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.

August 10, 2023

Summary of Consolidated Financial Results
for the First Six Months of the Fiscal Year Ending 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 filing of quarterly securities report: August 10, 2023
Scheduled date of dividend payment:―
Supplementary documents for quarterly results:
Yes
Quarterly results briefing:
Yes(TEL) +81-52-446-6100(Amounts are rounded down to the nearest million yen.)

1.

Consolidated financial results for the first six months of the fiscal year ending December 31, 2023 (January 1, 2023 toJune 30, 2023)(1) Consolidated operating results (cumulative)(Percentage figures represent changes from the same period of the previous fiscal year.)Net sales

Operating profit

First six months ended
million yen%
million yen
June 30, 2023
1,014
(29.9)(23)
June 30, 2022
1,447
9.6
551
Note: Comprehensive income
Six months ended June 30, 2023:
Six months ended June 30, 2022:
Earnings per share (Basic)
First six months ended
June 30, 2023
June 30, 2022

Profit attributable toowners of parent

Ordinary profit
%

–
75.1

million yen%

million yen

36(94.6)
681
57.4
183 million yen [(59.9)%]457 million yen [37.9%]

25
469

%

(94.6)
55.0

Earnings per share (Diluted)

yen

yen

1.18
22.40

1.18
22.39

(2) Consolidated financial position
Total assets
Net assets
Equity ratio
As ofmillion yen
million yen%
June 30, 2023
7,204
6,498
89.8
December 31, 2022
6,257
5,496
87.7
Reference: Equity As of June 30, 2023: 6,470 million yen As of December 31, 2022: 5,488 million yen
2.

Dividends
First quarter-end
yenAnnual dividends per share
Second quarter-end Third quarter-end
Fiscal year-end
yen

Fiscal year ended–
0.00–
December 31, 2022
Fiscal year ending–
0.00
December 31, 2023
Fiscal year ending–
December 31, 2023
(forecast)
Note: Revisions to the forecasts of dividends most recently announced: None

yen

Total

yen

yen

0.00

0.00

0.00

0.00

3.

Forecasts of consolidated financial results for the fiscal year ending December 31, 2023 (January 1, 2023 to December 31,
2023)(Percentage figures represent year-on-year changes)

Net sales
million yen

Operating profit%

million yen

Profit attributable to Earnings perowners of parent
share (Basic)

Ordinary profit%

Fiscal year ending
2,799
(4.1)
260 (69.9)
December 31, 2023
Note: Revisions to the forecasts of results most recently announced: None

million yen%

million yen

%

yen

242

(73.2)

183(74.7)

8.74* Notes(1) Changes in significant subsidiaries during the first six months ended June 30, 2023 (changes in specified subsidiaries resulting
in the change in scope of consolidation): None
(2) Application of special accounting for preparing quarterly consolidated financial statements: Yes
Note: For more details, please refer to the section of “(4) Notes to quarterly consolidated financial statements (Application of
special accounting for preparing quarterly consolidated financial statements)” of “2. Quarterly consolidated financial
statements and significant notes thereto” on page 10 of the attached material.
(3) 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 “(4) Notes to quarterly consolidated financial statements (Changes inaccounting policies)” of “2. Quarterly consolidated financial statements and significant notes thereto” on page 10 of theattached material.
(4) Number of issued shares (common shares)
a. Total number of issued shares at the end of the period (including treasury shares)
As of June 30, 2023

21,616,781 shares

As of December 31, 2022

20,977,181 sharesb. Total number of treasury shares at the end of the period
As of June 30, 2023

50 shares

As of December 31, 2022

50 sharesc. Average number of outstanding shares during the period (cumulative from the beginning of the fiscal year)
For the first six months ended June 30, 2023

21,594,082 shares

For the first six months ended June 30, 2022

20,963,172 shares* Quarterly financial results reports are exempt from quarterly review 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.
For the suppositions that form the assumptions for earnings forecasts and cautions concerning the use thereof, please refer to thesection of “(3) Qualitative information regarding consolidated earnings forecasts” of “1. Qualitative information regarding
settlement of accounts for the first six months” on page 4 of the attached material.
(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 Wednesday, August 16, 2023,
and for general investors on Thursday, August 17, 2023.
The Company plans to post the documents used at the briefings on its website promptly after the briefings are held.

Contents of attachment
1.

Qualitative information regarding settlement of accounts for the first six months ...................................................... 2(1) Qualitative information regarding consolidated operating results ............................................................................ 2(2) Qualitative information regarding consolidated financial position........................................................................... 3(3) Qualitative information regarding consolidated earnings forecasts .......................................................................... 4

2.

Quarterly consolidated financial statements and significant notes thereto ................................................................... 5(1) Consolidated balance sheet ....................................................................................................................................... 5(2) Consolidated statement of income and consolidated statement of comprehensive income ...................................... 7
Consolidated statement of income (cumulative)....................................................................................................... 7
Consolidated statement of comprehensive income (cumulative) ............................................................................. 7(3) Consolidated statement of cash flows ....................................................................................................................... 8(4) Notes to quarterly consolidated financial statements.............................................................................................. 10
Notes on premise of going concern ........................................................................................................................ 10
Notes on significant changes in the amount of shareholders’ equity ...................................................................... 10
Application of special accounting for preparing quarterly consolidated financial statements ................................ 10
Changes in accounting policies .............................................................................................................................. 10
Additional information ........................................................................................................................................... 10
Segment information, etc. ....................................................................................................................................... 10
Significant subsequent event .................................................................................................................................. 11

-1-

1.

Qualitative information regarding settlement of accounts for the first six months(1) Qualitative information regarding consolidated operating results
1) Financial results
During the first six months of the fiscal year ending December 31, 2023, the Japanese economy continued the gradual recovery
observed in the first quarter. According to the Bank of Japan’s quarterly short-term economic survey (June survey), the businesssentiment among large enterprises in the non-manufacturing sector improved for the fifth consecutive quarter, mainly inaccommodation, eating & drinking services. Among large enterprises in the manufacturing sector, business confidence improved
for the first time in seven quarters. Business conditions appear to have been led by three factors: consumer spending, capital
investment, and inbound demand.
In the pharmaceutical industry, some companies saw growth in sales and profits, mainly driven by favorable overseas sales; whileothers reported operating losses as domestic sales decreased due to the National Health Insurance (NHI) drug price revision.
Moreover, with industry associations calling for strengthening of the biopharmaceutical innovation ecosystem, including the NHI
drug price system, in June the Japanese cabinet approved the Basic Policy on Economic and Fiscal Management and Reform
2023 (Basic Policy), which calls for “further drug price measures that will appropriately recognize innovation and so forth.” In
addition, issues faced by the Japanese pharmaceutical industry and measures to address them are being discussed in various
occasions. Among these, a report of the Ministry of Health, Labour and Welfare Expert Panel on Comprehensive Measures toAchieve a Rapid and Stable Supply of Pharmaceuticals included proposals to strengthen drug discovery capabilities byconcentrating management resources supporting the creation of new modalities and on R&D for the creation of a drug discovery
ecosystem and innovative drug discovery.
Under such conditions, the Group achieved the following financial results during the first six months.
Regarding human drug products, sales of K-CAB® (generic name: tegoprazan)—a drug for gastroesophageal reflux disease
marketed by the Company’s licensee, HK inno.N Corporation (headquarters: Osong, South Korea, “HK inno.N”)—in South
Korea increased steadily. Sales from external prescriptions in the first six months ended June 30, 2023 amounted to approximately
74.1 billion won, an increase of 22.2% year on year, and equivalent to 7.4 billion yen at 0.10 yen to the won. K-CAB® has
maintained its leading share of the South Korean antiulcer drug market.
Global expansion of tegoprazan is also progressing steadily. 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 first six
months ended June 30, 2023, in 35 countries outside of South Korea, the companies that have entered into the license agreementswith HK inno.N are engaged in development, manufacturing, and marketing in their respective countries and regions. During thefirst six months ended June 30, 2023, sales of the product were launched in Mexico under the product name Ki-CAB®. With thislaunch, tegoprazan are now being marketed in five countries: South Korea, China, Mongolia, the Philippines, and Mexico.
Preparations for market launch are also under way in two countries, Indonesia and Singapore, while the filings for approval areunder review by local regulatory authorities in 20 and more countries, including Argentina and Peru.
With regard to pet drugs, sales were steady from last year for GALLIPRANT® (generic name: grapiprant) for osteoarthritis indogs, ENTYCE® (generic name: capromorelin) for anorexia management for dogs, and ELURA® (generic name: capromorelin)
for weight loss management in cats with chronic kidney failure, all of which were licensed to Elanco Animal Health Inc.
(headquarters: Indiana, U.S.).
Other licensed programs are also in the pre-clinical development stage or later at licensee and sublicensee companies. In the firstsix months ended June 30, 2023, regarding the cannabinoid CB2 receptor agonist (RQ-00202730/AAT-730/OCT461201, “CB2agonist”) licensed by the Company to AskAt Inc. (headquarters: Nagoya, Aichi, “AskAt”) and further licensed by AskAt to
Oxford Cannabinoid Technologies Ltd. (headquarters: London, U.K., “OCT”), OCT has obtained approval from the UK
regulatory authority and ethics committees for Phase I clinical trials. OCT plans to advance clinical development of the CB2agonist for the primary indication of chemotherapy-induced peripheral neuropathy (CIPN) and is preparing to start administration
to test subjects.
Also in the six months ended June 30, 2023, the Company acquired a new licensee as a result of ongoing business development
activities. In April 2023, the Company and Vetbiolix SAS (headquarters: Loos, Nord, France; “Vetbiolix”) agreed to enter into
an option and license agreement for a 5-HT4 agonist (RQ-00000010), discovered by the Company, to develop pet drugs for thetreatment of gut motility disorders in dogs and cats. Under the terms of the agreement, Vetbiolix is granted an exclusive option
for an exclusive, worldwide, and sublicensable license to develop, manufacture and market veterinary medicines containing RQ00000010. 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 other 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. With regard to tegoprazan, theCompany has the rights for development, manufacture, and marketing in Japan, and is currently in talks with candidate licensees
aimed at rapidly developing and marketing the drug in Japan. Furthermore, with regard to the ghrelin receptor agonist that the-2-Company is currently developing in-house with the aim of securing a major licensing contract, various pre-clinical studies arecontinuing and the Company is also manufacturing the API for clinical trials, aiming to start clinical trials in the fiscal year ending
December 31, 2024.
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. The Company
aims to establish a next-generation in-house drug discovery value chain through synergy effects from existing technologies andnew initiatives. In addition to its own independent research, since 2022, it has been strengthening its collaboration with startups
and drug discovery venture companies. In the six months ended June 30, 2023, the Company started a collaboration with leadXpro
AG (headquarters: Villigen, Switzerland) to accelerate a drug discovery research through 3D structural analysis of membraneproteins. In joint research with ASKA Pharmaceutical Co., Ltd. (headquarters: Minato-ku, Tokyo), which has been ongoing since
July 2019, the joint research agreement has been terminated with the agreement of both companies.
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, AM80/TM-411/SY-1425), licensed by the Company’s consolidated
subsidiary TMRC Co., Ltd. (“TMRC”) to Syros Pharmaceuticals Inc. (headquarters: Massachusetts, U.S., “Syros”). During thefirst six months ended June 30, 2023, TMRC received fees related to the clinical development from Syros.
Accordingly, financial results for the first six months, the reporting period, were as follows. Business revenue for the period was
1,014 million yen (down 29.9% year on year), operating loss totaled 23 million yen (compared with operating profit of 551 million
yen a year earlier), ordinary profit totaled 36 million yen (down 94.6% year on year), and profit attributable to owners of parent
was 25 million yen (down 94.6% year on year).
Total business expenses were 1,037 million yen (up 15.8% year on year). This mainly consists of cost of business revenue (122
million yen, a 16.9% increase year on year), research and development expenses (603 million yen, a 14.2% increase year on year)
and other selling, general and administrative expenses (311 million yen, an 18.7% increase year on year).
2)

Research and development activities

Research and development expenses of the entire Group during the first six months were 603 million yen. For the first six months,
there were no material changes to the research and development activities.
(2) Qualitative information regarding consolidated financial position
1) Analysis of assets, liabilities and net assets
AssetsTotal assets as of June 30, 2023 were 7,204 million yen, an increase of 946 million yen (up 15.1%) from the end of theprevious fiscal year. This is mainly attributable to an increase in accounts receivable - trade, and contract assets of 213
million yen, an increase in prepaid expenses of 276 million yen, and an increase in investment securities of 387 million yen.
Liabilities
Total liabilities as of June 30, 2023 were 706 million yen, a decrease of 54 million yen (down 7.1%) from the end of theprevious fiscal year. This is mainly attributable to a decrease in accounts payable - trade of 59 million yen, a decrease inaccounts payable - other of 78 million yen, and an increase in deferred tax liabilities of 69 million yen.
Net assets
Total net assets as of June 30, 2023 were 6,498 million yen, an increase of 1,001 million yen (up 18.2%) from the end of theprevious fiscal year. This is mainly attributable to an increase in share capital and legal capital surplus of 786 million yen
due to capital increase through third-party allotment, the recording of profit attributable to owners of parent of 25 million
yen, and an increase in valuation difference on available-for-sale securities of 158 million yen.
Consequently, the equity ratio was 89.8% (up 2.1 percentage points from the end of the previous fiscal year).
2)

Analysis of cash flows

The balance of cash and cash equivalents (“net cash”) as of June 30, 2023 amounted to 3,565 million yen (compared with 2,845
million yen a year earlier), a decrease of 113 million yen (down 3.1%) from the end of the previous fiscal year.
The respective cash flows in the first six months and the factors thereof are as follows.
Cash flows from operating activities
Net cash used in activities was 715 million yen (compared with net cash of 609 million yen provided a year earlier). This ismainly attributable to cash outflows from an increase in trade receivables of 213 million yen, an increase in prepaid expenses-3-

of 261 million yen and a decrease in accounts payable - other of 144 million yen, despite the recording of profit before
income taxes of 36 million yen and depreciation of 71 million yen.
Cash flows from investing activities
Net cash used in investing activities was 295 million yen (up 220.7% year on year). This is mainly attributable to the purchaseof property, plant and equipment of 119 million yen and the purchase of investment securities of 160 million yen.
Cash flows from financing activities
Net cash provided by financing activities was 826 million yen (compared with net cash of 1 million yen used a year earlier).
This is mainly attributable to proceeds from issuance of shares of 782 million yen and proceeds from long-term borrowingsof 50 million yen.
(3) Qualitative information regarding consolidated earnings forecasts
At the present time, there are no changes to the full-year consolidated earnings forecasts for the fiscal year ending December 31,
2023 presented in “Summary of Consolidated Financial Results for the Fiscal Year Ended December 31, 2022 (JGAAP)”
published on February 14, 2023.

-4-

2.

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

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, net
Tools, furniture and fixtures, net
Leased assets, net
Total property, plant and equipment
Intangible assets
Trademark right
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term prepaid expenses
Other
Total investments and other assets
Total non-current assets
Total assets-5-

As of June 30, 2023

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

3,545,558
815,753
269,673
1,155
7,212
88,544385,172
101,075
5,214,145

62,642
119,093
209,288
391,024

60,719261,353
190,467
512,539

4,268
19,98472
24,325

3,852
30,352
72
34,278987,962
24,0738,172
1,020,208
1,435,559
6,257,653

1,375,347
57,825
10,404
1,443,577
1,990,395
7,204,540

(Thousands of yen)
As of December 31, 2022
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-6-

As of June 30, 2023

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

68,348
12,62037,992
127,956
53,336
11,235
7,102
34,456353,049

9,170
167,661
12,22260,59045,360150,748
12,271
56,36014,49816,312

2,750
266,893760,671

72,352353,404
706,453

2,265,697
2,455,480
773,021(21)5,494,178

2,664,763
2,854,546
798,502(21)
6,317,791(5,569)(5,569)8,372
5,496,981
6,257,653

152,677
152,677
27,617
6,498,086
7,204,540

(2) Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income (cumulative)(Thousands of yen)First six months ended
June 30, 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 compound financial instruments
Other
Total non-operating income
Non-operating expenses
Interest expenses
Commitment fees
Share issuance costs
Loss on valuation of compound financial instruments
Loss on valuation of derivatives
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of investment securities
Gain on redemption of investment securities
Total extraordinary income
Extraordinary losses
Retirement benefits for directors (and other officers)
Total extraordinary losses
Profit before income taxes
Income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

First six months ended
June 30, 2023

1,447,178

1,014,084

104,611528,364
262,770
895,747
551,430

122,278
603,336
311,839
1,037,453(23,369)

416
9,928
171,840–319
182,505280
2,893
90,265
5,490
9,662
108,592

2,574
2,333
287
3,470
43,968052,633681,302

3,026
3,499
3,930
–
38,0490
48,50636,716

10,2682,739
13,007–––

17,80017,800676,510207,012469,498–
469,498––
36,716
11,23525,481–
25,481

Consolidated statement of comprehensive income (cumulative)(Thousands of yen)First six months ended
June 30, 2022
ProfitOther 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-7-

First six months ended
June 30, 2023

469,498

25,481(11,882)(11,882)457,615

158,246
158,246
183,728

457,615

183,728––

(3) Consolidated statement of cash flows(Thousands of yen)First six months ended
June 30, 2022
Cash flows from operating activities
Profit before income taxes
Depreciation
Interest income
Interest income on securities
Foreign exchange losses (gains)
Loss (gain) on valuation of compound financial
instruments
Interest expenses
Commitment fees
Share issuance costs
Loss (gain) on valuation of derivatives
Loss (gain) on sale of investment securities
Loss (gain) on redemption of investment securities
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 accounts receivable - other
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in accounts payable - other
Increase (decrease) in accrued expenses
Increase (decrease) in income taxes payable - factor
based tax
Decrease (increase) in consumption taxes refund
receivable
Increase (decrease) in accrued consumption taxes
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
Payments of retirement benefits for directors (and otherofficers)
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
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
Net cash provided by (used in) investing activities-8-

First six months ended
June 30, 2023

676,510
69,512(416)(9,928)(109,999)

36,716
71,728(280)(2,893)(70,801)

3,470(5,490)

2,574
2,333
287
43,968(10,268)(2,739)17,800380,974
2,195
10,223(53,298)(124,548)(244)
64(66,650)(14,764)

3,026
3,499
3,930
38,049–––(213,441)
133(59,717)1,276(261,462)(5,407)(33,752)(144,585)(7,142)(13,647)(4,831)(23,831)(5,077)(37,475)(23,813)
5,437–(11,819)(4,230)21,6971,813

369
745,792
13,010(2,601)(7,000)(121,537)–(1,378)(672,138)
9,962(3,118)(7,000)(54,869)
11,826(17,800)–

609,863(715,337)(200,000)(12,338)(162)(351,856)
315,249
156,940(92,167)–(119,998)(15,571)(160,000)––(295,570)

(Thousands of yen)First six months ended
June 30, 2022
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 fromexercise of share acquisition rights
Proceeds from issuance of share acquisition rights
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-9-First six months ended
June 30, 2023

13,100––50,000(3,810)782,614

2,275

188

–
(16,816)(1,441)

19,362(21,808)
826,545

88,27270,799604,5272,240,661
2,845,188(113,562)
3,679,304
3,565,741

(4) Notes to quarterly 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 399,065 thousand yen during the first six months ended June 30,
2023, resulting in share capital of 2,664,763 thousand yen and capital surplus of 2,854,546 thousand yen as of June 30, 2023.
Application of special accounting for preparing quarterly consolidated financial statements(Calculation of tax expenses)
Tax expenses are calculated by multiplying the profit before income taxes by the reasonably estimated effective tax rates after
the application of tax effect accounting to the profit before income taxes for the fiscal year including the quarter under review.

However, in cases where calculations using said estimated effective tax rate yield a result that is notably lacking
rationality, tax expenses are calculated by multiplying profit (loss) before income taxes by the statutory effective
tax rate, taking into consideration the recoverability of deferred tax assets.
Income taxes is the amount inclusive of income taxes - deferred.
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 first quarter 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 in accordance with the transitional measures provided for in paragraph 27-2 of the Implementation Guidance on
Accounting Standard 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 quarterly 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 the first quarter of the fiscal year under review. Accordingly, the treatment of accounting and disclosure forcorporation 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 quarterly consolidated financial statements. The effects of the spread of COVID-19 on the Groupare limited 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. For the first six months ended June 30, 2022 (January 1, 2022 to June 30, 2022)
This information is omitted because the Group consists of a single business segment dealing with research and developmentof pharmaceutical and related businesses.
II.

For the first six months ended June 30, 2023 (January 1, 2023 to June 30, 2023)
This information is omitted because the Group consists of a single business segment dealing with research and developmentof pharmaceutical and related businesses.

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Significant subsequent event(Conclusion of commitment line agreement)
In July 2023, the Company concluded commitment line agreements as follows.
Purpose of the commitment lines
The Company aims to strengthen its financial foundation by securing a flexible and stable means of raising funds to meet thedemand for funds for business development going forward.
Overview of commitment line agreements(1)

Counterparties of the agreements

The Shoko Chukin Bank, Ltd.

The Aichi Bank, Ltd.

(2)

Agreement amounts

500,000 thousand yen

200,000 thousand yen

July 31, 2023

July 21, 2023

(3)

Dates of conclusion of theagreements(4)

Commitment periods

From July 31, 2023 to July 31,
2024

From July 21, 2023 to May 31,
2024

(5)

Security

Unsecured

Unsecured- 11 -