this field are termed“orphan drugs.” The Japanese Ministry of Health, Labour and Welfare has established an orphan drug designation
system for drugs meeting the criteria of (1) a drug to treat a serious disease that affects less than 50,000 people inJapan, and (2) for which there is a great need for medical treatment. Once designation is obtained, the drug will enjoy
various advantages including shortening of the time from regulatory submission for review of the drug to approval andthe extension of the re-examination period for up to 10 years.

(Note 7)“In-licensed drug candidates” are compounds or products for which obtaining the rights of development andcommercialization from other companies is under consideration.

b) Dependency on specific partners and suppliers
As a specialty pharmaceutical company without production facilities, the Company needs to depend on the supply of
product from other companies when conducting clinical trials and marketing approved drugs. Given this fact, the financial
position and production conditions of the product supplier may have a significant impact on the Company’s financial position,business performance, and cash flow. With regard to the development and marketing of pipeline products, while the Company
has plans to conduct sales on its own in the future, its current business plan focuses on forming alliances with pharmaceuticalcompanies. However, if the partner company’s management situation deteriorates substantially or if management policies
change, which are matters beyond the Company’s control, initial business plans may not be realized. Also, if any breach ofcontract occurs that necessitates the termination of the license agreement as stipulated, the alliance may also end prior toreaching the expiration date. In such cases, there may be a significant impact on the Company’s financial position, businessperformance, and cash flow. Typically, in license agreements with partner companies, revenues to be gained before the drug
reaches the marketplace will include an upfront payment upon signing the contract, funding for co-development, and milestone
payments. Of these, milestone payments are extremely unstable and unpredictable income as they are based on the attainmentof predefined results. If development progress is delayed, there may be a significant impact on the Company’s financial
position, business performance, and cash flow.
c) Risk concerning intellectual property rights
During drug development activities, the Company makes use of various intellectual property rights which generally have―11―

been licensed to the Company by other companies such as pharmaceutical and bio venture companies. In relation to in-licensed
drug candidates, there is a risk that patent applications by licensors relating to an out-licensed drug are not approved or are
declared invalid. Moreover, it is difficult to completely avoid the possible creation of an intellectual property right by a thirdparty that supersedes the intellectual property right of the Company’s in-licensed drug candidate. These situations could lead toa significant impact on the Company’s financial position, business performance, and cash flow. As of the submission date ofthis document, no lawsuit has been filed by a third-party against the Company concerning intellectual property rights,
including patents in connection with product development. When in-licensing a drug candidate, the Company will seek advice
from lawyers and conducts a thorough due diligence investigation through patent firms in order to prevent such intellectual
property risks. Nevertheless, it is difficult to realize full protection from the occurrence of intellectual property right disputes
involving the infringement of third-party rights, and these may have a significant impact on the Company’s financial position,business performance, and cash flow. The candidate compounds that the Company in-licenses are not necessarily protected bypatents. On the other hand, even if a drug candidate is not protected by a patent, the assignment of the compound for reexamination review by the regulatory authorities would restrict the entry of generic drugs during the review period, giving rise
to a limited period of marketing exclusivity.
d) Information protection
To reduce the risk of significant confidential information relating to pipeline development and other business activities
leaking outside the Company, the Company engages in rigorous information protection. The Company requires directors andemployees, Scientific Advisory Board (SAB) members, outsourcing partners, and other business partners to sign confidentiality
agreements. Even with the agreement in place, directors and employees, SAB members, outsourcing partners, and otherbusiness partners may not adhere to confidentiality, and should this occur, significant confidential information may be divulged
elsewhere, which may impact the Company’s business, financial position, business performance, and cash flow.
e) Risk concerning important contracts
If any contracts that may have a significant impact on conducting the Company’s business operations are terminated due toexpiration, breach of contract, or for any other reason, there may be a significant impact on the Company’s financial condition,business performance, and cash flow.
(iii) Risk associated with organizationa) Risk of being a young company
SymBio is a young company founded in March 2005. Since inception, the Company has engaged in in-licensing activities ofdrug candidates for development. The founding President and CEO built up the pharmaceutical development business fromscratch, and the Company recorded income from product sales in August 2010, for the first time in its history. There is thepossibility that business issues that SymBio has never encountered arise in the future. At the moment, however, it is difficult toaccurately predict any changes in the external environmental factors that may affect the Company’s business results. Therefore,
the Company considers business results for the past several years to be an inadequate reference to pass judgment on whether or
not the Company can continue to grow.
b) Risk of being a small corporation
The Company uses contract research organizations (CROs (Note 8)) in conducting R&D, thereby forming a development
framework requiring relatively small staff numbers. With progress in the development of the pipeline already in place and with
newly in-licensed drug candidates coming on line, the Company may need growth in R&D human resources. However, forwhatever reason should an alliance with a CRO terminate, or should the Company fail to secure the planned number of staff, or
should existing staff decide to leave, the Company’s business operations may be hampered, leading to a possible impact on the
Company’s financial position, business performance, and cash flow.
(Note 8)A contract research organization (CRO) is an organization that provides research and other services to pharmaceuticalcompanies, supporting pharmaceutical companies in their efforts to conduct development activities without delay. The
details of the commissioned activities may include monitoring to ensure that clinical studies are carried out in fullaccordance with study protocols and clinical data management.

c) Dependency on a specific person
Fuminori Yoshida, the Representative Director, founding President and CEO, has played a key role since the Company’s―12―foundation in the implementation and execution of all operations in the Company’s business management. Thus, in the eventthat he cannot continue to perform his corporate responsibilities for some unforeseen reason, this could have a significant
impact on the Company’s business operations.
d) Scientific Advisory Board (SAB)The Scientific Advisory Board (“SAB”) is an advisory panel to the Company’s president on the potential in-licensing of new
drug candidates. The Company invites members of the panel from clinicians and scientists engaged in basic research who arehighly regarded in the healthcare industry due to their successful track records and wealth of experience. The SAB meets twoor three times a year to engage in active discussion and debate, with each member giving his/her own perspective on an inlicensed drug candidate in the aim of building a pipeline portfolio with a balanced risk–return trade-off, while taking into
consideration the degree of healthcare needs and profitability of in-licensed drug candidates, which are gathered from all over
the world. The Company will continue in its efforts to acquire members of excellence for the SAB. However, if difficulty
should arise in procuring members for reasons such as the cancellation of contracts with existing members, retirement, or
refusal to renew, or should a brain drain occur, there may be an impact on the Company’s ability to evaluate and in-licensequality drug candidates.
(iv) Business resultsa) Business performance in previous years
The Company's key business indicators are given below:
Term

10th Term

11th Term

12th Term

13th Term

14th Term

Fiscal Year Ended

December 2014

December 2015

December 2016

December 2017

December 2018

1,955,027

1,933,241

2,368,112

3,444,206

3,835,530(1,303,279)(2,551,662)(2,127,049)(3,947,061)(2,656,072)(1,110,316)(2,630,386)(2,316,806)(3,976,784)(2,748,730)

Business revenue(thousands of yen)
Operating profit (loss)(thousands of yen)
Ordinary profit (loss)(thousands of yen)

To date, with the exception of the 4th Term, the Company’s total R&D expenses and other general administrative expenses
exceeded the Company’s income, resulting in the posting of an operating loss, an ordinary loss, and a bottom-line loss. For thisreason, the Company does not consider the financial statements and indicators of previous years to provide adequate reference
data in making period comparisons of business performance or in forecasting future business performance.
b) Expected increase in R&D expenditures
The Company’s R&D expenses for the past five fiscal years are provided below:
Term

10th Term

11th Term

12th Term

13th Term

14th Term

Fiscal Year Ended

December 2014

December 2015

December 2016

December 2017

December 2018774,1032,034,714

1,667,098

3,017,812

1,832,746

R&D expenses(thousands of yen)

The Company intends to continue R&D activities, resulting in an increase of cumulative loss for the foreseeable future. With
future increases in product sales revenue from additional indications of TREAKISYM®, the recording of product sales revenue
upon early approval for the intravenous and oral formulations of rigosertib, and the income from alliances with pharmaceuticalcompanies, the Company intends to improve business performance as soon as possible; however, there is no guarantee thatsuch assumptions will materialize and swift performance improvement will be realized.
c) Negative retained earnings (accumulated deficits) brought forward
SymBio is a specialty pharmaceutical company. Until products under development at the clinical stage reach themarketplace so that the Company can continuously earn stable income through product sales revenue and royalty income, theCompany will continue to carry significant upfront outlay of R&D expenditure. Due to this situation, with the exception of the
4th Term, the Company has posted losses since its foundation. At the end of the 14th Term, the fiscal year ended December 31,
2018, the Company recorded a negative balance of 21,543,238 thousand yen as accumulated deficits brought forward. SymBio―13―

aims to become profitable at the earliest possible date by advancing its pipeline development in a rapid, precise, and efficientmanner. However, the possibility still exists that profits may not be generated in the planned timeframe. Should the Company’sbusiness fail to develop and fail to generate profits as planned, the timing of negative retained earnings brought forward
becoming positive may considerably be delayed.
d) Fundraising
As a specialty pharmaceutical company, the Company requires a large amount of R&D funding. If SymBio’s business plan
does not take shape as planned and it suffers a shortfall in funding, the Company will endeavor to procure funds by changing
strategic alliances, securing new alliance contracts, or issuing new shares. However, if the Company fails to generate funds
when they are required, there may be serious doubt over the continuation of its business operations.
e) Tax losses carried forward
The Company currently has tax losses carried forward. For this reason, the Company is not subject to corporate income tax,
local inhabitant tax, or enterprise tax at the standard rates and expects this to continue for several years into the future.
However, if accumulated deficits are written off earlier than expected and can no longer be used as an offset to taxable income
due to such reasons as the revision to current tax treatment of losses carried forward, the Company would become liable for thepayments of corporate income tax, local inhabitant tax, and enterprise tax at standard rates, which may have an impact on abottom-line profit (or loss) and cash flow currently planned.
(v) Other risksa) Profit distribution to shareholders
Since the foundation of the Company, dividends have not been distributed. SymBio is currently at the business stage ofmaking upfront investment for the development of pharmaceutical drugs and continues to prioritize the use of funds forstrengthening its financial position and for continued R&D activities. Thus, the Company has at present no plans for making
dividend payouts. However, the Company recognizes that the return of profit to shareholders is an important management issue
and will consider profit distribution based on future business performance and financial condition.
b) Procurement of funds
The Company may face increases in its capital requirements due to rises in necessary expenses accompanying businessexpansion through in-licensing of new drug candidates or unpredictable changes in external environment. Fluctuations inestimated earnings may also cause capital requirements to greatly exceed predictions in the Company forecast for the fiscal
year ending December 31, 2019 or in the medium- to long-term strategy. In either of these cases, the Company may obtain
additional financing through means such as the issue of new shares. By doing so, the number of issued shares will increase,potentially diluting the per share value of the Company’s stock.
c) Dilution of the Company’s shares by the exercise of potential shares
The Company adopted a stock option plan in order to motivate and encourage higher business performance of directors andemployees, and to attract human resources of excellence. In accordance with the Commercial Code of 1890 Article 280-19,
280-20, and 280-21, and the Companies Act Article 236, 238, 239, and 240, share acquisition rights are granted to directors
and employees.
Additionally, the Company made a resolution at the Board of Directors meeting held on April 6, 2016 to issue the 3rd
unsecured convertible bonds with share acquisition rights (total issue price: 3 billion yen) and the 39th warrant (total issue
price: 9,776 thousand yen; total issue price of shares when issued through the exercise of share acquisition rights: 943,592
thousand yen) by way of third-party allotment. The Company also made a resolution at the Board of Directors meeting held on
August 9, 2017 to issue the 42nd warrant (total issue price: 32,560 thousand yen; total issue price of shares when issued
through the exercise of share acquisition rights: 1,892,000 thousand yen) by way of third-party allotment. Furthermore, on
April 9, 2018, the Board of Directors resolved to issue the 45th through 47th warrants (total issue price: 23,100 thousand yen;
total issue price of shares when issued through the exercise of share acquisition rights: 10,440,000 thousand yen) by way ofthird-party allotment. Among these warrants, as of December 31, 2018 the following remained unexercised: 15,000,000 sharesof the number of shares issued upon the exercise of the 46th warrant and 15,000,000 shares of the number of shares issued
upon the exercise of the 47th warrant.
As of December 31, 2018, the number of potential dilutive shares from the abovementioned warrants (“number of potential―14―

shares”) totaled 33,758,300 shares and comprised 41.0% of the total number of shares issued. There is the possibility that per
share value of the Company’s stock will be diluted if these potential shares are exercised in the future. To attract talent, theCompany may continue to offer similar incentives. This means that if these share acquisition rights are exercised in the future,
per share value of the Company’s stock may be diluted.
d) Stock holding by venture capitals
In general, venture capitals and investment partnerships own shares for the purpose of realizing capital gains by sellingshares after IPO. If venture capitals and investment partnerships that own SymBio shares sell all or a portion of such shares, it
could have an impact on the market price of the Company’s shares.
e) Risk of loss on foreign exchange
The Company, which does not have a production facility, receives its supply of products from other companies and assumes
that it will make one-off payments when in-licensing drug candidates to expand its pipeline. Suitable financing for thesepayments is obtained in advance through the arrangement of deposits denominated in foreign currency or foreign exchange
forward contracts. Where such assets denominated in foreign currency are stated at market value in financial statements atevery year end, there is a risk of loss on valuation due to foreign currency fluctuations in the future and this may have an
impact on the Company’s financial position, business performance, and cash flow.
f) Risk associated with natural disasters
Any disasters (earthquake, typhoon, fire, etc.) and plague that occur in the Company’s geographic business domain could
lead to the occurrence of human and material damage, or suspension and delay in business. In such cases, fall in social
credibility and compensation issues may have an impact on the Company’s financial position, business performance, and cash
flow.

―15―

2. Status of Corporate Group
None to be reported.

3. Management Policies(1) Basic policy of company management
SymBio Pharmaceuticals Limited was established in March 2005 by Fuminori Yoshida, who previously served concurrently as
Corporate VP of Amgen Inc. (Note 9) (United States) and President of Amgen K.K., a wholly owned subsidiary of Amgen Inc., (nowpart of Takeda Pharmaceutical Company Limited) for 12 years since its establishment.
The Company aims to achieve social and management responsibilities by responding to unmet medical needs (Note 10) based on
the guiding principle of mutual harmony, creating an intricate symbiotic relationship between patients, physicians, scientists,
regulators, and investors.
The Company regards underserved therapeutic areas with extremely significant medical needs as a business opportunity andremains focused on the areas of oncology and hematology, where high entry barriers exist due to the high degree of specialization
required. In this sense, SymBio is the first specialty pharmaceutical company (Note 11) in Japan. Rather than exploring opportunities
to in-license and develop new blockbuster drugs (drugs with sales exceeding 100 billion yen), the Company channels its resources
into the development of drugs in underserved markets where medical needs are high despite limited patient numbers. Holding
multiple drug approvals and new drug candidates in these key therapeutic areas, the Company aims to build a solid pipeline
portfolio, achieve high profitability with high-value products and services, and operate sustainable businesses.
(Note 9)Applied Molecular Genetics, or Amgen Inc., the world’s largest company in the biopharmaceutical field, was foundedin Thousand Oaks, California, in 1980, and started business in Japan as Amgen K.K. on May 1, 1993. After Takeda
Pharmaceutical Company Limited (“Takeda”) acquired 100% of Amgen K.K.’s stock in February 2008, its operations
were merged into Takeda.
(Note 10) “Unmet medical needs” means requirements for medical treatment that have not yet been fulfilled. It refers to asituation in which no effective drugs or treatments are currently available, despite strong demand by patients and/or
physicians.
(Note 11) “Specialty pharmaceutical company” refers to a company that develops new drugs and receives a consistently highinternational reputation for its R&D ability in a particular field of expertise. This is based on the definition in the
Ministry of Health, Labour and Welfare’s “New vision for the pharmaceutical industry” (2007).

(2) Key performance index
The Company believes that for a pharmaceutical company, building its own salesforce is an important element in the process ofbringing new drugs into the market on an ongoing basis and thereby further enhancing corporate value. Accordingly, we plan tomove ahead with building an integrated sales system that includes a sales organization, as well as logistics and distribution. At thesame time, the Company intends to continue in-licensing drug candidates for development and aggressively investing management
resources into R&D activities.
Earnings have continued to grow, mainly due to product sales, since SyB L-0501 was approved for manufacture and sale inJapan and Singapore in 2010. Going forward, the Company will continue collaborating with Eisai to expand sales of
TREAKISYM® in Japan until our business partnership agreement expires in December 2020. From 2021, we aim to switch to ourown salesforce and expand earnings further. By obtaining approval for the intravenous and oral formulations of rigosertib andputting this product on the market, and by working to in-license, promote the development of, and acquire approval for new
pipeline products, the Company will establish a high level of stable profitability as soon as possible. The Company will not set
performance index targets such as ROE or ROA until profits are recorded in a single year through the transition to our own
salesforce in the fiscal year ending December 31, 2021.

(3) Pipeline
The Company currently has the following pipeline products under development: SyB L-0501, SyB C-0501, SyB L-1101, SyB
C-1101, SyB L-1701, and SyB L-1702. The Company will continue to in-license candidate drugs to further expand and build its
pipeline portfolio with a balanced risk–return trade-off.
(i) [Anticancer agents: SyB L-0501 (lyophilized powder formulation), SyB L-1701 (RTD formulation), SyB L-1702 (RI
formulation), and SyB C-0501 (oral formulation) (generic name: bendamustine hydrochloride, trade name: TREAKISYM®)]―16―

Bendamustine hydrochloride (the generic name), the active pharmaceutical ingredient of TREAKISYM®, is an anticancer
agent that has been in use for a number of years in Germany under the trade name of Ribomustin® for the treatment of nonHodgkin’s lymphoma (Note 11), multiple myeloma, and chronic lymphocytic leukemia. The Company decided to in-license thisproduct because there is currently no effective medication for the indications of recurrent/refractory low-grade non-Hodgkin’s
lymphoma and mantle cell lymphoma. These are underserved therapeutic areas aligned with the Company’s corporate mission
and also fall within one of SymBio’s targeted therapeutic fields (hematologic cancer). Astellas Deutschland GmbH, a German
subsidiary of Astellas Pharma Inc., is the worldwide licensor of bendamustine hydrochloride. Cephalon, Inc. (PA, United States),a subsidiary of Teva Pharmaceutical Industries Ltd. (Israel), in-licensed rights to bendamustine hydrochloride for North America
from Astellas Pharma GmbH and obtained approvals from the U.S. Food and Drug Administration (FDA) to use the drug for thetreatment of chronic lymphocytic leukemia and refractory B-cell non-Hodgkin’s lymphoma in March 2008 and October 2008,
respectively. Mundipharma International Corporation Limited (United Kingdom) and Janssen-Cilag Limited (United Kingdom)
are also licensed from Astellas Pharma GmbH and have obtained exclusive rights for the development and commercialization of
bendamustine hydrochloride in Europe and other regions, respectively.
The Company is licensed from Astellas Deutschland GmbH with exclusive rights for the development and commercializationof bendamustine hydrochloride in Japan, China, Hong Kong, South Korea, Singapore, and Taiwan. In Japan, the drug hasreceived approval for the indications of recurrent/refractory low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma(October 27, 2010), and was launched under the trade name TREAKISYM® on December 10, 2010. For additional indications, in
December 2015, the Company filed sNDAs in Japan for the target indications of first-line treatment of low-grade non-Hodgkin’s
lymphoma and mantle cell lymphoma, and chronic lymphocytic leukemia. The Company received manufacturing and marketing
approval of an sNDA for the indication of chronic lymphocytic leukemia in August 2016 and of first-line treatment of low-grade
non-Hodgkin’s lymphoma and mantle cell lymphoma in December 2016. The Phase II clinical trial for recurrent/refractory
diffuse large B-cell lymphoma (r/r DLBCL) has been completed, and the Phase III clinical trial is currently being conducted. Inorder to maximize the business value of TREAKISYM® by further promoting product life cycle management, the Company
concluded an exclusive license agreement with Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.) (“Eagle”) in
September 2017 to develop, market, and sell Eagle’s ready-to-dilute (“RTD”) and rapid infusion (“RI”) liquid formulation
injection products in Japan. Presently, the Company is preparing approval applications for the RTD formulation, and has begun aclinical trial aimed primarily at verifying the safety of the RI formulation.
In addition to the indications of these intravenous formulation products, the Company is exploring the development of an oral
formulation of TREAKISYM® with a focus on the treatment of solid tumors and autoimmune diseases, further expanding thebusiness potential. To this end, the Company has commenced a Phase I clinical trial for progressive solid tumors with the aim of
examining the recommended dosage and schedule as well as tolerability and safety of the oral formulation of TREAKISYM®,
and narrowing down the types of target tumors. Meanwhile, with a view to evaluating the effect of oral administration of
TREAKISYM® on the immune system, the Company concluded a joint research agreement with Keio University to conduct a
pre-clinical trial to verify the therapeutic value of this product in the treatment of systemic lupus erythematosus (SLE), a form of
autoimmune disease. Both parties are working on the pre-clinical trial.
Eisai has signed an agreement on TREAKISYM® with SymBio for the rights of joint development and exclusive sales inJapan, and is currently selling TREAKISYM®.
In Asia, SyB L-0501 received the approval for the indication of low-grade non-Hodgkin’s lymphoma and chronic lymphocytic
leukemia in Hong Kong in December 2009. In Hong Kong, Cephalon, Inc. has the exclusive right to develop and sellbendamustine hydrochloride, and is currently selling the product. In Singapore, approval for the indications of low-grade nonHodgkin’s lymphoma and chronic lymphocytic leukemia was obtained in January 2010. In South Korea, approval for theindications of chronic lymphocytic leukemia and multiple myeloma was obtained in May 2011, approval for the indication ofrecurrent/refractory low-grade non-Hodgkin’s lymphoma was achieved in June 2014, and approval for the first-line treatment of
CD20 positive follicular lymphoma was obtained in August 2017.
In South Korea and Singapore, Eisai has agreements in place with SymBio for exclusive development and selling rights.
Eisai’s subsidiaries launched the product in Singapore and South Korea in September 2010 and October 2011, respectively.
In China, SymBio’s business partner Cephalon, Inc. received approval in December 2018 for the treatment of patients withindolent B-cell non-Hodgkin lymphoma that has progressed following treatment with rituximab or a rituximab-containing
regimen. In Taiwan, SymBio’s business partner InnoPharmax Inc. (Taiwan) achieved approval for the indications of low-grade
non-Hodgkin’s lymphoma and chronic lymphocytic leukemia in October 2011, followed by product launch in February 2012. In
November 2017, InnoPharmax Inc. obtained approval for the first-line treatment of low-grade non-Hodgkin’s lymphoma andmantle cell lymphoma.

―17―

(ii) [Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oral formulation) (generic name: rigosertib
sodium)]Rigosertib is an anticancer agent with a unique type of multikinase inhibitory activity (Note 12). It is currently being developed in
the U.S. and Europe by a U.S. company, Onconova Therapeutics, Inc. (“Onconova”), for the target indications of myelodysplastic
syndromes (“MDS”). MDS is the pre-pathological state for malignant tumors of blood cells, which has shown increasing
numbers of patients in recent years; it frequently affects elderly people; and it is a refractory disease, with a high probability ofdeveloping into leukemia.
No effective medication is available yet, especially for recurrent/refractory MDS, and it therefore constitutes an underserved
therapeutic area. In July 2011, the Company signed a license agreement with Onconova, obtaining the exclusive right to develop
and commercialize rigosertib in Japan and South Korea. Based on this agreement, the Company continues to develop theintravenous rigosertib formulation for the target indication of recurrent/refractory higher-risk MDS and the oral formulation for
the target indication of first-line higher-risk MDS (in combination with azacitidine).
As for the intravenous formulation of rigosertib, the Company is participating in a global Phase III clinical trial with clinical
trial sites in more than 20 countries worldwide, for higher-risk myelodysplastic syndromes (HR-MDS) which do not respond tothe current standard treatment with hypomethylating agents, which relapse after treatment under the current standard of care, or
which are intolerant to hypomethylating agents. The Company is participating in the global Phase III clinical trial from Japan.
As for the oral formulation of rigosertib, Onconova has been conducting a Phase II clinical trial for the target indication oftransfusion-dependent lower-risk MDS and Phase I/II clinical trials for the indication of first-line higher-risk MDS (incombination with azacitidine).
The Company has completed its domestic Phase I clinical trial of the oral formulation of rigosertib as a monotherapy for thetarget indication of lower-risk MDS, and is currently conducting a domestic Phase I clinical trial to confirm the safety of highdose as a monotherapy, in order to conduct a Phase I clinical trial in combination with azacitidine for the target indication of firstline 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 development
progress made by Onconova.
While Onconova is making steady progress with development, we will look into the option of developing indications otherthan MDS. By allocating development of the intravenous and oral formulations to different indications, the Company aims to
make progress with development of treatment methods that are easy for patients to use, and that place sufficient importance on
the need for compliance.
(Note 12) Multikinase inhibitors impede the growth, proliferation, and metastasis of cancer cells, thereby eradicating them.

(4) Medium- to long-term strategy
The Company is pursuing primarily the following five strategies in order to achieve our long range plan (LRP).
(i) De-risking by post-POC strategy
We in-license drug candidates for which proof of concept (POC) is already confirmed in human subjects in principle.
Accordingly, they should be drugs that are in a relatively late stage of clinical development or already on the market overseas.
The advanced development is already conducted overseas for these drug candidates and their efficacy and safety are alreadyconfirmed in human subjects, thereby reducing the development risk. We utilize existing clinical data available overseas so as tocompress development timelines, reduce the development costs, and increase the likelihood of regulatory approvals in Japan andAsian markets.
(ii) Building a high-quality pipeline with exceptional search and evaluation capabilities
Our new drug search engine is connected to the diverse network of pharmaceutical and bio venture companies, and enables us
to select promising drug candidates from the vast amount of chemical compounds after the careful review by internal experts.
Using their wealth of experience at the forefront of research and development, Scientific Advisory Board (SAB) members
carefully evaluate and render final judgment on each drug candidate. The highly established screening process up to the final
selection of drug candidates, coupled with the post-POC strategy (in which we in-license drug candidates whose efficacy and―18―

safety are already confirmed overseas), alleviates development risk and reduces development timelines. It also helps tounderstand how satisfactorily the drug candidates meet the healthcare needs and to improve the accuracy of revenue projections
after the product launch.
(iii) Containment of fixed costs by labless/fabless strategy
The Company does not own any research or production facilities, which are often regarded as the main cause of fixed costs.
Once drug candidates are searched and in-licensed, we focus on value-added activities such as the formulation andimplementation of development strategy and outsource other necessary routine procedures. This enables us to reduce
development costs of pharmaceutical drugs and secure a flexible financial strategy.
(iv) Realization of high business efficiency by “Blue Ocean strategy” (Note 13)
There are many cases that the standard drug used overseas cannot be prescribed in Japan or a new drug is launched in Japan
five years behind its initial approval overseas. This problem is called “drug lag” and is becoming aggravated, while the term
“cancer patient refugee” has been created. This drug lag is particularly conspicuous in our strategic drug development areas ofrefractory cancer and hematological diseases. There is a large market of anticancer agents that continues to grow with the aging
population. However, anticancer agents have a wide range of indications and they are fragmented by the type of tumor, and insome therapeutic areas there are a limited number of patients. Although an extremely high degree of specialization is required
and developing new agents in these therapeutic areas is highly difficult, it is often financially unattractive for larger
pharmaceutical companies to pursue due to the small size of the potential market. This is part of the cause of the delay in drugs
coming to market. On the other hand, obtaining approval and launching a new drug in one of these less competitive therapeuticareas creates an opportunity to achieve superior growth and profitability by continuous indication expansion and bringing new
products into the market.
(Note 13) “Blue Ocean strategy” means a strategy of redefining the market, avoiding marketplaces with fierce competition inwhich competitors seek to gain limited market shares (termed “red oceans”), and instead creating a “blue ocean,” anunexploited market with reduced competition, enabling profits to be maximized while providing customers with highvalue products and services.
(v) Going global beyond Asia
Although the Company has been operating its businesses in Asia centered on Japan, major development is unachievable given
the changing environment surrounding Japanese healthcare. Moving forward, it will carry out search and evaluation activities toadvance new drug candidates with a view to global development.

(5) Issues to be addressed by the Company
The Company is committed to making improvements in the following areas.
(i) Further expansion of the pipeline
In order to enhance the enterprise value as a specialty pharmaceutical company, we need to expand the pipeline throughongoing in-licensing of new drug candidates for development.
The Company is conducting or planning development of the following anticancer agents: SyB L-0501, SyB C-0501, SyB
L-1101, SyB C-1101, SyB L-1701, and SyB L-1702. Currently we are in discussion with counterparties regarding the inlicensing 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
In order to enhance the enterprise value, not only in-licensing new drug candidates but also promoting product life cycle
management is important. Therefore, it is critical 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 indications of recurrent/refractory low-grade
non-Hodgkin’s lymphoma and mantle cell lymphoma, chronic lymphocytic leukemia, and first-line treatment of low-grade nonHodgkin’s lymphoma and mantle cell lymphoma. The Company has completed a Phase II clinical trial for recurrent/refractory―19―diffuse large B-cell lymphoma (r/r DLBCL), and a Phase III clinical trial is currently underway. In addition, the Company intends
to maximize business value of TREAKISYM® by promoting the product life cycle management of the product, and pursue thedevelopment of TREAKISYM® liquid formulation (RTD and RI liquid formulations) in-licensed from Eagle Pharmaceuticals,Inc. (head office: New Jersey, U.S.). In addition to the intravenous formulation, the Company is also exploring the developmentof an oral formulation of TREAKISYM® with a focus on the treatment of solid tumors and autoimmune diseases, further
expanding the business potential. To this end, the Company has commenced a Phase I clinical trial for progressive solid tumors
with the aim of examining the recommended dosage and schedule as well as tolerability and safety of the oral formulation of
TREAKISYM®, and narrowing down the types of target tumors.
The development of intravenous and oral formulations of rigosertib for the indication of myelodysplastic syndromes (MDS) is
currently progressing. Few useful therapeutic agents are 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 ofrecurrent/refractory higher-risk MDS conducted by Onconova, the Company is conducting its clinical trial in Japan. As for theoral formulation, the Company has completed 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 the safety of high-dose as amonotherapy, in order to conduct a Phase I clinical trial in combination with azacitidine 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 ofdevelopment by Onconova.
The Company is focused on maximizing the business value of TREAKISYM® and rigosertib by promoting product life cycle
management through further indication expansion.
(iii) Preparation for the establishment of the Company’s own salesforce
Domestic sales of TREAKISYM® are currently handled through Eisai, in accordance with the business partnership agreement
the Company concluded in August 2008. This agreement 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 technical information will enable the Company to more accurately understand the needs of the market
and respond more swiftly, allowing it to contribute to the benefit of patients while aiming to maximize the business value of
TREAKISYM®. Furthermore, the Company strives to build a consistent sales organization with a high level of specialization in
the field of hematological diseases. Through this effort, the Company aims to achieve high business efficiency, ensure sustainableearnings growth, and maximize shareholder gains once the intravenous and oral formulations of rigosertib, which are currently
under development to treat myelodysplastic syndromes (MDS), join TREAKISYM® in the product lineup.
(iv) Global expansion for further growth
In addition to Japan, the Company identifies China, Hong Kong, South Korea, Taiwan, and Singapore as strategic regions andhas moved forward with business development in Asia.
However, with expanding medical expenditures due to the aging population in Japan, and the advent of the “era of genericdrugs comprising 80% of all drugs dispensed” as a governmental policy of Japan, the business environment for innovative drug
developers is expected to remain extremely challenging. Such a policy may also be implemented by other Asian countries.
Under these circumstances, the Company will promote global expansion aiming for further growth. The Company will carryout the search, evaluation, and negotiation activities for new drug candidates, in order to acquire global rights on such candidates,
utilizing its experience fostered through its business in Asia.
(v) Securing personnel
The Company places the highest priority on personnel as the Company’s principal management resource. We cannot makesuperior achievements in exploring and developing new drugs without talent. We have been continually recruiting talented
people; especially after being listed, we have recruited the best and brightest people in order to strengthen the management
organization. Going forward, we plan to continue to further strengthen our human resources by providing on-the-job training andemployee development programs.
(vi) Financial issue―20―

It is necessary for the Company to raise funds required for business activities such as R&D expenditures as the pipeline
development progresses and the number of drug candidates increases.
Therefore, we make every effort to further strengthen the financial base by continually diversifying the method of fund raisingand curtailing costs through tight budget control.

(6) Other important matters concerning the Company’s management
Issuance of 45th through 47th warrants
In order to secure the funds necessary for its research and development activities, preparation for establishing its salesorganization, and new licensing opportunities, the Company made a resolution at the Board of Directors meeting held on April 9,2018 to issue the 45th through 47th warrant with Exercise Price Revision Clauses by way of third-party allotment, and received thepayment of 2,611,800 thousand yen as of December 31, 2018.

4. Basic Views on Selection of Accounting Standards
Over the near term, the Company will prepare its financial statements based on Japanese generally accepted accounting principles(GAAP), taking into account the inter-period comparability of financial statements and comparability across companies.
In terms of the application of International Financial Reporting Standards (IFRS), the Company will take appropriate measures inlight of the existing circumstances in Japan and overseas.

―21―

5. Financial Statements and Primary Notes(1) Balance sheet(Unit: thousands of yen)
FY 2017(as of December 31, 2017)

FY 2018(as of December 31, 2018)

2,947,059
489,874
362,514558
73,72018,76098,44015,84429,7494,036,522

4,821,355
411,720533,824
589
83,372
31,147
124,855—
31,624
6,038,490

35,521(7,034)28,48649,291(30,968)
18,32264
46,873

46,198(9,427)
36,77159,541(39,361)
20,180—56,951

65,583
3,295
68,87850,946
20,43071,3760
14,20985,799100,008
215,761
4,252,284

0
1,225
71,37872,604200,932
6,239,423

604,382
330,867
54,813—
21,427
1,011,490

726,100
503,637
71,24916,42718,926
1,336,342

1,392
1,392
1,012,882

1,281
1,281
1,337,623

AssetsCurrent assets
Cash and deposits
Accounts receivable–trade
Merchandise and finished goods
Supplies
Prepaid expenses
Advances paid
Consumption taxes receivable
Forward exchange contracts
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Software in progress
Total intangible assets
Investments and other assets
Shares of subsidiaries
Long-term prepaid expenses
Lease and guarantee deposits
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable–trade
Accounts payable–other
Income taxes payable
Forward exchange contracts
Other
Total current liabilities
Non-current liabilities
Provision for retirement benefits
Total non-current liabilities
Total liabilities―22―

(Unit: thousands of yen)
FY 2017(as of December 31, 2017)

FY 2018(as of December 31, 2018)

10,761,676

12,972,579

10,731,676
10,731,676

12,942,579
12,942,579(18,790,705)(18,790,705)(17)
2,702,629
536,772
3,239,402
4,252,284(21,543,238)(21,543,238)(17)
4,371,902
529,897
4,901,799
6,239,423

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Total capital surplus
Retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Share acquisition rights
Total net assets
Total liabilities and net assets―23―

(2) Statement of income
FY 2017(from January 1, 2017
to December 31, 2017)
Net sales
Net sales of goods
Rights income
Total net sales
Cost of sales
Beginning goods
Cost of purchased goods
Purchase allowance and returns
Total
Ending goods
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest on refund
Interest income
Dividend income of insurance
Other
Total non-operating income
Non-operating expenses
Commission fee
Share issuance cost
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on reversal of share acquisition rights
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Impairment loss
Total extraordinary losses
Profit (loss) before income taxes
Income taxes–current
Total income taxes
Profit (loss)

3,444,206—
3,444,206

3,809,874
25,656
3,835,530

272,725
2,588,681
85,951
2,775,455
362,5142,412,940
1,031,266*2 *3
4,978,327(3,947,061)

362,5142,968,586
134,614
3,196,486*1
533,824
2,662,661
1,172,869*2 *3
3,828,941(2,656,072)

—
3,092
1,339
75
4,506

116
525
1,501
54
2,196

9,090
14,477
10,421
240
34,229(3,976,784)

11,10029,65054,103—
94,854(2,748,730)

17,414
17,414

9,826
9,826

—
14,692
14,692(3,974,062)
3,800
3,800
(3,977,862)
*5

―24―

(Unit: thousands of yen)
FY 2018(from January 1, 2018
to December 31, 2018)

*4

9,829
—
9,829
(2,748,733)
3,800
3,800
(2,752,533)

(3) Statement of changes in equity
FY 2017 (from January 1, 2017 to December 31, 2017)(Unit: thousands of yen)
Shareholders’ equity
Capital surplus
Retained earnings
Other retained
earnings
Capital stock Legal capital Total capital
Retained Total retained
surplussurplusearnings
earnings
brought
forwardBalance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Net changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period

Balance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Net changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period

9,948,298

9,918,298

813,378

813,378

813,378

813,378

10,761,676

10,731,676

ShareacquisitionrightsTotal net
assets431,135

9,918,298 (14,812,843) (14,812,843)(2,245,468)

536,772

3,239,402

5,053,735

1,626,756(3,977,862)(3,977,862)(3,977,862)—(2,351,105)

10,731,676 (18,790,705) (18,790,705)(17)

2,702,629

813,378(3,977,862)

105,637

Total
shareholders’equity(3,977,862)

1,626,756

105,637(17)

813,378

5,484,870

105,637

Treasuryshares―25―(3,977,862)

FY 2018 (from January 1, 2018 to December 31, 2018)(Unit: thousands of yen)
Shareholders’ equity
Capital surplus
Retained earnings
Other retained
earnings
Capital stock Legal capital Total capital
Retained Total retained
surplussurplusearnings
earnings
brought
forwardBalance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Net changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period

Balance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Net changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period

10,761,676

10,731,676

10,731,676 (18,790,705) (18,790,705)

2,210,903

2,210,903

2,210,903

Treasuryshares(17)

Total
shareholders’equity2,702,629

4,421,806(2,752,533)(2,752,533)(2,752,533)(2,752,533)

2,210,903

2,210,903

2,210,903(2,752,533)—

1,669,273

12,972,579

12,942,579

12,942,579 (21,543,238) (21,543,238)(17)

4,371,902

ShareacquisitionrightsTotal net
assets536,772

3,239,402

4,421,806
ሺ2,752,533)(6,875)(6,875)(6,875)

1,662,397

529,897

4,901,799―26―

(4) Statement of cash flows
FY 2017(from January 1, 2017
to December 31, 2017)
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Amortization of guarantee deposits
Share-based compensation expenses
Impairment loss
Increase (decrease) in provision for retirement
benefits
Interest income
Foreign exchange losses (gains)
Commission fee
Share issuance cost
Gain on reversal of share acquisition rights
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts
receivable–trade
Decrease (increase) in inventories
Decrease (increase) in prepaid expenses
Decrease (increase) in advances paid
Decrease (increase) in consumption taxes refund
receivable
Decrease (increase) in other current assets
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in notes and accounts payable–
trade
Increase (decrease) in accounts payable–other
Increase (decrease) in other current liabilities
Other, net
SubtotalInterest and dividend income received
Commitment fee paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee
deposits
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issuance of shares resulting fromexercise of share acquisition rights
Proceeds from issuance of share acquisition rights
Payments for issuance of common shares
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period―27―(Unit: yen in thousands)
FY 2018(from January 1, 2018
to December 31, 2018)(3,974,062)
29,5691,117
121,205
14,692(2,748,733)
34,6991,186
122,944
—

(4)

(111)

(3,092)
42,1959,090
14,477(17,414)—(525)
47,032
11,10029,650(9,826)
9,829(2,403)78,154(89,789)
7,437
47,705(171,310)(9,696)(12,386)(63,674)(26,414)(21,038)
5,495

30,366
4,928

282,522

121,718(208,540)
7,274
309(3,796,925)
3,132(19,200)(3,800)(3,816,793)

155,185
13,935—(2,318,271)
524(3,000)(3,800)(2,324,547)(10,657)(46,364)(23,550)(31,932)(7,837)
(159)

3,065

13,747(77,507)(26,180)

1,146,042

4,278,712

32,560(14,372)
1,164,230

23,100(29,755)
4,272,056(42,195)(47,032)(2,772,266)
5,719,325*1
2,947,059

1,874,296
2,947,059*1
4,821,355

(5) Notes to going concern assumptions
None to be reported.
(6) Significant accounting policies
1. Valuation basis and method of marketable and investment securities(1) Shares of subsidiaries
Shares of subsidiaries are stated at cost determined by the moving-average method.
(2) 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 onmarketable value on the closing date and other premises. Any valuation differences are included directly
in shareholders’ equity. Cost of securities sold is calculated by the moving-average method.
Available-for-sale securities without determinable market value
Available-for-sale securities without determinable market value are stated at cost determined by themoving-average method.
2. Valuation basis and method of derivative transactions
Derivative financial instruments are stated at fair value.
3. Valuation basis and method of inventories
Inventories are stated at cost determined by the weighted-average method. The amount on the balance sheet
is calculated by reducing book value when the contribution of inventories to profitability declines.
4. Depreciation and amortization of non-current assets(1) Property, plant and equipment (excluding lease assets)
Depreciation of property, plant and equipment is computed 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
5 to 15 years(2) Intangible assets (excluding lease assets)
Amortization of intangible assets is computed by the straight-line method.
Capitalized software costs are being amortized over the period of the internal use of five years.
(3) Lease assets
Depreciation of lease assets is computed by the straight-line method over the lease term with no residual
value.
5. Deferred assets
Share issuance costs and bond issuance costs are recorded as expenses in full at the time of expenditure.
6. Basis for translating assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the spot
exchange rates prevailing on the closing date, and resulting gains or losses are credited or charged to income.
7. Basis for reserves and provisions(1) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount determined based on the historicalexperience of bad debt with respect to ordinary receivables and an estimate of uncollectible amounts
determined by reference to specific doubtful receivables from customers which are experiencing financial
difficulties.
For the fiscal year ended December 31, 2018, no allowance for doubtful accounts is provided due to no
historical experience of bad debt and no receivable balances that are deemed uncollectible.
―28―

(2) Provision for retirement benefits
The provision for retirement benefits is provided based on an estimated amount for retirement benefit
obligations as of December 31, 2018.
The Company applies the simplified method to calculate amounts of provision for retirement benefits andretirement benefit expenses. That is, the amount of retirement benefit obligations are the payments requiredfor voluntary retirement as of each fiscal year end.
8. Cash and cash equivalents in the statement of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time, andshort-term investments with a maturity of three months or less that can easily be converted to cash and are
subject to little risk of change in value.
9. Other significant basis for the preparation of financial statements
Accounting for consumption tax
Transactions are recorded at amounts exclusive of consumption tax.

(7) Notes to financial statements(Balance sheet)
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 endof each fiscal year is as follows:(Unit: thousands of yen)
FY 2017
FY 2018(as of December 31, 2017)(as of December 31, 2018)
Total amounts of bank overdraft limit
1,350,000
1,350,000
and loan commitment line
Balance of borrowing outstanding——
Unused balance
1,350,000
1,350,000(Statement of income)* 1 Inventories at fiscal year-end are stated after writing down based on the decrease in profitability.
The following amount is included within cost of sales as loss on valuation of inventories.
(Unit: thousands of yen)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)—
121,317
A certain batch of TREAKISYM® 25mg was determined to be unsalable due to its poor external appearance,

which resulted in an inventory valuation loss. Inventory at fiscal year-end reflects their book value, taking thisinventory valuation loss into account.

―29―

* 2 The selling expenses ratio is roughly 6.1% and 10.6% for the fiscal years ended December 31, 2017 and 2018,
respectively, and the general and administrative expenses ratio is roughly 93.9% and 89.4% for the fiscal years
ended December 31, 2017 and 2018, respectively.
Major expense items and amounts are as follows:(Unit: thousands of yen)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)
Directors’ compensations
166,292
163,971
Salaries and allowance
387,415
339,859
Retirement benefit expenses
769
663
Research and development expenses
3,017,812
1,832,746
Depreciation
11,322
18,787Compensations
567,117443,679
Promotion expenses
303,867
405,467* 3 Total amounts of research and development expenses included in general and administrative expenses(Unit: thousands of yen)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)
3,017,812
1,832,746* 4 Details of loss on retirement of non-current assets
FY 2017(from January 1, 2017
to December 31, 2017)—

Facilities attached to buildings(Unit: thousands of yen)
FY 2018(from January 1, 2018
to December 31, 2018)
9,829* 5 Impairment loss
FY 2017 (from January 1, 2017 to December 31, 2017)
For the fiscal year ended December 31, 2017, the Company has recorded impairment loss for the following asset:(Unit: thousands of yen)
Location

Use

Category

Impairment loss

Head office
Tools, furniture andIdle asset
14,692
fixtures(Minato-ku, Tokyo)
Impairment loss has been recognized for tools, furniture and fixtures with no prospect to be used in the future,
writing down the carrying value of the asset to the recoverable amount. The recoverable amount of the asset iszero; therefore, its total carrying value has been recorded as impairment loss under extraordinary loss.
FY 2018 (from January 1, 2018 to December 31, 2018)
None to be reported.

―30―

(Statement of changes in equity)
FY 2017 (from January 1, 2017 to December 31, 2017)
1. Type and number of shares issued and treasury shares
At beginning ofcurrent period
Shares issued
Common stock
Total
Treasury shares
Common stock
Total

Increase(Unit: number of shares)
At end of current
periodDecrease

46,530,824
46,530,824

7,518,400
7,518,400——

54,049,224
54,049,224

75
75

—
—

—
—

75
75

(Note) Increase of 7,518,400 shares in common stock is due to the exercise of share acquisition rights.
2. Share acquisition rights
Number of shares to be issued
Company

Description

The 34th warrant
The 39th warrant

Type ofshares to beissuedCommonstock
Commonstock
Commonstock

Balance asofDecember31, 2017(thousandsof yen)At
beginningof current
periodIncrease

Decrease

At end ofcurrent
period975,800—

975,800——

4,472,000—

301,000

4,171,000

9,118

The 42nd warrant— 8,800,000 5,034,800 3,765,200
13,931
SymBioPharmaceuticals The 3rd unsecured
bonds with
LimitedCommonconvertible bond
2,132,708— 2,132,708—(Note 2)stock
type shareacquisition rights
Share acquisitionrights as stock
—
—
—
—
—
513,723
options
Total
7,580,508 8,800,000 8,444,308 7,936,200
536,772(Notes) 1. The information about the type and number of shares to be issued pertaining to share acquisition rights
as stock options is described in “Stock options.”
2. The 3rd unsecured bonds with convertible bond type share acquisition rights are computed by the lumpsum method.
(Main reasons for increase/decrease)
Decrease due to expiration of exercise period of the 34th warrant: 975,800 shares
Decrease due to exercise of the 39th warrant: 301,000 shares
Increase due to issuance of the 42nd warrant: 8,800,000 shares
Decrease due to exercise of the 42nd warrant: 5,034,800 shares
Decrease due to exercise of share acquisition rights for the 3rd unsecured bonds with convertible bond type shareacquisition rights: 2,132,700 shares
3. Dividends
None to be reported.

―31―

FY 2018 (from January 1, 2018 to December 31, 2018)
1. Type and number of shares issued and treasury shares(Unit: number of shares)
At beginning ofcurrent period
Shares issued
Common stock
Total
Treasury shares
Common stock
Total

Increase

At end of current
periodDecrease

54,049,224
54,049,224

28,349,700
28,349,700——

82,398,924
82,398,924

75
75

—
—

—
—

75
75

(Note) Increase of 28,349,700 shares in common stock is due to the exercise of share acquisition rights.
2. Share acquisition rights
Number of shares to be issued
Company

Description

The 39th warrant
The 42nd warrant
The 45th warrant
SymBioPharmaceuticals
The 46th warrant
LimitedThe 47th warrant

Type ofshares to beissuedCommonstock
Commonstock
Commonstock
Commonstock
Commonstock

Balance
as ofDecember31, 2018(thousandsof yen)At
beginningof current
periodIncrease

Decrease

At end ofcurrent
period4,171,000—

4,171,000——

3,765,200—

3,765,200——— 20,000,000 20,000,000——— 15,000,000— 15,000,000

6,600— 15,000,000— 15,000,000

5,700

Share acquisitionrights as stock
—
—
—
—
—
517,597
options
Total
7,936,200 50,000,000 27,936,200 30,000,000
529,897(Note) The information about the type and number of shares to be issued pertaining to share acquisition rights as
stock options is described in “Stock options.”(Main reasons for increase/decrease)
Decrease due to exercise of the 39th warrant: 4,171,000 shares
Decrease due to exercise of the 42nd warrant: 3,765,200 shares
Increase due to issuance of the 45th warrant: 20,000,000 shares
Decrease due to exercise of the 45th warrant: 20,000,000 shares
Increase due to issuance of the 46th warrant: 15,000,000 shares
Increase due to issuance of the 47th warrant: 15,000,000 shares
3. Dividends
None to be reported.

―32―

(Statement of cash flows)*1. Cash and cash equivalents as of the fiscal year end are reconciled to the accounts reported in the balance sheet as
follows:(Unit: thousands of yen)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)
Cash and deposits
2,947,059
4,821,355
Cash and cash equivalents
2,947,059
4,821,355
2. Details of significant non-cash transactions
Exercise of share acquisition rights for bonds with convertible bond type share acquisition rights(Unit: thousands of yen)
FY 2017(from January 1, 2017
to December 31, 2017)
Amount of increase in capital stock due to theexercise of share acquisition rights
Amount of increase in legal capital surplus due tothe exercise of share acquisition rights
Amount of decrease in corporate bonds due to theexercise of share acquisition rights―33―

FY 2018(from January 1, 2018
to December 31, 2018)

225,000—

225,000—

450,000—(Financial instruments)
1. Financial instruments(1) 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.
(2) Types of financial instruments and related risks
Operating receivables such as accounts receivable–trade and advances paid in connection with joint development
are exposed to the credit risk of customers and joint development partners. Operating receivables denominated inforeign currencies are exposed to foreign exchange fluctuation risk.
The Company intends to invest in marketable and investment securities which have a relatively 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 well as the actual volume of export and import transactions denominated inforeign currencies.
Lease and guarantee deposits are mostly security deposits related to leased office premises and their refunds are
subject to the credit risk of the lessor.
(3) Risk management for financial instruments(i) 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 operatingreceivables, the Company’s marketing department periodically monitors the creditworthiness of major customers
and monitors due dates and outstanding balances by individual customers. In addition, the Company is making
efforts to promptly identify and mitigate risks of bad debts from customers who are having financial difficulties.
The Company enters into derivative transactions only with financial institutions which have a sound credit
profile in order to mitigate the counterparty risk.
(ii) 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 initialinvestments by investing in securities with a satisfactory credit rating and investment 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 inconnection 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 arereported to the executive management committee.
(iii) 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 the liquidity on hand to manage liquidity risk.
(4) 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―34―

market price available, fair value is reasonably estimated. Since various assumptions and factors are reflected inestimating the fair value, different assumptions and factors could result in different fair value. In addition, thenotional amounts of derivatives in notes to “Derivative transactions” are not necessarily indicative of the actual
market risk involved in derivative transactions.
(5) Concentration of credit risk
As of December 31, 2018, all operating receivables are from one particular major customer.
2. Fair value of financial instruments
The carrying value on the balance sheet, fair values, and their differences are as follows. The financial instruments
whose fair value is extremely difficult to determine are not included. (See Note 2.)
FY 2017 (as of December 31, 2017)(Unit: thousands of yen)
Carrying value on the
Fair value
Differencesbalance sheet(1) Cash and deposits
2,947,059
2,947,059―(2) Accounts receivable–trade489,874
489,874―(3) Advances paid
18,76018,760―Assets, total
3,455,694
3,455,694―(1) Accounts payable–trade604,382
604,382―(2) Accounts payable–other
330,867
330,867―(3) Income taxes payable
54,81354,813―Liabilities, total
990,062
990,062―(*)
Derivative transactions, total
15,844
15,844―(*) Receivables and liabilities arising from derivative transactions are presented on a net basis and net liabilities areshown in parentheses.
FY 2018 (as of December 31, 2018)(Unit: thousands of yen)
Carrying value on the
Fair value
Differencesbalance sheet(1) Cash and deposits
4,821,355
4,821,355―(2) Accounts receivable–trade411,720
411,720―(3) Advances paid
31,14731,147―
Assets, total
5,264,223
5,264,223―(1) Accounts payable–trade726,100
726,100―(2) Accounts payable–other503,637
503,637―(3) Income taxes payable
71,24971,249―Liabilities, total
1,300,988
1,300,988―(*)
Derivative transactions, total(16,427)(16,427)―(*) Receivables and liabilities arising from derivative transactions are presented on a net basis and net liabilities areshown in parentheses.

―35―

(Notes)
1. Fair value measurement of financial instruments and other matters related to securities and derivative transactions
Assets(1) Cash and deposits, (2) Accounts receivable–trade, and (3) Advances paid
The carrying value is deemed as the fair value since these are scheduled to be settled in a short 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 a short period of time.
Derivative transactions
See notes to “Derivative transactions.”
2. Financial instruments whose fair value is extremely difficult to determine

Lease and guarantee deposits

FY 2017(as of December 31, 2017)85,799(Unit: thousands of yen)
FY 2018(as of December 31, 2018)
71,378

Lease and guarantee deposits are not included in the above table since no market quote is available and their fairvalue is extremely difficult to determine.

―36―

3. The redemption schedule for monetary assets and securities with maturities after the closing date
FY 2017 (as of December 31, 2017)(Unit: thousands of yen)Due in one year or
less
Deposits

Due after one year Due after five years Due after ten years
through five years through ten years

2,946,982―――

Accounts receivable–trade489,874―――

Advances paid

18,760―――3,455,617

―

―

―

Total
FY 2018 (as of December 31, 2018)(Unit: thousands of yen)Due in one year or
less

Due after one year Due after five years Due after ten years
through five years through ten years

4,821,265―――

Accounts receivable–trade411,720―――

Advances paid

31,147―――

5,264,133―――

Deposits

Total

―37―

(Derivative transactions)
1. Derivative transactions to which hedge accounting is not applied
Currency-related transactions
FY 2017 (as of December 31, 2017)(Unit: thousands of yen)Classification

Type

Notional amountPortion due after
one year included
hereinFair value

Unrealized gain
(loss)

Forward exchange
contract
OTC
transactions
BuyEuro
1,366,477―
15,844
15,844
Total
1,366,477―
15,844
15,844(Note) Fair value measurement
The fair value is measured based on the quoted prices obtained from financial institutions with which theCompany has a business relationship.
FY 2018 (as of December 31, 2018)(Unit: thousands of yen)Classification

Type

Notional amountPortion due after
one year included
hereinFair value

Unrealized gain
(loss)

Forward exchange
contract
BuyEuro
578,438―(16,427)(16,427)
Total
578,438―(16,427)(16,427)(Note) Fair value measurement
The fair value is measured based on the quoted prices obtained from financial institutions with which theCompany has a business relationship.

OTC
transactions

2. Derivative transactions to which hedge accounting is applied
None to be reported.

―38―

(Retirement benefits)
1. Outline of retirement benefit plans
The Company has adopted a defined contribution pension plan. A lump-sum payment plan (non-contributory plan) is
applied for certain employees based on the Company’s internal rules for retirement benefits.
The simplified method is applied to calculate amounts of provision for retirement benefits and retirement benefit
expenses.
2. Retirement benefit plan under the simplified method(1) The reconciliation of provision for retirement benefits at the beginning and the end of the fiscal year under thesimplified method is as follows:(Unit: thousands of yen)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)
Provision for retirement benefits at beginning of period
1,396
1,392
Retirement benefit expenses
147
325
Paid amount of retirement benefits
(151)
(436)
Provision for retirement benefits at end of period
1,392
1,281
(2) The reconciliation of retirement benefit obligations or pension assets at the end of the fiscal year and provision for
retirement benefits and the prepaid pension cost on the balance sheet is as follows:(Unit: thousands of yen)
FY 2017
FY 2018(as of December 31, 2017) (as of December 31, 2018)
Retirement benefit obligations under non-contributory
1,392
1,281
plan
Net defined benefit liability or asset on the balance sheet
1,392
1,281
Provision for retirement benefits
Net defined benefit liability or asset on the balance
sheet(3) Retirement benefit expenses
Retirement benefit expenses calculated under the simplified method

1,392

1,281

1,392

1,281

FY 2017: 147 thousand yen
FY 2018: 325 thousand yen

3. Defined contribution pension plan
The amount of the Company’s contribution to the defined contribution pension plan for the fiscal years ended
December 31, 2017 and 2018 were 1,836 thousand yen and 1,942 thousand yen, respectively.

―39―

(Stock options)
1. The account title and the amount of stock options charged as expenses

Selling, general and administrative expenses

FY 2017(from January 1, 2017
to December 31, 2017)
121,205(Unit: thousands of yen)
FY 2018(from January 1, 2018
to December 31, 2018)
122,944

2. The account title and the amount of income recognized for vested shares that expired unexercised(Unit: thousands of yen)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)
Gain on reversal of share acquisition rights
14,0779,826―40―

3. Description of stock options and changes in the size of stock options(1) Description of stock options
The 17th Warrant
Directors of the Company
3
Individuals covered by the plan and
Audit & Supervisory Board
number of persons granted stock
member of the Company
1
options
Total
4Class and number of shares to beissued upon the exercise of theCommon stock
72,000 sharesstock options
Grant date
March 18, 2009
1. A person to whom these stock
options are granted (hereinafter,“Person Granted”) must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Vesting conditions
Granted retires due to the expiryof her/his term or compulsory
retirement; if otherwise theBoard of Directors approves; orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
Vesting period
The vesting period is not fixed.
From March 19, 2011 to March 18,
Exercise period
2019

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

The 20th Warrant
Directors of the Company
Audit & Supervisory Board
member of the Company
Total
Common stock

External collaborators

Common stock2

12,500 shares

March 18, 2009Same as on the left

Same as on the left
From March 19, 2011 to March 18,
2019
The 21st Warrant

61
7

361,000 shares

March 31, 2010
1. The Person Granted must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; if otherwise theBoard of Directors approves; orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From April 1, 2012 to March 31,
2020
―41―

The 19th Warrant

Employees of the Company

Common stock50

326,500 shares

March 31, 2010Same as on the left

Same as on the left
From April 1, 2012 to March 31,
2020

The 22nd Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

External collaborators

Common stock

The 23rd Warrant
13

153,000 shares

March 31, 2010
1. The Person Granted must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; if otherwise theBoard of Directors approves; orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From April 1, 2012 to March 31,
2020
The 24th Warrant

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock

932,000 shares

October 15, 2010Same as on the left

Same as on the left
From October 15, 2012 to October
14, 2020
The 25th Warrant

5

192,000 shares

March 31, 2011
1. The Person Granted must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; or if otherwise theBoard of Directors approves orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From March 31, 2013 to March 30,
2021

―42―

Employees of the Company

Employees of the Company

Common stock59

195,000 shares

March 31, 2011

Same as on the left

Same as on the left
From March 31, 2013 to March 30,
2021

The 26th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 27th Warrant
4

362,500 shares

May 2, 2012
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1) to (6).
The period that fulfills therequirement of the exercise
conditions *(2) and (5).
From April 18, 2014 to April 17,
2022
The 30th Warrant

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock70

430,700 shares

May 2, 2012Same as on the left

Same as on the left
From April 18, 2014 to April 17,
2022
The 31st Warrant

5

116,000 shares

May 29, 2013
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1) to (6).
The period that fulfills therequirement of the exercise
conditions *(2) and (5).
From May 15, 2015 to May 14,
2023

―43―

Employees of the Company

Employees of the Company

Common stock

68

124,000 shares

May 29, 2013Same as on the left

Same as on the left
From May 15, 2015 to May 14,
2023

The 32nd Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 33rd Warrant
5

252,000 shares

April 30, 2014
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(5).
From April 16, 2017 to April 15,
2024
The 35th Warrant

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock68

330,000 shares

April 30, 2014

Same as on the left

Same as on the left
From April 16, 2017 to April 15,
2024
The 36th Warrant

6

204,200 shares

April 10, 2015
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(5).
From March 27, 2018 to March 26,
2025

―44―

Employees of the Company

Employees of the Company

Common stock61

312,000 shares

April 10, 2015

Same as on the left

Same as on the left
From March 27, 2018 to March 26,
2025

The 37th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 38th Warrant
6

236,500 shares

April 14, 2016
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(5).
From March 31, 2019 to March 30,
2026
The 40th Warrant

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock

73

395,000 shares

April 14, 2016

Same as on the left

Same as on the left
From March 31, 2019 to March 30,
2026
The 41st Warrant

6

280,000 shares

April 24, 2017
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(5).
From March 30, 2020 to March 29,
2027

―45―

Employees of the Company

Employees of the Company

Common stock71

451,200 shares

April 24, 2017Same as on the left

Same as on the left
From March 30, 2020 to March 29,
2027

The 43rd Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 44th Warrant
6

305,000 shares

April 26, 2018
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(5).
From March 30, 2021 to March 29,
2028

Employees of the Company

Common stock74

464,800 shares

April 26, 2018

Same as on the left

Same as on the left
From March 30, 2021 to March 29,2028*(1) Fractions less than one unit of a share acquisition right shall be unexercisable.
(2) The Person Granted may exercise all or part of the rights in accordance with the following classifications:
The 26th and the 27th warrants(a) Those who were granted the share acquisition rights may exercise the rights within the limit of one-fourth (1/4) from April
18, 2014 to April 17, 2015.
(b) Those who were granted the share acquisition rights may exercise the rights within the limit of one-half (1/2) from April 18,
2015 to April 17, 2016.
(c) Those who were granted the share acquisition rights may exercise the rights within the limit of three-fourths (3/4) from
April 18, 2016 to April 17, 2017.
(d) Those who were granted the share acquisition rights may exercise all the rights from April 18, 2017 to April 17, 2022.
The 30th and the 31st warrants(a) Those who were granted the share acquisition rights may exercise the rights within the limit of one-fourth (1/4) from May
15, 2015 to May 14, 2016.
(b) Those who were granted the share acquisition rights may exercise the rights within the limit of one-half (1/2) from May 15,
2016 to May 14, 2017.
(c) Those who were granted the share acquisition rights may exercise the rights within the limit of three-fourths (3/4) from May
15, 2017 to May 14, 2018.
(d) Those who were granted the share acquisition rights may exercise all the rights from May 15, 2018 to May 14, 2023.

―46―

(3) The Person Granted shall exercise the rights starting from the date of resolution by the below-mentioned shareholders’ meetingor the Board of Directors’ meeting until one day before the effective date of the Organizational Restructuring as followed,
regardless of the conditions of the exercise period originally stipulated, when the Organizational Restructuring is approved by
the resolution of the Company’s shareholders’ meeting (including the case where resolution of a shareholders’ meeting isdeemed to exist pursuant to the provision of Article 319 of the Companies Act) or the Board of Directors’ meeting (limited tothe case where no shareholders’ meeting is required for the said Organizational Restructuring) before the exercise period of theshare acquisition rights comes into effect: an absorption-type merger or an incorporation-type merger where the Company
becomes a dissolving company and an absorption-type split or an incorporation-type company split where the Company
becomes a split company, or a share exchange or a share transfer where the Company becomes a wholly-owned subsidiary(collectively, “Organizational Restructuring” as mentioned above).
(4) The share acquisition rights shall not be offered for pledge or disposed of in any other way.
(5) A person to whom these stock options are granted (“Person Granted”) must have the status as the Company’s director, Audit &Supervisory Board member, or employee of the Company or its affiliates at the time of exercise. However, this is notnecessarily the case where:(a) The Person Granted is a director or Audit & Supervisory Board member of the Company or its affiliates and retires due tothe expiry of her/his term.
(b) The Person Granted is an employee of the Company or its affiliates and retires due to compulsory retirement.
(c) The Person Granted is a director, Audit & Supervisory Board member, or employee of the Company or its affiliates and theBoard of Directors resolves that he/she has resigned or retired with honorable recognition.
(6) In the event that:(a) The Person Granted dies before the exercise period comes into effect, the beneficiary/ies shall exercise the rights of up to
one-half (1/2) within six (6) months from the date of inheritance, or(b) The Person Granted dies during the exercise period, the beneficiary/ies shall exercise all the rights within six (6) months
from the date of inheritance. However, in the event that the beneficiary/ies dies, the rights shall be discarded and shall not
be exercised by his/her beneficiary/ies.
(7) The Person Granted must have the status as a director or employee of the Company or its affiliates at the time of exercise.
However, this is not necessarily the case where:(a) The Person Granted is a director of the Company or its affiliates and retires due to the expiry of her/his term.
(b) The Person Granted is an employee of the Company or its affiliates and retires due to compulsory retirement.
(c) The Person Granted is a director or employee of the Company or its affiliates and the Board of Directors resolves thathe/she has resigned or retired with honorable recognition.
(8) In the event that the Person Granted dies, the beneficiary/ies shall be able to succeed and exercise the share acquisition rights asprescribed in the allotment agreement for share acquisition rights entered into between the Company and the Person Granted.
However, in the event that the beneficiary/ies dies, the rights shall be discarded and shall not be exercised by his/her
beneficiary/ies.

―47―

(2) Changes in the size of stock options
The following information is based on stock options that were available in the fiscal year ended December 31, 2018. The
number of stock options are calculated to the number of shares.
(a) Number of stock options

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

(Unit: number of shares)
The 17th Warrant The 19th Warrant
March 18, 2009
March 18, 2009

The 14th Warrant
October 1, 2008

The 16th Warrant
October 1, 2008

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

28,000——28,000—70,000——70,000
—

4,000
—
—
—
4,000

2,500
—
—
—
2,500

The 20th Warrant
March 31, 2010

The 21st Warrant
March 31, 2010

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

344,500———
344,500

141,500——
8,000
133,500

153,000———
153,000

10,000———10,000―48―(Unit: number of shares)
The 22nd Warrant The 23rd Warrant
March 31, 2010
October 15, 2010

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

(Unit: number of shares)
The 26th Warrant The 27th Warrant
May 2, 2012
May 2, 2012

The 24th Warrant
March 31, 2011

The 25th Warrant
March 31, 2011

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

192,000———
192,000

89,000——5,500
83,500362,500———
362,500

212,200——
16,900195,300

The 30th Warrant
May 29, 2013

The 31st Warrant
May 29, 2013

21,250——21,250—10,925—200
10,725
—

—
—
—
—
—

—
—
—
—
—

94,75021,250——116,000

47,975
10,725—4,700
54,000252,000—
183,000—
69,000136,600—
41,5007,000
88,100―49―(Unit: number of shares)
The 32nd Warrant The 33rd Warrant
April 30, 2014
April 30, 2014

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

(Unit: number of shares)
The 37th Warrant The 38th Warrant
April 14, 2016
April 14, 2016

The 35th Warrant
April 10, 2015

The 36th Warrant
April 10, 2015

173,300——
173,300—

153,500——
153,500—

203,500——
16,500187,000

268,100—
49,90023,500194,700

30,900173,300
148,000—
56,20029,500
153,500
41,0007,000
135,000

33,00016,500——49,50015,00023,500——38,500The 40th Warrant
April 24, 2017

The 41st Warrant
April 24, 2017

280,000——
40,000240,000

391,100—
90,90026,000274,200—
305,000——
305,000—
464,800
60,50030,000374,300—
40,000——40,000—26,000——26,000

—
—
—
—
—

—
30,000——30,000―50―(Unit: number of shares)
The 43rd Warrant The 44th Warrant
April 26, 2018
April 26, 2018

(b) Per share prices
Grant date
Exercise price (yen)(Note 1)

The 14th Warrant
October 1, 2008

The 16th Warrant
October 1, 2008

The 17th Warrant
March 18, 2009

The 19th Warrant
March 18, 2009

1,169

1,169

1,169

1,169

—

—

—

—

0

0

0

0

Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)Grant date
Exercise price (yen)The 20th Warrant
March 31, 2010

The 21st Warrant
March 31, 2010

The 22nd Warrant
March 31, 2010

The 23rd Warrant
October 15, 2010

585

585

585

585

—

—

—

—

0

0

0

0

The 24th Warrant
March 31, 2011

The 25th Warrant
March 31, 2011

The 26th Warrant
May 2, 2012

The 27th Warrant
May 2, 2012

682

682

555

555

—

—

—

—

0

0

(a) 179(b) 187(c) 195(d) 202(a) 179(b) 187(c) 195(d) 202

The 30th Warrant
May 29, 2013

The 31st Warrant
May 29, 2013

The 32nd Warrant
April 30, 2014

The 33rd Warrant
April 30, 2014

799

1

1

(Note 1)

Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)Grant date
Exercise price (yen)(Note 1)

Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen) (Note 2)

Grant date
Exercise price (yen)(Note 1)

(Note 1)

799

(Note 1)

Average stock price atthe time of exercise
(yen)

—

—

185

183

Fair value price at
grant date (yen) (Note 2)(a) 586(b) 602(c) 617(d) 631(a) 586(b) 602(c) 617(d) 631229

229

The 35th Warrant
April 10, 20151

The 36th Warrant
April 10, 20151

The 37th Warrant
April 14, 20161

The 38th Warrant
April 14, 2016
1

185

183

—

—

306

306

272

272

Grant date
Exercise price (yen)Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)―51―Grant date
Exercise price (yen)Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)The 40th Warrant
April 24, 20171

The 41st Warrant
April 24, 20171

The 43rd Warrant
April 26, 20181

The 44th Warrant
April 26, 2018
1

—

—

—

—

203

203

198

198

(Notes) 1. The Company increased its capital through the public offering on December 4, 2013 and through the third-party allotment on
December 25, 2013, at the per share amount less than the exercise price of options. Thus, the exercise amounts above arestated after applying the price adjustments clause.
2. (a), (b), (c), and (d) above correspond to each of (a), (b), (c), and (d) of the exercise periods as previously described in 3. (1)*(2).

4. Method for estimating the fair value of the stock options
The fair value of the stock options that were granted during this fiscal year is estimated based on the following method:(1) Estimate technique used: Black-Scholes Option Pricing Model(2) Major assumptions and estimate method
The 43rd Warrant

The 44th Warrant

Volatility of stock price (Note 1)

56.95%

56.95%

Estimated remaining period (Note 2)

2.9 years

2.9 years

Estimated dividend (Note 3)

0 yen per share

0 yen per share

Risk-free interest rate (Note 4)

ሺ0.12)%

ሺ0.12)%(Notes) 1. The volatility was calculated based on the actual stock prices from May 23, 2015 to April 24, 2018.
2. The period from the allotment date to the start date of the exercise period is used.
3. The Company estimates dividends to be zero since no dividends have been paid in the past.
4. This represents yields of Japanese government bonds corresponding to the estimated remaining outstanding period.

5. Estimate of the number of stock options vested
The number of expired shares is estimated based on the historical turnover ratio.

―52―

(Deferred tax accounting)
1. Significant components of deferred tax assets and liabilities
FY 2017(as of December 31, 2017)
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
Impairment loss disallowed
Loss on valuation of inventories
disallowed
Loss carried forward
Subtotal
Valuation allowance
Total deferred tax assets(Unit: thousands of yen)
FY 2018(as of December 31, 2018)

2,125

2,631

1,080,219

799,994735,170

1,286,703

1,189

1,755

426

392

16,329933

28,516
1,188

127,971

130,759

3,653

—

—

37,4382,925,912
4,893,931(4,893,931)—

3,524,512
5,776,745(5,776,745)—

2. The reconciliation between the effective tax rates reflected in the financial statements and the statutory tax rate is omitted
since the Company reported loss before income taxes for the fiscal years ended December 31, 2017 and 2018.

(Asset retirement obligations)
The Company has future restoration obligations related to leasehold contracts for office premises. Carrying the balanceof lease and guarantee deposits as an asset, the Company reasonably estimates non-recoverable amounts of lease andguarantee deposits under lease contracts and records the amount attributable to the respective fiscal year as expenses,
instead of accounting for asset retirement obligations by recognizing a liability and an associated asset.

―53―

(Segment information)[Segment information]
FY 2017 (from January 1, 2017 to December 31, 2017) and FY 2018 (from January 1, 2018 to December 31, 2018)
Segment information is omitted since the Company operates within a single segment, which includes the researchand development, manufacturing, and marketing of pharmaceutical drugs and other related activities.
[Related information]
FY 2017 (from January 1, 2017 to December 31, 2017)
1. Information by product and service
Information by product and service is omitted since external sales of a single service category account for morethan 90% of net sales stated in the statement of income.
2. Information about geographical areas(1) Net sales
Net sales information about geographical areas is omitted since external sales to Japanese customers accountfor more than 90% of net sales stated in the statement of income.
(2) Property, plant and equipment
None to be reported as all property, plant and equipment are located in Japan.
3. Information by the major customer(Unit: thousands of yen)
Name of customer

Net sales

Eisai Co., Ltd.

3,382,484

Name of related segment
Pharmaceutical businesses including the
research and development, manufacturing,and marketing of pharmaceutical drugs andother related activities

FY 2018 (from January 1, 2018 to December 31, 2018)
1. Information by product and service
Information by product and service is omitted since external sales of a single service category account for morethan 90% of net sales stated in the statement of income.
2. Information about geographical areas(1) Net sales
Net sales information about geographical areas is omitted since external sales to Japanese customers accountfor more than 90% of net sales stated in the statement of income.
(2) Property, plant and equipment
None to be reported as all property, plant and equipment are located in Japan.
3. Information by the major customer(Unit: thousands of yen)
Name of customer
Eisai Co., Ltd.

Net sales
3,648,493

Name of related segment
Pharmaceutical businesses including the
research and development, manufacturing,and marketing of pharmaceutical drugs andother related activities[Information about impairment loss on non-current assets by reportable segment]
FY 2017 (from January 1, 2017 to December 31, 2017)
Information by segment is omitted since the Company operates within a single segment.
FY 2018 (from January 1, 2018 to December 31, 2018)
None to be reported.
[Information about the amortization and unamortized balance of goodwill by reportable segment]
FY 2017 (from January 1, 2017 to December 31, 2017) and FY 2018 (from January 1, 2018 to December 31, 2018)
None to be reported.
―54―

[Information about the gain on bargain purchase by reportable segment]
FY 2017 (from January 1, 2017 to December 31, 2017) and FY 2018 (from January 1, 2018 to December 31, 2018)
None to be reported.

(Affiliated party information)
Transactions with affiliated parties
Officer(s) and major individual shareholder(s) of the Company
FY 2017 (from January 1, 2017 to December 31, 2017)
None to be reported.
FY 2018 (from January 1, 2018 to December 31, 2018)
Category

Name ofcompany or
personExecutive

Fuminori
YoshidaRatio of voting
Capital or
rights and other Relationships
investment Business details or
Locationforms ofwith affiliated(thousands
profession
ownershippartiesof yen)(ownership) (%)——

Representative
Director, President
and Chief
Executive Officerof the Company(Ownership)
Direct: 4.18—

Transaction
details

Transaction
amount(thousandsof yen)Exercise ofshareacquisitionrights87,526(331
thousandshares)Year-end
Accountbalance(thousands
title
of yen)——(Note) This information describes the exercise during the fiscal year under review of share acquisition rights
granted based on resolutions at Board of Directors meetings on April 15, 2014 and March 26, 2015.

(Per share information)
FY 2017
FY 2018(from January 1, 2017(from January 1, 2018
to December 31, 2017)
to December 31, 2018)
Net assets per share
50.00 yen Net assets per share
53.06 yen
Loss per share(79.78) yen Loss per share(41.38) yen(Notes) 1. While having potential dilutive shares, diluted earnings per share is not provided since the Company
reported loss per share.
2. The basis for calculating loss per share is as follows:

Loss (thousands of yen)Amount not attributable to the shareholders of common
stock (thousands of yen)
Loss attributable to the shareholders of common stock(thousands of yen)
Average number of shares outstanding during the year
(shares)
Description of potential dilutive shares not included in
the earning-per-share calculation due to anti-dilution

FY 2017(from January 1, 2017
to December 31, 2017)(3,977,862)

FY 2018(from January 1, 2018
to December 31, 2018)(2,752,533)――(3,977,862)(2,752,533)

49,857,917

66,511,113

24 types of shareacquisition rights(11,686,800 units) inaccordance with theCommercial Code of1890 Article 280 (20) and(21), and the Companies
Act Article 236, 238, and239.

24 types of shareacquisition rights(33,758,300 units) inaccordance with theCommercial Code of1890 Article 280 (20) and(21), and the Companies
Act Article 236, 238, and
239.

―55―

3. The basis for calculating net assets per share is as follows:

Net assets (thousands of yen)Amount to be deducted from net assets (thousands ofyen)(Of which, share acquisition rights herein [thousandsof yen])Net assets attributable to the shareholders of common
stock (thousands of yen)
Number of shares used in the calculation of net assets
per share (shares)

FY 2017
FY 2018(as of December 31, 2017) (as of December 31, 2018)
3,239,402
4,901,799(Significant subsequent events)
None to be reported.

―56―

536,772

529,897(536,772)(529,897)

2,702,629

4,371,902

54,049,149

82,398,849

6. Other(1) Change in officers
None to be reported.

(2) Other
None to be reported.

―57―