Disclaimer: This translation is prepared and provided for readers’ convenience only. This summary does not constitute any
guarantee, and the Company will not compensate any losses and/or damage stemming from actions taken based on thesestatements. In the case that there is any discrepancy between the Japanese and English versions, the Japanese version is assumed
to be correct.

February 14, 2024

Summary of Consolidated Financial Results
for the Fiscal Year Ended December 31, 2023 (JGAAP)
Listed company’s name: RaQualia Pharma Inc.
Listed on:
Tokyo Stock Exchange (TSE)
Stock code:
4579
URL:
https://www.raqualia.com/en/
Representative:
Hirobumi Takeuchi, President and CEO
Contact:
Hidefumi Sugiyama, General Manager, Finance & Accounting Dept.
Scheduled date of general meeting of shareholders: March 26, 2024
Scheduled date of dividend payment:―
Scheduled date of filing of securities report:
March 27, 2024
Supplementary documents for financial results:
Yes
Financial results briefing:
Yes(TEL) +81-52-446-6100(Amounts are rounded down to the nearest million yen.)

1. Consolidated financial results for the fiscal year ended December 31, 2023 (January 1, 2023 to December 31, 2023)(1) Consolidated operating results(Percentage figures represent changes from the previous fiscal year.)Net sales
Fiscal year ended
December 31, 2023
December 31, 2022

Operating profit

Profit attributable toowners of parent

Ordinary profit

million yen%

million yen%

million yen%

million yen

%

1,901
2,918

(34.8)
5.1

(337)
866

–
22.4

(293)
904

–
4.7

(323)
723

–
(4.3)

Note: Comprehensive income

Fiscal year ended December 31, 2023:
Fiscal year ended December 31, 2022:

Earnings per share(Basic)Earnings per share(Diluted)(197) million yen[–%]
693 million yen [(10.5)%]
Ordinary profit/ total Operating profit/ net
assetssales

Profit/equity

Fiscal year endedyen
yen
December 31, 2023
(14.98)–December 31, 2022
34.50
34.47
Reference: Share of (profit) loss of entities accounted for using equity method:
Fiscal year ended December 31, 2023:
Fiscal year ended December 31, 2022:

%

%

%

(5.6)
14.1

(4.5)
15.7

(17.7)
29.7– million yen– million yen(2) Consolidated financial position
Total assets

Net assets

As ofmillion yen
December 31, 2023
6,871
December 31, 2022
6,257
Reference: Equity As of December 31, 2023: 6,094 million yen

Equity ratio

Net assets per share

million yen

%

yen

6,120
88.7
5,496
87.7
As of December 31, 2022: 5,488 million yen

281.87261.65(3) Consolidated cash flows
Cash flows fromoperating activities
Fiscal year ended
December 31, 2023
December 31, 2022

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash equivalents
at end of period

million yen

million yen

million yen

million yen

(718)
1,480

(135)
(47)

793
(29)

3,664
3,679

2.

Dividends
Annual dividends per share
First
SecondThird
Fiscal yearquarter-end quarter-end quarter-end
end
yen

Fiscal year ended
December 31, 2022
Fiscal year ended
December 31, 2023
Fiscal year ending
December 31, 2024
(forecast)
3.

yen

yen

Total

Total cash
dividends(Total)yen

yenmillion yen

Ratio of
Dividend
dividends topayout ratio
net assets(Consolidated)(Consolidated)
%

%

–

0.00

–

0.00

0.00

–

–

–

–

0.00

–

0.00

0.00

–

–

–

–

0.00

–

0.00

0.00

–

Forecasts of consolidated financial results for the fiscal year ending December 31, 2024 (January 1, 2024 to December 31,
2024)(Percentage figures represent changes from the previous fiscal year.)Net sales
million yen

Operating profit%

million yen

Profit attributable to Earnings perowners of parent
share (Basic)

Ordinary profit%

million yen%

million yen%

yen

Fiscal year ending
4,535 138.5
313
–
290
–
236
–
10.91
December 31, 2024
Note: As the Company conducts performance management on an annualized basis, forecasts of results over a six-month period are
not presented.
* Notes(1) Changes in significant subsidiaries during the fiscal year ended December 31, 2023 (changes in specified subsidiaries resulting
in the change in scope of consolidation): None
(2) Changes in accounting policies, changes in accounting estimates, and restatements of prior financial statements
a. Changes in accounting policies due to the revisions to accounting standards and other regulations: Yes
b. Changes in accounting policies due to other reasons: Nonec. Changes in accounting estimates: None
d. Restatements of prior financial statements: None
Note: For more details, please refer to the section of “(5) Notes to consolidated financial statements (Changes in accounting
policies)” of “3. Consolidated financial statements and significant notes thereto” on page 17 of the attached material.
(3) Number of issued shares (common shares)
a. Total number of issued shares at the end of the period (including treasury shares)
As of December 31, 2023

21,623,281 shares

As of December 31, 2022

20,977,181 sharesb. Total number of treasury shares at the end of the period
As of December 31, 2023

51 shares

As of December 31, 2022

50 sharesc. Average number of outstanding shares during the period
For the fiscal year ended December 31, 2023

21,606,239 shares

For the fiscal year ended December 31, 2022

20,969,376 shares

(Reference) Overview of non-consolidated financial results
Non-consolidated financial results for the fiscal year ended December 31, 2023 (January 1, 2023 to December 31, 2023)(1) Non-consolidated operating results(Percentage figures represent changes from the previous fiscal year.)Net sales
Fiscal year ended
December 31, 2023
December 31, 2022

Fiscal year ended
December 31, 2023
December 31, 2022

Operating profit

Ordinary profit

Profitmillion yen%

million yen%

million yen%

million yen

%

1,642
2,681

(38.7)
13.5

(478)
683

–
35.1

(444)
701

–
6.9

(431)
583

–
(5.1)

Earnings per share(Basic)Earnings per share(Diluted)

yen

yen

(19.95)
27.83

–
27.81

(2) Non-consolidated financial position
Total assets
Net assets
Equity ratio
Net assets per share
As ofmillion yen
million yen%
yen
December 31, 2023
6,596
5,862
88.5
269.95
December 31, 2022
6,091
5,346
87.6
254.49Reference: Equity As of December 31, 2023: 5,837 million yen
As of December 31, 2022: 5,338 million yen* Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.
* Appropriate use of financial forecasts and other special remarks(Caution concerning forward-looking statements)
Forward-looking statements provided in this document, including financial forecasts, are based on the information currently
available to the Company and certain assumptions considered reasonable. Such statements are included without any guarantee asto their future achievement. Actual results, etc. may differ materially from the forecasts depending on various factors.
Moreover, as notified in “Notice Concerning Acquisition of Shares of FIMECS, Inc. (Conversion to a Subsidiary),” announced
today, the Company is to acquire all shares of FIMECS, Inc. on March 26, 2024, converting it into a consolidated subsidiary.
This conversion to a consolidated subsidiary has been factored into the financial forecast figures.
(Method of accessing supplementary documents for financial results and details of financial results briefing)
The Company plans to hold financial results briefings for institutional investors and analysts on Thursday, February 15, 2024,
and for general investors on Friday, February 16, 2024.
The Company plans to post the documents used at the briefings on its website promptly after the briefings are held.

Contents of attachment
1.

Overview of consolidated operating results and others ................................................................................................ 2(1) Overview of consolidated operating results for the fiscal year under review ........................................................... 2(2) Overview of consolidated financial position for the fiscal year under review.......................................................... 6(3) Overview of cash flows for the fiscal year under review ......................................................................................... 7(4) Outlook for the fiscal year ending December 31, 2024 ............................................................................................ 7

2.

Basic rationale for selecting the accounting standard .................................................................................................. 83.

Consolidated financial statements and significant notes thereto .................................................................................. 9(1) Consolidated balance sheet ....................................................................................................................................... 9(2) Consolidated statement of income and consolidated statement of comprehensive income .................................... 11
Consolidated statement of income .......................................................................................................................... 11
Consolidated statement of comprehensive income ................................................................................................. 12(3) Consolidated statement of changes in equity .......................................................................................................... 13(4) Consolidated statement of cash flows ..................................................................................................................... 15(5) Notes to consolidated financial statements ............................................................................................................. 17
Notes on premise of going concern ........................................................................................................................ 17
Notes on significant changes in the amount of shareholders’ equity ...................................................................... 17
Changes in accounting policies .............................................................................................................................. 17
Additional information ........................................................................................................................................... 17
Segment information, etc. ....................................................................................................................................... 17
Per share information.............................................................................................................................................. 18
Significant subsequent event .................................................................................................................................. 19

-1-

1.

Overview of consolidated operating results and others(1) Overview of consolidated operating results for the fiscal year under review(General overview)
During the fiscal year ended December 31, 2023, the Japanese economy showed a modest recovery due to the normalization of
economic activities following the COVID-19 pandemic. According to the Bank of Japan’s quarterly short-term economic survey
in December 2023, business sentiment among large enterprises in the non-manufacturing sector rose for the seventh consecutive
quarter on the back of a recovery in holiday and inbound demand, while business sentiment among large enterprises in the
manufacturing sector also improved for the third consecutive quarter on the back of improved terms of trade due to falling energy
prices and firm production of automobiles and other end products. In the pharmaceutical industry, as in the previous year, theyear continued to be marked by discussions in various forums about issues such as the worsening drug lag/drug loss andinsecurity in the supply of pharmaceutical products, especially generics. At the meeting of the Special Committee on Drug Pricesof the Central Social Insurance Medical Council (Chuikyo), opinions were also heard from industry associations in preparation
for the next reform of the National Health Insurance (NHI) drug price system in April 2024 and discussions were held on
measures to promote both innovation and the sustainability of the universal health insurance system, as well as for the rapid
introduction of innovative new drugs. In addition, following the report of the Ministry of Health, Labour and Welfare Expert
Panel on “Comprehensive Measures to Achieve a Rapid and Stable Supply of Pharmaceuticals,” discussions are underway toreview pharmaceutical regulations and to change the industrial structure of generic drugs.
Such industry trends had no small impact on the business activities of drug discovery venture companies, like the Group, that
operate a drug discovery business.
Under such conditions, the business activities of the Group during the fiscal year under review were as follows.
Regarding human drug products, sales of K-CAB® (generic name: tegoprazan)—gastric acid secretion inhibitor marketed by HK
inno.N Corporation (headquarters: Osong, South Korea, “HK inno.N”)—in South Korea continued to perform well from theprevious year, with sales in the fiscal year from external prescriptions of 158.2 billion won, an increase of 19.8% compared withthe previous fiscal year, equivalent to approximately 17.4 billion yen at 0.11 yen to the won, maintaining the No. 1 share in theSouth Korean gastric acid secretion inhibitor market.
Global expansion of tegoprazan also progressed well. The Company has executed exclusive license agreements with HK inno.N
for the development, marketing, and manufacturing of tegoprazan with sublicensing rights. As of the end of the fiscal year underreview, in 35 countries outside of South Korea, the companies that have entered into the license agreements with HK inno.N (the“sublicensees”) are engaged in development, manufacturing, and marketing in their respective countries and regions. During the
fiscal year under review, tegoprazan products were launched in Mexico, Indonesia, Singapore, and Peru. With these launches,
tegoprazan are now being marketed in eight countries: South Korea, China, Mongolia, the Philippines, Mexico, Indonesia,
Singapore, and Peru. In China, which is the second country following South Korea, where tegoprazan products were launchedin 2022 by the sublicensee, Shandong Luoxin Pharmaceutical Group Co., Ltd. (headquarters: Shandong Province, China,“Luoxin”) and tegoprazan is currently marketed in 31 provinces and administrative regions, as they are now eligible forreimbursement under the national basic medical insurance program from March 2023. In addition, the product is under review
or in preparation for submission for approval in approximately 20 countries, including Thailand, Vietnam, and Argentina. In the
U.S., the world’s second-largest market after China, a Phase III clinical trial is underway by Braintree Laboratories(headquartered in Massachusetts, U.S.; “Braintree”), a sublicensee, and an application for approval is expected in 2024. As aresult of the above progress, the Company received milestone income or a portion of the income earned by HK inno.N from its
sublicensees based on development progress in accordance with the agreement with HK inno.N.
With regard to pet drugs, sales were strong for GALLIPRANT® (generic name: grapiprant), which is a drug for osteoarthritis indogs, and ENTYCE® (generic name: capromorelin), which has an indication for anorexia management for dogs, and ELURA®
(generic name: capromorelin), which has an indication for weight loss management in cats with chronic kidney failure, all ofwhich were licensed to Elanco Animal Health Inc. (headquarters: Indiana, U.S., “Elanco”). Since there is no official drug pricesystem for pet pharmaceuticals, the industry is characterized by the fact that drug prices are not cut as in human pharmaceuticals,
and manufacturers have strong pricing power for products highly rated by pet owners. Under these circumstances, the sales
royalty income for the Company increased. In June 2023, the European Medicines Agency (EMA) approved ELURA® for the
management of anorexia and weight loss in cats with chronic diseases, but the product was not launched during the fiscal year
under review, and the achievement of the milestone assumed in the plan at the beginning of the fiscal year has been postponedto the next fiscal year.
Licensed programs are also steadily progressing in preclinical trials and clinical development at licensee and sublicensee
companies. As new progress in the fiscal year under review regarding the cannabinoid CB2 receptor agonist (RQ00202730/AAT-730/OCT461201) assigned by the Company to AskAt Inc. (headquarters: Nagoya, Aichi, “AskAt”) and further-2-licensed by AskAt to Oxford Cannabinoid Technologies Ltd. (headquarters: London, U.K., “OCT”), OCT initiated Phase I
clinical trials in the U.K. OCT plans to pursue further clinical development with chemotherapy-induced peripheral neuropathy(CIPN) as the primary indication. In addition, pre-clinical studies have been completed for the TRPM8 blocker (RQ00434739/XG2002) licensed to Xgene Pharmaceutical Co. Ltd. (headquarters: Hong Kong, “Xgene”), and Xgene is now
preparing for Phase I clinical trials. Pre-clinical and clinical trials were also conducted for other out-licensed programs at licensee
companies.
In addition, one new license agreement was concluded during the fiscal year under review. In April 2023, the Company andVetbiolix SAS (headquarters: Nord, France; “Vetbiolix”) agreed to enter into an option and license agreement for a 5-HT4 agonist(RQ-00000010), to develop pet drugs for the treatment of gut motility disorders in dogs and cats. Under the terms of theagreement, Vetbiolix is granted an exclusive option for an exclusive, worldwide, and sublicensable license to develop,
manufacture and market veterinary medicines containing RQ-00000010. Upon exercise of the exclusive option, Vetbiolix will
pay option fees to the Company, and the Company will acquire the right to receive milestone payments based on development
progress and the sales royalty based on the product sales.
For pre-licensing programs, the Company has conducted business development activities aimed at acquiring further licensees
through a flexible combination of face-to-face meetings and online conferences. Although the Company holds the rights todevelop, manufacture, and market tegoprazan in Japan, in order to achieve a speedy launch of the drug in Japan, the Company
has changed its policy to concentrate on licensing activities forgoing clinical trials in-house and has proceeded in discussions
with candidate partner companies. The initial plan was to conclude a license agreement during the fiscal year under review, but
the agreement was not concluded and has been postponed to the next fiscal year. For the ghrelin receptor agonist, which theCompany is developing in-house with the aim of securing a large license agreement, the Company has been conducting preclinical studies and manufacture active pharmaceutical ingredients (APIs) for clinical trials.
In the discovery research stage, the Company is focusing on discovery research programs to generate development compounds,
and is also working to strengthen its drug discovery research capabilities, which are central to its growth strategy. In the fiscal
year under review, focusing on four areas, “modality,” “drug target,” “disease area,” and “basic technology,” the Company isaiming to establish a next-generation in-house drug discovery value chain through synergy effects from existing technologies
and new initiatives. In addition to its own independent research, it has strengthened its collaboration with startups and drug
discovery ventures. As part of those efforts, the Company has been collaborating with Veritas In Silico, Inc. (headquarters:
Shinagawa-ku, Tokyo; hereinafter “Veritas In Silico”) since December 2022 to create mRNA-targeted small molecule drugs thattarget multiple genes related to cancer diseases and in December 2023, the two companies achieved a predetermined milestone.
In addition, in the fiscal year under review, the Company started a new collaboration with leadXpro AG (headquartered in
Villigen, Switzerland) to accelerate drug discovery research through 3D structural analysis of membrane proteins. Furthermore,
we have established a new research base at Shonan Health Innovation Park (Fujisawa City, Kanagawa Prefecture) for the purposeof accelerating these efforts. In joint research with ASKA Pharmaceutical Co., Ltd. (headquarters: Minato-ku, Tokyo), which
has been ongoing since July 2019, the joint research agreement was terminated in June 2023 with the agreement of bothcompanies.
Clinical trials for the treatment of myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML) are underway in the
U.S. for a retinoic acid receptor alpha agonist (tamibarotene, TM-411/SY-1425), licensed by the Company’s consolidated
subsidiary TMRC Co., Ltd. (“TMRC”) to Syros Pharmaceuticals Inc. (headquarters: Massachusetts, U.S., “Syros”). With regard
to MDS, a Phase III clinical trial using patients with high-risk myelodysplastic syndrome (HR-MDS) overexpressing the RARA
gene is ongoing. Regarding AML, in December 2023, Syros announced initial data from the randomized Phase II clinical trial
part of the study. In connection with these activities, during the year ended December 31, 2023, TMRC received fees related tothe clinical development from Syros.
In addition, for the issuance of new shares through third-party allotment and the 16th series of share acquisition rights to CVI
Investments, Inc. (headquartered in the Cayman Islands) as resolved by the Board of Directors on December 20, 2022, thepayment procedure was completed on January 5, 2023. As a result, the Company raised 786 million yen.
Accordingly, financial results for the fiscal year under review were as follows. Business revenue for the period was 1,901 million
yen (down 34.8% year on year), operating loss totaled 337 million yen (compared with operating profit of 866 million yen a year
earlier), ordinary loss totaled 293 million yen (compared with ordinary profit of 904 million yen a year earlier), and loss
attributable to owners of parent was 323 million yen (compared with profit attributable to owners of parent of 723 million yen a
year earlier).
-3-

Total business expenses were 2,238 million yen (up 9.1% year on year). In terms of the breakdown of this total, in addition tocost of business revenue of 245 million yen (up 5.8% year on year), research and development expenses were 1,372 million yen(up 9.9% year on year) and other selling, general and administrative expenses came to 620 million yen (up 8.6% year on year).
(Research and development activities)
Research and development expenses of the Group during the fiscal year ended December 31, 2023 were 1,372 million yen. The
main components of these activities were as follows:<RaQualia’s research and development and collaborative research>(A)
Clinical development phasea)
Potassium-competitive acid blocker (RQ-00000004, tegoprazan)
The rights to this compound for the target indication of gastroesophageal reflux disease (GERD) and other gastric
acid-related diseases have been licensed to HK inno.N for regions other than Japan, while the Company holds therights in Japan. In the fiscal year under review, in order to achieve a speedy launch of the drug in Japan, the Company
has decided to forgo conducting clinical trials in-house and concentrate on licensing activities and had discussions
with candidate partner companies. The initial plan was to conclude a license agreement during the fiscal year underreview, but the agreement was not concluded and has been postponed to the next fiscal year.
b)

5-HT4 partial agonist (RQ-00000010)
Regarding this compound for the target indication of gastrointestinal dysmotility, including gastroparesis, functional
dyspepsia, and chronic constipation, partnering activity was promoted as a post-Phase I clinical trials licensing
preparation program. As a result, for pet pharmaceutical applications, the Company entered into an option and license
agreement with Vetbiolix for the treatment of intestinal motility disorders in dogs and cats during the fiscal year underreview.

c)

5-HT2B antagonist (RQ-00310941)
This compound for the target indication of irritable bowel syndrome with diarrhea (IBS-D) is also in a post-Phase I
clinical trials licensing preparation program.

(B)a)

Preclinical development phase
Ghrelin receptor agonist (RQ-00433412)
This compound is under development for the target indication of cancer-related anorexia/cachexia syndrome andconstipation resulting from spinal cord injury. Continuing from the previous year, pre-clinical studies and manufacture
active pharmaceutical ingredients (APIs) for clinical trials were outsourced in the fiscal year under review.

b)

Motilin receptor agonist (RQ-00201894)
This compound is under development for the target indication of gastrointestinal dysmotility including gastroparesis,
functional dyspepsia, and post-operative ileus, and is in a licensing preparation program, as the preclinical studies
required for Phase I clinical trials have been completed.

c)

TRPM8 blocker (RQ-00434739)
Based on the license agreement signed in September 2021, the rights to this compound have been licensed to Xgene
for regions other than Japan, while the Company continues to hold the rights in Japan. In the fiscal year under review,
the Company provided support to Xgene for the start of pre-clinical studies.

(C)
a)

b)

Exploratory research phase
Independent research projectIn addition to promoting exploratory research aimed at the discovery of development candidate compounds, theCompany is also working to strengthen its drug discovery research capabilities, which are central to its growth strategy.
In addition to the joint research with pharmaceutical companies listed below, also in independent research projects,
the Company is aiming to establish a next-generation in-house drug discovery value chain through the synergy effects
from existing technologies and new initiatives in four areas: “modality,” “drug target,” “disease area,” and“fundamental technology.”
Collaborative research with companies
Collaborative research implemented with companies in the fiscal year under review is as follows.
Company
Start dateContent
ASKA Pharmaceutical Co., Ltd.

July 2019SOCIUM Inc.

May 2022-4-

Collaborative research with respect to drug
discovery research targeting at a specific ion channel
Collaborative research to explore the potential of theCompany’s compounds for intractable and rarediseasesCompanyc)Start dateContent
Verification of the feasibility of drug discovery
application of intracellular antibody technology(from STAND) for the creation of therapeutic agentsfor intractable and rare diseases
Collaborative research for discovery of therapeutic
drugs for ocular diseases

STAND Therapeutics Co., Ltd.

August 2022

D. Western Therapeutics InstituteDecember 2022

Veritas In Silico Inc.

December 2022

Collaborative research for discovery of smallmolecule drugs targeting messenger RNA (mRNA)

leadXpro AG

April 2023

Three-dimensional structural analysis of membraneproteins

Collaborative research with academia
Multiple early-stage collaborative research projects, such as drug target discovery, are in progress with universities
and other public research institutions, including Nagoya University and Gifu Pharmaceutical University.

<Status of development at licensee corporation>a)tegoprazan (K-CAB®, RQ-00000004/LXI-15028, etc.)
HK inno.N launched K-CAB® 25mg, which is a new drug product that contains half the amount of tegoprazan
compared to the current drug, in South Korea in January 2023 as a maintenance treatment for patients with cured
erosive esophagitis. This means K-CAB® is the only Potassium Competitive Acid Blocker (P-CAB)-based gastric acidsecretion inhibitor marketed in South Korea that can be used in all stages of erosive esophagitis, from onset to after it
is cured. The five approved indications in Korea are erosive gastro-esophageal reflux disease, non-erosive gastroesophageal reflux disease, gastric ulcer, adjuvant therapy for Helicobacter pylori eradication, and maintenancetreatment for patients with cured erosive gastro-esophageal reflux disease.
In China, it has been eligible for reimbursement under China’s public health insurance system since March 2023, andtegoprazan products are currently marketed in 31 provinces and administrative regions by Luoxin, a sublicensee(Chinese brand name (registered trademark): Taixinxan®). In November 2023, Luoxin received marketing approval
from the Chinese authorities for the treatment of duodenal ulcers. This brings the total number of approved indications
for manufacturing and marketing in China to two: erosive gastro-esophageal reflux disease and duodenal ulcers.
Duodenal ulcers are one of the most common and frequent chronic diseases in China, accounting for about 70% of all
peptic ulcers. In addition, Luoxin completed a Phase III clinical trial for adjuvant therapy for Helicobacter pylori
eradication and submitted an application to the Chinese authorities for approval.
With respect to other countries and regions, during the fiscal year under review, tegoprazan products were launchedin Mexico, Indonesia, Singapore, and Peru. With these launches, tegoprazan are now being marketed in eight countries:
South Korea, China, Mongolia, the Philippines, Mexico, Indonesia, Singapore, and Peru. In addition, the product iscurrently under review or in preparation for submission for approval in more than 20 countries around the world,
including Thailand, Vietnam, Malaysia, Argentina, Brazil, and India. In the U.S., Braintree is conducting a Phase III
clinical trial in patients with erosive gastro-esophageal reflux disease and non-erosive gastro-esophageal reflux disease
since October 2022 and is expected to file for approval in 2024.
b)

EP4 antagonist (GALLIPRANT®, grapiprant)This compound is currently being marketed as a drug for osteoarthritis in dogs by Elanco. Since its launch in the U.S.
in January 2017, the compound has been launched in over 20 countries around the world and is also being marketedin Japan since October 2020.

c)

Ghrelin receptor agonist (ENTYCE®, ELURA®, capromorelin)
Two products containing capromorelin, a ghrelin receptor agonist, as an active ingredient are currently being marketedin the U.S.: ENTYCE® for the treatment of anorexia in dogs and ELURA® for the management of weight loss in catswith chronic kidney disease (CKD). In June 2023, the European Medicines Agency (EMA) approved ELURA® forthe management of anorexia and weight loss in cats with chronic diseases, but the product was not launched during
the fiscal year under review, and the achievement of the milestone assumed in the plan at the beginning of the fiscal
year has been postponed to the next fiscal year.

d)

P2X7 receptor antagonist (RQ-00466479/AK1780)
Eli Lilly is currently conducting Phase II clinical trials for the compound, which was created through collaborative
research with Asahi Kasei Pharma and licensed to Eli Lilly and Company (Head Office: Indianapolis, Indiana, USA;
“Lilly”) by Asahi Kasei Pharma, for the treatment of patients with chronic pain.

e)

EP4 antagonist (RQ-00000007/AAT-007, grapiprant)
AskAt’s licensee 3D Medicines Inc. (headquarters: Shanghai, China, “3DM”) completed Phase I clinical trials in China
for the indication of pain, and Ningbo NewBay Medical Technology Development Co., Ltd. (headquarters: Zhejiang,
China), another of AskAt’s licensees, is conducting Phase I clinical trials in China in the area of oncology.
In the U.S., Ikena Oncology Inc. (headquartered in Massachusetts, U.S.), a licensee of AskAt, was conducting Phase
I clinical trials for the cancer immunotherapy drug. However, in September 2023, AskAt announced the termination-5-

of the sublicensing agreement on March 20, 2024. AskAt will now implement strategic options, including the selectionof a new partner.
f)

Cyclooxygenase-2 (COX-2) inhibitor (RQ-00317076/AAT-076)
AskAt’s licensee, 3DM, continues to conduct Phase I clinical trials in China for the indication of pain. In addition,
Velo-1, Inc. (headquartered in Tennessee, U.S.A.) is preparing to develop a pet pharmaceutical application.

g)

CB2 agonist (RQ-00202730/AAT-730/OCT461201)
In July 2023, OCT, a licensee of AskAt, initiated a Phase I clinical trial of this compound in the United Kingdom.
OCT plans to pursue further clinical development with this compound for chemotherapy-induced peripheral
neuropathy (“CIPN”) as the primary indication.

h)

TRPM8 blocker (RQ-00434739/XG2002)
In December 2023, Xgene, the licensee, announced that it was preparing to start Phase I clinical trials in Australia forthe development of a drug for the treatment of chronic pain. In addition, the company announced that the compound
exhibited favorable analgesic effects in various animal models of pain and had no effect on the cardiovascular,
respiratory, or central nervous systems, and that the compound also exhibited favorable characteristics in terms ofpharmacokinetics.

i)

Sodium channel blocker (RQ-00350215)
For this compound licensed to Hisamitsu Pharmaceutical Co., Inc. (headquarters: Tosu, Saga, “Hisamitsu
Pharmaceutical”) in December 2021, Hisamitsu Pharmaceutical is conducting pre-clinical studies for the developmentof a transdermal chronic pain treatment.

j)

Development candidate compound for a specific ion channel target (no compound code disclosed)
Regarding this compound discovered through collaborative research with EA Pharma Co., Ltd. (headquarters: Chuo,
Tokyo, “EA Pharma”), EA Pharma continues to develop it.

k)Selective sodium channel blocker (no compound code disclosed)
Regarding this compound licensed to Maruho Co., Ltd. (headquarters: Osaka, Osaka, “Maruho”), Maruho continues
to develop it.

l)5-HT4 partial agonist (RQ-00000010)
The compound licensed to Vetbiolix in the fiscal year under review is being developed by Vetbiolix for the expectedindications of megacolon in cats and gastroparesis in dogs.

m)Retinoic acid receptor alpha agonist (tamibarotene, TM-411/SY-1425)
Syros, TMRC’s licensee, is conducting clinical trials in the U.S. for MDS and AML. For MDS, a Phase III clinical
trial using HR-MDS patients is ongoing, and in January 2023, Syros received fast-track designation from the U.S.
Food and Drug Administration (FDA). Syros expects to complete patient enrollment in this Phase III clinical trial in
the first quarter of 2024 and report trial results in the fourth quarter of 2024. Regarding AML, in December 2023,
Syros announced initial data from the ongoing randomized Phase II clinical trial part of the study. In the announcement,
Syros noted that the study’s primary endpoint of complete response (CR)/complete remission with incomplete
hematological recovery (CRi) was 100% in evaluable patients (9 of 9 patients) who received the triple combination oftamibarotene, venetoclax and azacitidine, compared to 70% in control patients (7 of 10) who received the double
combination of venetoclax and azacitidine, and initial data on the safety of the triple combination were also presented
showing good tolerability. Syros is continuing to enroll patients in this Phase II clinical trial and expects to report
updated data from the trial in 2024.

(2) Overview of consolidated financial position for the fiscal year under review
AssetsTotal assets as of December 31, 2023 were 6,871 million yen, an increase of 614 million yen (up 9.8%) from the end of theprevious fiscal year. This is mainly attributable to a decrease in marketable securities of 200 million yen, an increase insupplies of 138 million yen, an increase in lease assets of 96 million yen, and an increase in investment securities of 243
million yen.
Liabilities
Total liabilities as of December 31, 2023 were 751 million yen, a decrease of 9 million yen (down 1.2%) from the end of
the previous fiscal year. This is mainly attributable to a decrease in accounts payable of 73 million yen, an increase in leaseobligations of 105 million yen, and a decrease in accounts payable - other of 47 million yen.
Net assets
Total net assets as of December 31, 2023 were 6,120 million yen, an increase of 623 million yen (up 11.3%) from the endof the previous fiscal year. This is mainly attributable to an increase in share capital and capital surplus of 786 million yen
due to capital increase through third-party allotment, and the recording of loss attributable to owners of parent of 323 million
yen.
Consequently, the equity ratio was 88.7% (up 1.0 percentage points from the end of the previous fiscal year).
-6-(3) Overview of cash flows for the fiscal year under review
The balance of cash and cash equivalents (“net cash”) as of December 31, 2023 amounted to 3,664 million yen, a decreaseof 14 million yen (down 0.4%) from the end of the previous fiscal year.
The respective cash flows in the fiscal year under review and the factors thereof are as follows.
Cash flows from operating activities
Net cash used in operating activities was 718 million yen, a decrease of 2,198 million yen (compared with net cash of 1,480
million yen provided a year earlier). This is mainly attributable to the recording of loss before income taxes of 294 million
yen and depreciation of 175 million yen, as well as use of cash due to an increase in inventories of 139 million yen andincome taxes paid of 121 million yen.
Cash flows from investing activities
Net cash used in investing activities was 135 million yen, an increase of 87 million yen (up 184.1% year on year). This ismainly attributable to the purchase of property, plant and equipment of 204 million yen, purchase of investment securitiesof 160 million yen, and proceeds from redemption of investment securities of 250 million yen.
Cash flows from financing activities
Net cash provided by financing activities was 793 million yen, an increase of 823 million yen (compared with net cash of
29 million yen used a year earlier). This is mainly attributable to proceeds from long-term borrowings of 50 million yen,proceeds from issuance of shares of 782 million yen, and repayments of lease liabilities of 52 million yen.
(Reference) Trend in cash flow-related indicators
Fiscal year
ended

Fiscal year
ended

Fiscal year
ended

Fiscal year
ended

Fiscal year
ended

December 31,
2019

December 31,
2020

December 31,
2021

December 31,
2022

December 31,
2023

Equity ratio (%)

95.3

94.1

91.3

87.7

88.7

Market value equity ratio (%)

580.9

492.8

470.0

413.0

216.6

Interest-bearing debt to cash flow
ratio (years)

–

–

0.1

0.2

–

Interest coverage ratio (factor)

–

–

252

247

–

Equity ratio: equity / total assets
Market value equity ratio: market capitalization / total assets
Interest-bearing debt to cash flow ratio: interest-bearing debt / cash flow
Interest coverage ratio: cash flow / paid interest
Note 1. Interest-bearing debt to cash flow ratio and interest coverage ratio for the fiscal year ended December 31, 2019,the fiscal year ended December 31, 2020, and the fiscal year ended December 31, 2023, are not provided since
operating cash flow was a minus figure.
(4) Outlook for the fiscal year ending December 31, 2024
For the next fiscal year (the fiscal year ending December 31, 2024), the Company expects to receive steady royalty income
from tegoprazan—a gastro-esophageal reflux disease treatment, GALLIPRANT®—a drug for osteoarthritis in dogs,
ENTYCE®—a treatment for anorexia in dogs, and ELURA®—a drug for weight loss management in cats. The Company
also expects to earn upfront payments associated with concluding new licensing agreements and milestone income associatedwith development progress.
In research and development activities, the Company will strive to enhance corporate value by making progress in researchand development-stage projects and by strengthening its drug discovery research infrastructure through collaboration withstartups, drug discovery ventures, academia, and other partners.
Moreover, the Company announced today the conversion of FIMECS, Inc. to a subsidiary through a share acquisition, andit will become a consolidated subsidiary from March 31, 2024. Accordingly, its financial results will be reflected in the
Company’s consolidated financial results from the second quarter of the fiscal year ending December 31, 2024.
As for the outlook of consolidated financial results for the fiscal year ending December 31, 2024, the Group forecasts
business revenue of 4,535 million yen, operating profit of 313 million yen, ordinary profit of 290 million yen and profit
attributable to owners of parent of 236 million yen.
The forecast figures presented above are based on the information currently available to the Group and certain assumptions
considered reasonable. Such statements are included without any guarantee as to their future achievement. Actual results,-7-etc., may differ materially from the forecasts depending on various factors. In the case where the Group acknowledges theneed to revise the financial forecasts, it will disclose such information promptly.

2.

Basic rationale for selecting the accounting standard
The Group has adopted Japanese accounting standards to ease the cost, etc., of parallel disclosure of reporting under both
Japanese accounting standards and international financial reporting standards (IFRS).
The Group does not have plans to adopt IFRS as of the end of the fiscal year under review; however, its policy is to respond
appropriately to the situation in Japan and overseas with regard to adoption trends by other companies in the industry.

-8-

3.

Consolidated financial statements and significant notes thereto(1) Consolidated balance sheet(Thousands of yen)
As of December 31, 2022

As of December 31, 2023

3,675,450
602,311
250,599
978
7,522
89,820108,633
86,777
4,822,094

3,714,984
603,196
49,754
1,713
146,226
66,600188,128
186,290
4,956,894

154,158
963,622
254,926(981,683)
391,024

157,866
1,124,544
397,738(1,106,541)
573,608

4,268
19,98472
24,325

4,544
25,57072
30,187

987,962
24,073–8,172
1,020,208
1,435,559
6,257,653

1,231,458
63,501
5,711
10,6101,311,281
1,915,077
6,871,972

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade, and contract assets
Securities
Work in process
Supplies
Advance payments to suppliers
Prepaid expenses
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Tools, furniture and fixtures
Leased assets
Accumulated depreciation
Total property, plant and equipment
Intangible assets
Trademark right
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term prepaid expenses
Deferred tax assets
Other
Total investments and other assets
Total non-current assets
Total assets-9-

(Thousands of yen)
As of December 31, 2022

As of December 31, 2023

128,066
2,620
42,887206,20960,47930,95718,922
3,635
493,778

54,174
12,62064,301
158,888
54,197
19,687
3,502
21,941
389,313

9,170
167,661
12,22260,59039,050251,747
12,32048,222

14,498

10,8752,750
266,893760,671–362,215
751,5282,265,697
2,455,480
773,021(21)5,494,178

2,667,649
2,857,432
449,358(22)
5,974,418(5,569)(5,569)8,372
5,496,981
6,257,653

120,415
120,415
25,6106,120,443
6,871,972

Liabilities
Current liabilities
Accounts payable - trade
Current portion of long-term borrowings
Lease liabilities
Accounts payable - otherAccrued expenses
Income taxes payable
Deposits received
Other
Total current liabilities
Non-current liabilities
Long-term borrowings
Lease liabilities
Asset retirement obligations
Provision for share awards
Provision for share awards for directors (and otherofficers)
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Total accumulated other comprehensive income
Share acquisition rights
Total net assets
Total liabilities and net assets- 10 -

(2) Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income(Thousands of yen)
Fiscal year ended
December 31, 2022
Business revenue
Business expenses
Cost of business revenue
Research and development expenses
Other selling, general and administrative expenses
Total business expenses
Operating profit (loss)
Non-operating income
Interest income
Interest on securities
Foreign exchange gains
Gain on valuation of derivatives
Gain on valuation of compound financial instruments
Subsidy income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Commitment fees
Share issuance costs
Loss on valuation of derivatives
Loss on valuation of compound financial instruments
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on sale of investment securities
Gain on redemption of investment securities
Total extraordinary income
Extraordinary losses
Loss on redemption of investment securities
Loss on valuation of investment securities
Retirement benefits for directors (and other officers)
Total extraordinary losses
Profit (loss) before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit (loss)
Profit attributable to non-controlling interests
Profit (loss) attributable to owners of parent- 11 -

Fiscal year ended
December 31, 2023

2,918,038

1,901,202

231,586
1,248,678
571,538
2,051,803
866,235

245,053
1,372,560
620,954
2,238,568(337,366)

529
13,127
43,697
13,672––
5,622
76,6493,426
6,272
52,038
–
3,390
2,600
20,531
88,257

5,995
5,833
15,897–
10,820–38,545904,338

6,681
8,522
4,005
25,055–26
44,291(293,400)

10,2684,203
14,472––––
49,99917,80067,799851,011129,034(1,413)
127,620
723,390–
723,390

649
–
–
649
(294,049)
93,627(64,014)
29,612(323,662)–(323,662)

Consolidated statement of comprehensive income(Thousands of yen)
Fiscal year ended
December 31, 2022
Profit (loss)
Other comprehensive income
Valuation difference on available-for-sale securities
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests- 12 -

Fiscal year ended
December 31, 2023

723,390(323,662)(29,489)(29,489)
693,901

125,984
125,984(197,678)

693,901(197,678)––

(3) Consolidated statement of changes in equity
Fiscal year ended December 31, 2022
(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity2,256,920

2,446,703

49,631(21)

4,753,234

8,776

8,776

Share capital
Balance at beginning of
periodChanges during period
Issuance of new shares

17,553

Profit attributable toowners of parent
Net changes in items
other thanshareholders’ equity
Total changes during
periodBalance at end of period

723,390

–
8,776

8,776

723,390–

740,9442,265,697

2,455,480

773,021(21)5,494,178

Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of
period723,390

23,919

Share acquisition rights

Total net assets

Total accumulated
other comprehensive
income23,91910,8504,788,004

Changes during period
Issuance of new shares–

17,553

Profit attributable toowners of parent–

723,390

Net changes in items
other thanshareholders’ equity
Total changes during
periodBalance at end of period(29,489)(29,489)(2,477)(31,966)(29,489)(29,489)(2,477)

708,977(5,569)(5,569)8,372

5,496,981- 13 -

Fiscal year ended December 31, 2023
(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity2,265,697

2,455,480

773,021(21)5,494,178

401,951

401,951

Share capital
Balance at beginning of
periodChanges during period
Issuance of new shares

803,903

Loss attributable toowners of parent(323,662)

Purchase of treasury
sharesNet changes in items
other thanshareholders’ equity
Total changes during
periodBalance at end of period

(0)

(0)

401,951

401,951(323,662)(0)480,2392,667,649

2,857,432

449,358(22)

5,974,418

Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of
period(323,662)(5,569)

Share acquisition rights

Total net assets

Total accumulated
other comprehensive
income(5,569)8,372

5,496,981

Changes during period
Issuance of new shares

803,903

Loss attributable toowners of parent(323,662)

Purchase of treasury
shares(0)

Net changes in items
other thanshareholders’ equity
Total changes during
periodBalance at end of period

125,984

125,984

17,237143,221125,984

125,984

17,237

623,461

120,415

120,415

25,6106,120,443- 14 -

(4) Consolidated statement of cash flows(Thousands of yen)
Fiscal year ended
December 31, 2022
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Interest income
Interest income on securities
Interest expenses
Commitment fees
Foreign exchange losses (gains)
Loss (gain) on sale of investment securities
Loss (gain) on redemption of investment securities
Loss (gain) on valuation of investment securities
Loss (gain) on valuation of derivatives
Loss (gain) on valuation of compound financial
instruments
Share issuance costs
Subsidy income
Retirement benefits for directors (and other officers)
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Decrease (increase) in advance payments to suppliers
Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid expenses
Decrease (increase) in consumption taxes refund
receivable
Increase (decrease) in accrued consumption taxes
Increase (decrease) in accounts payable - other
Increase (decrease) in accrued expenses
Increase (decrease) in income taxes payable - factor
based tax
Increase (decrease) in deposits received
Increase (decrease) in provision for share awards
Increase (decrease) in provision for share awards for
directors (and other officers)
Other, net
SubtotalInterest and dividends received
Interest paid
Commitment fees paid
Income taxes paid
Income taxes refund
Subsidies received
Payments of retirement benefits for directors (and otherofficers)
Net cash provided by (used in) operating activities- 15 -

Fiscal year ended
December 31, 2023

851,011
147,731(529)(13,127)
5,995
5,833
(30,934)(10,268)(4,203)49,999(13,672)(294,049)
175,564(3,426)(6,272)
6,681
8,522(45,955)–649–
25,055

10,820(3,390)15,897–

4,005(2,600)17,800603,089
2,047
82,070(73,881)(6,524)––(884)(139,439)(73,892)
23,219(65,112)(31,544)(24,032)(91,441)(37,475)
75,933(2,524)–(45,600)(6,282)(6,788)(9,339)(9,961)60,590(15,419)(12,368)

14,498(3,623)(33,096)
1,676,296
18,128(6,018)(7,000)(183,521)––

11,414(595,528)
10,110(6,760)(19,212)(121,631)
11,8262,600(17,800)–

1,480,084(718,596)

(Thousands of yen)
Fiscal year ended
December 31, 2022
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities
Proceeds from redemption of securities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sale of investment securities
Proceeds from redemption of investment securities
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of shares
Proceeds from issuance of shares resulting from exerciseof share acquisition rights
Proceeds from issuance of share acquisition rights
Purchase of treasury shares
Repayments of lease liabilities
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- 16 -

Fiscal year ended
December 31, 2023

(200,000)
310,130(100,000)
100,000(31,132)(773)(651,634)
315,249
210,512–(47,649)(100,000)––
100,000(204,475)(17,730)(160,000)–
250,000(3,168)(135,373)

13,100(1,310)–50,000(10,120)782,614

4,033

3,952

–
–
(45,387)(29,563)
35,771
1,438,643
2,240,661
3,679,304

19,362(0)(52,357)
793,450
45,953(14,565)
3,679,304
3,664,738

(5) Notes to consolidated financial statements
Notes on premise of going concern
No items to report.
Notes on significant changes in the amount of shareholders’ equity
On January 5, 2023, the Company received payment for capital increase through third-party allotment from CVI Investments,
Inc. As a result, share capital and capital surplus each increased 393,125 thousand yen. Moreover, including increases due tothe issuance of share acquisition rights (stock options) and the issuance of new shares as restricted stock-based compensation
for directors, share capital and capital surplus each increased 401,951 thousand yen during the fiscal year under review,
resulting in share capital of 2,667,649 thousand yen and capital surplus of 2,857,432 thousand yen as of the end of the fiscal
year under review.
Changes in accounting policies(Application of implementation guidance on accounting standard for fair value measurement)
The Company has applied the “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ
Guidance No. 31, June 17, 2021) from the beginning of the fiscal year under review, and it has applied the new accounting
policy provided for by the Implementation Guidance on Accounting Standard for Fair Value Measurement prospectively inaccordance with the transitional measures provided for in paragraph 27-2 of the Implementation Guidance on AccountingStandard for Fair Value Measurement.
Note that there was no effect of the application of the Implementation Guidance on Accounting Standard for Fair Value
Measurement on the consolidated financial statements.
Additional information(Application of practical solution on the accounting and disclosure under the group tax sharing system) The Company and its
consolidated subsidiaries have transitioned from the consolidated taxation system to the group tax sharing system from thefiscal year under review. Accordingly, the treatment of accounting and disclosure for corporation tax, regional corporation tax,
and tax effect accounting is in accordance with the “Practical Solution on the Accounting and Disclosure under the Group Tax
Sharing System” (PITF No. 42, issued on August 12, 2021; hereinafter “PITF No. 42”). In addition, the change in accounting
policy with the application of PITF No. 42 in accordance with paragraph 32(1) of PITF No. 42 is considered to have no impact.
(Accounting estimates amid the spread of COVID-19)
The Group has determined the accounting estimates for impairment accounting of non-current assets, etc. based on information
available when preparing the consolidated financial statements. The effects of the spread of COVID-19 on the Group arelimited at the present time and the Group has determined that there will not be a significant impact on the estimates for the
fiscal year under review.
Segment information, etc.
[Segment information]
I. Fiscal year ended December 31, 2022
This information is omitted because the Group consists of a single business segment dealing with research and developmentof pharmaceutical and related businesses.
II.

Fiscal year ended December 31, 2023
This information is omitted because the Group consists of a single business segment dealing with research and developmentof pharmaceutical and related businesses.

- 17 -

Per share information
Fiscal year ended
December 31, 2022

Fiscal year ended
December 31, 2023

Net assets per share (Yen)

261.65281.87

Basic earnings (loss) per share

34.50(14.98)

Diluted earnings per share

34.47

–

Notes: 1. Diluted earnings per share of fiscal year ended December 31, 2023 are not described here because, although there arepotentially dilutive shares, basic loss per share was recorded.
2. The basis for calculation of net assets per share is as follows:
As of December 31, 2022
Total net assets(Thousands of yen)

As of December 31, 2023

5,496,981

6,120,443

8,372

25,610[Share acquisition rights included therein](Thousands of yen)

[8,372][25,610]Amount of net assets at the end of period related tocommon shares(Thousands of yen)

5,488,609

6,094,833

20,977,131

21,623,230

Amount to be deducted from total net assets(Thousands of yen)

Number of common shares at the end of period used in
calculation of net assets per share(Shares)- 18 -

3. The basis for calculation of basic earnings (loss) per share and diluted earnings per share is as follows:
Fiscal year ended
December 31, 2022

Fiscal year ended
December 31, 2023

723,390(323,662)––

723,390(323,662)

20,969,376

21,606,239––

13,764

8,612

–

–

Basic earnings (loss) per share
Amount of profit (loss) attributable to owners ofparent(Thousands of yen)Amount not attributable to common shareholders(Thousands of yen)Amount of profit (loss) attributable to owners ofparent related to common sharesyen)(Thousands of

Average number of outstanding common shares
during the period(Shares)

Diluted earnings per share
Adjustment on profit attributable to owners ofparent(Thousands of yen)
Increase in number of common shares(Shares)[Share acquisition rights included therein(Shares)]
Summary of potential shares that are not included in
calculation of diluted earnings per share due to a lackof dilution effect

―――

―――

Significant subsequent event
Business combination through acquisition
・FIMECS, Inc.
The Board of Directors of the Company, at its meeting held on February 14, 2024, resolved to acquire all shares of FIMECS,
Inc. (“FIMECS”) and entered into a share transfer agreement on February 14, 2024.
1.

Overview of Business Combination(1) Name of acquired company and its business
Name of acquired company
FIMECS, Inc.
Description of businessResearch and development of novel drugs with proteolysis-inducing mechanisms(2) Main reasons for the business combination
The Company is an R&D-oriented drug discovery venture company that aims to create new pharmaceuticals for highly
needed disease areas in the medical field by utilizing cutting-edge science and technology, and its business development
is based on licensing the intellectual property rights (licensing out under a license agreement) of originally developed
compounds to pharmaceutical companies and other parties.
FIMECS, on the other hand, is a startup company founded in 2018 that aims to create innovative pharmaceuticals fordiseases that have traditionally been considered extremely difficult (Undruggable) to discover treatments for by using
targeted proteolysis inducers, a new modality of drug discovery.
The Company acquired the shares because the acquisition of all shares of FIMECS is expected to make significant
progress in strengthening the next-generation in-house drug discovery value chain by strengthening the drug discovery
value chain, enable the acquisition of joint research partners in Japan and overseas from the initial stages of research
centered on FIMECS’s proprietary platform technologies, and strengthen the drug discovery pipeline for oncology.
(3) Date of business combination
March 26, 2024

- 19 -

(4) Legal form of business combination
Share acquisition(5) Name of company after combination
Names remain unchanged.
(6) Percentage of voting rights acquired
100%(7) The main grounds for determining the acquisition of the company
The Company acquires shares for cash consideration.
2.

Breakdown by type of consideration
Consideration for
Cash and deposits
acquisition
Acquisition cost

4,500,000 thousandyen
4,500,000 thousandyen
In addition to the acquisition price, the Company also agreed on conditions for payment based on future earnings of theacquired subsidiary (hereinafter “earn out consideration”). Earn out consideration refers to payment to the seller of amounts
calculated by a predetermined method based on contract lump-sum revenue, milestone revenue, royalty revenue, andconsignment-related revenue arising from contracts, etc. between FIMECS and other parties. The introduction of earn out
consideration can mitigate the risk of the acquisition to the Company.
3.

Description and amount of major acquisition-related expenses
Compensation, fees, etc. for advisory
17,000 thousand yen (approximate amount)

4.

Amount of goodwill to be accrued, reason for accrual, amortization method and amortization period
Not determined at this point.

5.

Amount of assets and liabilities to be accepted on the date of business combination and their major breakdown
Not determined at this point.

- 20 -