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, 2023

Summary of Consolidated Financial Results
for the Fiscal Year Ended December 31, 2022 (JGAAP)
Listed company’s name: RaQualia Pharma Inc.
Listed on:
Tokyo Stock Exchange (TSE)
Stock code:
4579
URL:
https://www.raqualia.com/
Representative:
Hirobumi Takeuchi, President and CEO
Contact:
Hidefumi Sugiyama, General Manager, Finance & Accounting Dept.
Scheduled date of general meeting of shareholders: March 24, 2023
Scheduled date of dividend payment:―
Scheduled date of filing of securities report:
March 27, 2023
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, 2022 (January 1, 2022 to December 31, 2022)(1) Consolidated operating results(Percentage figures represent changes from the previous fiscal year.)Net sales
Fiscal year ended
December 31, 2022
December 31, 2021

Operating profit

Profit attributable toowners of parent

Ordinary profit

million yen%

million yen%

million yen%

million yen

%

2,918
2,776

5.1
150.7

866
707

22.4
–

904
863

4.7
–

723
755

(4.3)
–

Note: Comprehensive income

Fiscal year ended December 31, 2022:
Fiscal year ended December 31, 2021:

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

693 million yen [(10.5)%]774 million yen[–%]
Ordinary profit/ total Operating profit/ net
assetssales

Profit/equity

Fiscal year endedyen
yen
December 31, 2022
34.50
34.47
December 31, 2021
36.07
36.04
Reference: Share of (profit) loss of entities accounted for using equity method:
Fiscal year ended December 31, 2022:
Fiscal year ended December 31, 2021:

%

%

%

14.1
17.2

15.7
18.2

29.7
25.5

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

Net assets

As ofmillion yen
December 31, 2022
6,257
December 31, 2021
5,234
Reference: Equity As of December 31, 2022: 5,488 million yen

Equity ratio

Net assets per share

million yen

%

yen

5,496
87.7
4,788
91.3
As of December 31, 2021: 4,777 million yen

261.65227.97(3) Consolidated cash flows
Cash flows fromoperating activities
Fiscal year ended
December 31, 2022
December 31, 2021

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash equivalents
at end of period

million yen

million yen

million yen

million yen

1,480
366

(47)
(279)

(29)
(16)

3,679
2,240

2.

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

Fiscal year ended
December 31, 2021
Fiscal year ended
December 31, 2022
Fiscal year ending
December 31, 2023
(forecast)
3.

yen

yen

Total cash
dividends(Total)

Total

yen

yen

million 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, 2023 (January 1, 2023 to December 31,
2023)(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
2,799
(4.1)
260 (69.9)
242 (73.2)
183 (74.7)
8.74
December 31, 2023
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, 2022 (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
(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, 2022

20,977,181 shares

As of December 31, 2021

20,955,142 sharesb. Total number of treasury shares at the end of the period
As of December 31, 2022

50 shares

As of December 31, 2021

50 sharesc. Average number of outstanding shares during the period
For the fiscal year ended December 31, 2022

20,969,376 shares

For the fiscal year ended December 31, 2021

20,953,020 shares(Reference) Overview of non-consolidated financial results
Non-consolidated financial results for the fiscal year ended December 31, 2022 (January 1, 2022 to December 31, 2022)(1) Non-consolidated operating results(Percentage figures represent changes from the previous fiscal year.)Net sales
Fiscal year ended
December 31, 2022
December 31, 2021

Operating profit

Profit%million yen%

million yen%

million yen

%

2,681
2,361

13.5
134.0

683
505

35.1
–

701
656

6.9
–

583
614

(5.1)
–

Earnings per share(Basic)Fiscal year ended
December 31, 2022
December 31, 2021

Ordinary profit

million yen

Earnings per share(Diluted)

yen

yen

27.83
29.34

27.81
29.31

(2) Non-consolidated financial position
Total assets
Net assets
Equity ratio
Net assets per share
As ofmillion yen
million yen%
yen
December 31, 2022
6,091
5,346
87.6
254.49December 31, 2021
5,210
4,777
91.5
227.47
Reference: Equity As of December 31, 2022: 5,338 million yen As of December 31, 2021: 4,766 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.
(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 16, 2023,
and for general investors on Friday, February 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.

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 ......................................................................................... 6(4) Outlook for the fiscal year ending December 31, 2022 ............................................................................................ 7

2.

Basic rationale for selecting the accounting standard .................................................................................................. 73.

Consolidated financial statements and significant notes thereto .................................................................................. 8(1) Consolidated balance sheet ....................................................................................................................................... 8(2) Consolidated statement of income and consolidated statement of comprehensive income .................................... 10
Consolidated statement of income .......................................................................................................................... 10
Consolidated statement of comprehensive income ................................................................................................. 11(3) Consolidated statement of changes in equity .......................................................................................................... 12(4) Consolidated statement of cash flows ..................................................................................................................... 14(5) Notes to consolidated financial statements ............................................................................................................. 16
Notes on premise of going concern ........................................................................................................................ 16
Changes in accounting policies .............................................................................................................................. 16
Additional information ........................................................................................................................................... 16
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, 2022, the Japanese economy experienced a slow recovery in personal consumption
in the first half of the year. This was amid a prolonged intensity of impact from COVID-19 and rising prices due to the rapid
depreciation of the yen and the turmoil caused by Russia’s invasion of Ukraine as personal consumption recovery was delayed.
Although corporate capital investment showed steady expansion to support the economy and consumer spending picked up in
the second half of the year, accelerated inflation in the U.S. and Europe and declining exports due to the economic downturn
slowed recovery.
In the pharmaceutical industry, while many companies achieved strong results from overseas sales, others suffered harm tobusiness conditions due to sluggish domestic sales growth and soaring costs for active pharmaceutical ingredients, raw materials,
and clinical development costs overseas. Since the mid-year revision implemented in 2021, annual NHI drug price revisions
have become the norm, and there is strong concern that the attractiveness of the pharmaceutical market in Japan will further
decline. In addition to the emerging tendency of foreign companies to shy away from the Japanese market, and criticisms of theresurgence of “drug lag,” a situation of delayed approval in Japan of new drugs used overseas, there are now frequent mentionsof the term “drug loss,” referring to a situation where new drugs do not enter Japan. In addition, the issue of short pharmaceuticalsupplies, triggered by the quality fraud issue of generic manufacturers, has had a significant impact on the medical field and thepharmaceutical market.
Such industry trends as these had no small impact on the business development activities of drug discovery ventures, like theGroup, that operate a drug discovery business.
Under such conditions, the Group pursued activities to create development candidate compounds for pharmaceuticals based oninternal, independent research or collaborative research with partner companies or academies and to expand its research anddevelopment portfolio, while also promoting licensing activities for development candidate compounds it owns and researchand development to enhance value.
Accordingly, business activities for the fiscal year under review were as follows.
Regarding human drug products that have been launched, sales of K-CAB® (generic name: tegoprazan)—a drug for gastroesophageal reflux disease marketed by HK inno.N Corporation (headquarters: Osong, South Korea, “HK inno.N”)—in South
Korea continued to perform well from the previous year, with sales in the fiscal year from external prescriptions of 125.2 billion
won, an increase of 14.2% compared with the previous fiscal year, equivalent to approximately 12.5 billion yen at 0.10 yen to
the won. Furthermore, HK inno.N received manufacturing and marketing approval in South Korea for the product as amaintenance treatment for patients with cured erosive esophagitis, resulting in five indications for which the product has received
manufacturing and marketing approval from the South Korean Ministry of Food and Drug Safety. This makes K-CAB® the drugwith the greatest number of indications among all the Potassium Competitive Acid Blocker-based gastric acid secretion inhibitors(P-CABs) sold in South Korea. These developments helped lead to increased sales royalty income for the Company.
Global expansion of tegoprazan is also progressing well. The Company has executed exclusive license agreements with HK
inno.N for the development, marketing and manufacturing of tegoprazan with sublicensing rights, and the companies which haveentered into the license agreements with HK inno.N (the “sublicensees”) are engaged in development, manufacturing andmarketing in their respective countries and regions.
In China, sublicensee Shandong Luoxin Pharmaceutical Group Co., Ltd. (headquarters: Shandong Province, China, “Luoxin”),
obtained manufacturing and marketing approval and commenced product sales. Similarly, in the Philippines, sublicensee Metro
Pharma Phils. Inc. (headquarters: Manila, Philippines, “MPPI”), obtained marketing approval and commenced product sales. In
Indonesia, sublicensee PT Kalbe Pharma Tbk (headquarters: Jakarta, Indonesia, “Kalbe”) has also received marketing approval.
In addition, the product is currently under review or in preparation for submission for approval in a total of 28 countries.
Furthermore, in the U.S., sublicensee Braintree Laboratories, Inc. (headquarters: Massachusetts, U.S., “Braintree”) has started
Phase III clinical trials.
In line with its goal of expanding into 100 countries globally, HK inno.N is searching for sublicensees in other regions. In thefiscal year under review, it concluded a new drug product supply agreement with a local company in Malaysia, as well as alicense agreement for seven countries including India with Dr. Reddy’s Laboratories Limited (headquarters: Hyderabad, India).
As a result of the above progress, the Company received milestone income or a portion of the income earned by HK inno.N
from its sublicensees in accordance with the agreement with HK inno.N, in accordance with development progress.
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 of-2-

which were licensed to Elanco Animal Health Inc. (headquarters: Indiana, U.S., “Elanco”). In particular, GALLIPRANT® has
become one of Elanco’s most profitable products, maintaining double-digit growth in the U.S., the world’s largest pet drug
market, five years after its launch in 2017. Since medical care for pets is basically at owners’ own expenses, there is no drug
price system for pet pharmaceuticals, and the industry is characterized by the fact that official drug prices are not cut as in humanpharmaceuticals, and manufacturers have strong pricing power for products highly rated by pet owners. These developments
also helped lead to increased sales royalty income for the Company in pet pharmaceuticals. With respect to ELURA®, Elancohas filed for approval in Europe, and the Company has received a lump-sum payment of 1 million U.S. dollars for milestoneachievement.
Other licensed programs also progressed through the pre-clinical development stage or later at licensee companies.
Eli Lilly and Company (headquarters: Indiana, U.S., “Eli Lilly”) has initiated Phase II clinical trials for a P2X7 receptor
antagonist (RQ-00466479/AK1780) discovered through collaborative research with Asahi Kasei Pharma Corporation(headquarters: Chiyoda, Tokyo, “Asahi Kasei Pharma”) and licensed to Eli Lilly by Asahi Kasei Pharma last year. As a result,
the Company received a lump-sum payment of 4 million U.S. dollars from Asahi Kasei Pharma for achievement of this milestone.
In addition, Xgene Pharmaceutical Co., Ltd. (headquarters: Hong Kong, “Xgene”) has started preclinical studies for the TRPM8
blocker (RQ-00434739) licensed to Xgene last year.
For the cyclooxygenase inhibitor (COX-2 inhibitor, RQ-00317076/AAT-076), which was licensed out to AskAt Inc.
(headquarters: Nagoya, Aichi, “AskAt”), AskAt entered into a license agreement with Velo-1, Inc. (headquarters: Tennessee,
U.S., “Velo-1”) for use as a pet pharmaceutical, and as a result, the Company received a lump-sum payment from AskAt.
As for licensing preparation programs, pre-clinical trials progressed during the fiscal year under review for a ghrelin receptor
agonist, which is being developed in-house. In addition, the Company holds the rights to develop, manufacture, and market
tegoprazan in Japan, but in order to achieve a speedy launch of the drug in Japan, the Company is preparing for clinicaldevelopment and are in discussions to secure potential partners. For other licensing preparation programs, the Company
conducted business development activities aimed at finding business partners through face-to-face meetings as well as online
conferences.
As for programs in the discovery research stage, collaborative research with ASKA Pharmaceutical Co., Ltd. (headquarters:
Minato, Tokyo) has made steady progress. In parallel, the Company promoted internal independent research projects to generate
development candidate compounds. Furthermore, in the fiscal year under review, the Company promoted partnership withstartups and drug discovery ventures with the aim of strengthening its drug discovery research foundations. As part of this, inMay 2022, the Company newly initiated exploration for indication potential for intractable and rare diseases for specificcompound(s) owned by the Company in collaboration with SOCIUM Inc. (headquarters: Chuo, Tokyo, “SOCIUM”), using
SOCIUM’s proprietary disease database and AI-driven drug discovery platform. In addition, for the purpose of validating a newmodality concept, the Company invested in STAND Therapeutics Co., Ltd. (headquarters: Minato, Tokyo, “STAND”) by
subscribing to a portion of its issued share acquisition rights and started a collaborative research project to discover new drugs
for intractable and rare diseases by utilizing the Company’s ion channel drug discovery technology and STAND’s intracellular
antibody production technology. Similarly, as a modality-related initiative, in December 2022, the Company entered into acollaborative research agreement with Veritas In Silico Inc. (headquarters: Shinagawa, Tokyo), which has platform technology
specialized in drug discovery for mRNA, for the creation of small molecule drugs targeting mRNA. Furthermore, in the samemonth, the Company entered into a collaborative research agreement with D. Western Therapeutics Institute (headquarters:
Nagoya, Aichi) for the discovery of therapeutic drugs for ocular diseases.
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”).
In addition, at a meeting of the Board of Directors held on December 20, 2022, the Company resolved to issue new shares (the“Shares”) and the 16th series of share acquisition rights (the “Share Acquisition Rights”) by way of third-party allotment and toenter into a purchase agreement for the Shares and Share Acquisition Rights on the same date with CVI Investments, Inc.
(headquarters: Cayman Islands, the “Scheduled Allottee”).
Based on the business plan and growth potential announced in February 2022, the Company is implementing a mid- to longterm investment strategy to increase and maximize shareholder value, and plans to invest a total of 2,393 million yen in R&D
through the fiscal year ending December 31, 2024. Since it is necessary to maintain a high level of R&D investment in order toenhance the development pipeline and accelerate the progress of the development stage, the Company has decided to procure
approximately 2,800 million yen, which will be newly required over the next five years, through third-party allotment of the-3-

Shares and Share Acquisition Rights to the allottee. The Scheduled Allottee is a U.S. institutional investor with extensive
experience in investing in biotechnology companies and has the capacity for mid- to long-term investments. It is managed by
Heights Capital Management, Inc., a member of the Susquehanna International Group, one of the world’s largest financial
conglomerates, and has over 100 biotechnology investments and assets under management group-wide.
The funds to be procured through the issuance and exercise of the Shares and Share Acquisition Rights will be used for clinicaldevelopment of existing programs and new compounds, exploratory activities for new modalities and investment related to AI
drug discovery, and enhancement of laboratory facilities. The planned amount to be procured is 2,723 million yen (excluding 27
million yen for issuance expenses).
Accordingly, financial results for the fiscal year under review were as follows. Business revenue for the period was 2,918 million
yen (up 5.1% year on year), operating profit totaled 866 million yen (up 22.4% year on year), ordinary profit totaled 904 million
yen (up 4.7% year on year), and profit attributable to owners of parent was 723 million yen (down 4.3% year on year).
Total business expenses were 2,051 million yen (down 0.8% year on year). In terms of the breakdown of this total, in addition
to cost of business revenue of 231 million yen (down 27.8% year on year), research and development expenses were 1,248
million yen (up 10.8% year on year) and other selling, general and administrative expenses came to 571 million yen (down 7.9%
year on year).
(Research and development activities)
Research and development expenses of the Group during the fiscal year ended December 31, 2022 were 1,248 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, the Company consulted with the Pharmaceuticals and Medical Devices
Agency (PMDA), the regulatory authority, based on its plan to conduct clinical pharmacology studies for rapid andefficient development and approval by utilizing data from South Korea, and also conducted business development
activities to search for potential partner companies, proceeding with discussions toward licensing.
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 is underway as a licensing preparation program post-Phase I
clinical trials.

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

(B) Preclinical development phasea)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, preclinical studies have been
conducted during the fiscal year under review through outsourcing.
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) Exploratory research phasea)
Independent research projectIn addition to promoting exploratory research aimed at creating development candidate compounds for ion channels
and other target molecules where the Company has strengths, the Company has also worked to achieve discontinuous
growth by combining new initiatives with the strengthening of its existing drug discovery research base, through-4-

collaborations with the pharmaceutical companies listed below, in order to expand its drug discovery disease areas,
expand modalities, and strengthen the drug discovery value chain.
b)c)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 2019

Epigeneron, Inc.

September 2019SOCIUM Inc.

May 2022

STAND Therapeutics Co., Ltd.

August 2022

D. Western Therapeutics InstituteDecember 2022

Veritas In Silico Inc.

December 2022

Collaborative research with respect to drug
discovery research targeting at a specific ion channel
Collaborative research for the creation of drugs fortreating idiopathic pediatric nephrotic syndrome
Collaborative research to explore the potential of theCompany’s compounds for intractable and rarediseases
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
Collaborative research for discovery of smallmolecule drugs targeting messenger RNA (mRNA)

Collaborative research with academia
Drug discovery research was conducted with Gifu Pharmaceutical University, with whom the Company established acollaborative research chair “Joint Research Chair of Innovative Drug Discovery” in April 2021, mainly for indicationof retinal vein occlusion. With regard to the collaborative research with National Research Center for the Control andPrevention of Infectious Diseases Nagasaki University/Department of Emerging Infectious Diseases, Institute ofTropical Medicine, Nagasaki University, which had been underway since September 2020 with the target indicationof COVID-19, research aimed at creating a development candidate compound has been terminated and thecollaboration has been migrated to academic research. In addition, several other early-stage collaborations aimed at
discovering drug targets are underway.

<Status of development at licensee corporation>a)tegoprazan (K-CAB®, RQ-00000004/LXI-15028, etc.)
In July 2022, HK inno.N received manufacturing and marketing approval from the South Korean Ministry of Foodand Drug Safety for maintenance therapy for patients with cured erosive esophagitis, bringing the total number ofapproved indications in South Korea to five: erosive esophagitis, non-erosive reflux disease, gastric ulcer, adjuvant
therapy for Helicobacter pylori eradication, and maintenance treatment for patients with cured erosive esophagitis. In
addition, a new dosage form, orally disintegrating tablets, was launched in May 2022.
In China, in April 2022, Luoxin received manufacturing and marketing approval from the local authorities for thetreatment of erosive esophagitis and began marketing the product in the same month (Chinese brand name (registeredtrademark): 泰欣賛® (Taixinxan)). Similarly, in the Philippines, MPPI received marketing approval from the local
authorities in May 2022 for four indications, including erosive esophagitis, and began marketing the product inNovember. In Indonesia, Kalbe received marketing approval from the local authorities in November 2022 for thetreatment of non-erosive reflux disease. In addition, the product is under review or in preparation for approval in 28
other countries, including Thailand, Vietnam, Mexico, Singapore, and India.
In the U.S., in October 2022, Braintree initiated Phase III clinical trials in patients with erosive esophagitis and nonerosive reflux disease.
b)

EP4 antagonist (GALLIPRANT®, grapiprant)This compound is currently being sold 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 sold in 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). ELURA® is currently under review for approval in Europe.

d)Serotonin 5-HT2A and dopamine D2 receptor blocker (ziprasidone)
Regarding this compound, which was licensed out as a treatment for schizophrenia, in February 2022, the Company
terminated the license agreement with Meiji Seika Pharma Co., Ltd. (headquarters: Chuo, Tokyo), and returned therights to develop and market ziprasidone in Japan to the licensor.
-5-

e)

P2X7 receptor antagonist (RQ-00466479/AK1780)
In November 2022, Eli Lilly initiated Phase II clinical trials for this compound, which was created throughcollaborative research with Asahi Kasei Pharma and licensed to Eli Lilly by Asahi Kasei Pharma, for the treatment ofpatients with chronic pain.

f)

EP4 antagonist (RQ-00000007/AAT-007, grapiprant)
Continuing from the previous year, 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. (headquarters: Massachusetts, U.S.), a sublicensee of AskAt, was conducting Phase
I clinical trials for the cancer immunotherapy drug. However, in December 2022, the company announced that it would
discontinue its in-house clinical development and consider strategic alternative plans.

g)

Cyclooxygenase-2 (COX-2) inhibitor (RQ-00317076/AAT-076)
Continuing from last year, AskAt’s licensee 3DM is conducting Phase I clinical trials in China for the indication of
pain. In addition, Velo-1 is preparing a pilot study for pet pharmaceutical applications.

h)CB2 agonist (RQ-00202730/AAT-730)
Oxford Cannabinoid Technologies Ltd. (headquarters: London, U.K.), a licensee of AskAt, has completed pre-clinicalstudies and is preparing to begin clinical trials.

i)

TRPM8 blocker (RQ-00434739)
With respect to this compound licensed to Xgene in September 2021, Xgene has started pre-clinical studies for thedevelopment for the treatment of chronic pain.

j)

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 preparing pre-clinical studies for the developmentof a transdermal chronic pain treatment.

k)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.

l)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.

m)Retinoic acid receptor alpha agonist (tamibarotene, TM-411/SY-1425)
For this compound licensed by TMRC to Syros, clinical trials are underway in the U.S. for MDS and AML. In thefiscal year under review, data was reported from the Safety Lead-in portion of the Phase II clinical trial (SELECTAML-1) being conducted by Syros for AML starting in September 2021. Based on the data obtained, Syros announcedplans to initiate the randomized part of the SELECT AML-1 trial in the first quarter of 2023.

(2) Overview of consolidated financial position for the fiscal year under review
AssetsTotal assets as of December 31, 2022 were 6,257 million yen, an increase of 1,023 million yen (up 19.6%) from the end of
the previous fiscal year. This is mainly attributable to an increase in cash and deposits of 1,330 million yen, a decrease inaccounts receivable - trade, and contract assets of 603 million yen, an increase in leased assets of 160 million yen, and anincrease in investment securities of 100 million yen.
Liabilities
Total liabilities as of December 31, 2022 were 760 million yen, an increase of 314 million yen (up 70.5%) from the end of
the previous fiscal year. This is mainly attributable to an increase in lease obligations of 171 million yen and an increase inaccounts payable - other of 93 million yen.
Net assets
Total net assets as of December 31, 2022 were 5,496 million yen, an increase of 708 million yen (up 14.8%) from the endof the previous fiscal year. This is mainly attributable to the recording of profit attributable to owners of parent of 723 million
yen.
Consequently, the equity ratio was 87.7% (down 3.6 percentage points from the end of the previous fiscal year).
(3) Overview of cash flows for the fiscal year under review
The balance of cash and cash equivalents (“net cash”) as of December 31, 2022 amounted to 3,679 million yen, an
increase of 1,438 million yen (up 64.2%) from the end of the previous fiscal year.
-6-The respective cash flows in the fiscal year under review and the factors thereof are as follows.
Cash flows from operating activities
Net cash provided by operating activities was 1,480 million yen, an increase of 1,114 million yen (up 304.4% year on year).
This is mainly attributable to the recording of profit before income taxes of 851 million yen and depreciation of 147 million
yen, and a cash inflow from a decrease in trade receivables of 603 million yen.
Cash flows from investing activities
Net cash used in investing activities was 47 million yen, a decrease of 231 million yen (down 82.9% year on year). This ismainly attributable to purchase of investment securities of 651 million yen, proceeds from sale of investment securities of
315 million yen, and proceeds from redemption of investment securities of 210 million yen.
Cash flows from financing activities
Net cash used in financing activities was 29 million yen, an increase of 13 million yen (up 79.8% year on year). This ismainly attributable to repayments of lease obligations of 45 million yen.
(Reference) Trend in cash flow-related indicators
Fiscal year

Fiscal year

Fiscal year

Fiscal year

Fiscal year

ended
December 31,

ended
December 31,

ended
December 31,

ended
December 31,

ended
December 31,

2018

2019

2020

2021

2022

Equity ratio (%)

94.9

95.3

94.1

91.3

87.7

Market value equity ratio (%)

541.9

580.9

492.8

470.0

413.0

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 from the fiscal year ended December 31, 2018
to the fiscal year ended December 31, 2020 are not provided since operating cash flow was a minus figure.
(4) Outlook for the fiscal year ending December 31, 2022
For the next fiscal year (the fiscal year ending December 31, 2023), 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 withstart-ups, drug discovery ventures, academia, and other partners.
As for the outlook of consolidated financial results for the fiscal year ending December 31, 2023, the Group forecasts
business revenue of 2,799 million yen, operating profit of 260 million yen, ordinary profit of 242 million yen and profit
attributable to owners of parent of 183 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,
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.

-7-

3.

Consolidated financial statements and significant notes thereto(1) Consolidated balance sheet(Thousands of yen)
As of December 31, 2021

As of December 31, 2022

2,345,306
1,205,401–
313,807–
10,547
15,93990,382
22,3904,003,775

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

154,158
944,383
59,772(858,924)
299,389

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

3,839
29,227731
33,7994,268
19,98472
24,325887,932
140
9,160
897,233
1,230,422
5,234,197

987,962
24,0738,172
1,020,208
1,435,559
6,257,653

AssetsCurrent assets
Cash and deposits
Accounts receivable - trade
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
Other
Total investments and other assets
Total non-current assets
Total assets-8-

(Thousands of yen)
As of December 31, 2021

As of December 31, 2022

45,996–
21,547112,768
63,00480,40537,47528,884
10,442400,524

128,066
2,620
42,887206,20960,47930,957–18,922
3,635
493,778–
17,52012,129–9,170
167,661
12,22260,590–14,49816,01845,668446,193

2,750
266,893760,6712,256,920
2,446,703
49,631(21)
4,753,234

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

23,91923,91910,8504,788,004
5,234,197(5,569)(5,569)8,372
5,496,981
6,257,653

Liabilities
Current liabilities
Accounts payable - trade
Current portion of long-term borrowings
Lease liabilities
Accounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
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-9-(2) Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income(Thousands of yen)
Fiscal year ended
December 31, 2021
Business revenue
Business expenses
Cost of business revenue
Research and development expenses
Other selling, general and administrative expenses
Total business expenses
Operating profit
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
Settlement payments
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
Loss on valuation of investment securities
Retirement benefits for directors (and other officers)
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent- 10 -

Fiscal year ended
December 31, 2022

2,776,233

2,918,038

320,674
1,127,397
620,301
2,068,373
707,860

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

1,775
21,074
145,688
–
50
5,785
2,967
177,340529
13,127
43,697
13,672––
5,622
76,6491,454–
120
10,079–9,600
21,254
863,946

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

14,364
2,267
16,632

10,2684,203
14,472–––880,579
122,047
2,742
124,790755,788–755,788

49,99917,80067,799851,011129,034(1,413)
127,620
723,390–
723,390

Consolidated statement of comprehensive income(Thousands of yen)
Fiscal year ended
December 31, 2021
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- 11 -

Fiscal year ended
December 31, 2022

755,788723,390

19,11019,110774,899(29,489)(29,489)
693,901

774,899

693,901––

(3) Consolidated statement of changes in equity
Fiscal year ended December 31, 2021
(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity2,255,401

2,445,184(706,157)(21)

3,994,407

1,519

1,519

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

3,038

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

755,788755,788

–
1,519

1,519

755,788–758,827

2,256,920

2,446,703

49,631(21)

4,753,234

Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of
period4,809

Total accumulated
other comprehensive
incomeShare acquisition rights

4,809

11,912

Total net assets

4,011,129

Changes during period
Issuance of new shares

–

3,038

Profit attributable toowners of parent–

755,788

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

19,11019,110(1,062)

18,048

19,11019,110(1,062)776,875

23,91923,91910,8504,788,004- 12 -

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

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
period23,919Total accumulated
other comprehensive
incomeShare acquisition rights

23,91910,850Total net assets

4,788,004

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 -

(4) Consolidated statement of cash flows(Thousands of yen)
Fiscal year ended
December 31, 2021
Cash flows from operating activities
Profit 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
Settlement payments
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 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
Subsidies received
Payments of retirement benefits for directors (and otherofficers)
Settlement paid
Net cash provided by (used in) operating activities- 14 -

Fiscal year ended
December 31, 2022

880,579
141,555(1,775)(21,074)
1,454–(113,901)(14,364)(2,267)–
10,079851,011
147,731(529)(13,127)
5,995
5,833
(30,934)(10,268)(4,203)49,999(13,672)(50)

10,820120(5,785)9,600

15,897–––(674,582)(4,007)
4,166
20,472(40,139)
12,737

17,800603,089
2,047
82,070(73,881)(6,524)
178

63,146(24,032)

37,47568,223
13,135(37,475)
75,933(2,524)

14,023(6,788)25,750–(9,961)60,590–14,498972
425,543
22,460(1,454)–(76,707)
5,785(33,274)
1,676,296
18,128(6,018)(7,000)(183,521)––(17,800)(9,600)366,027–
1,480,084

(Thousands of yen)
Fiscal year ended
December 31, 2021
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 short-term borrowings
Repayments of short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of shares resulting fromexercise 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- 15 -

Fiscal year ended
December 31, 2022

(317,510)
207,380(200,000)–(91,494)(13,924)(200,649)
221,383
115,065497(279,251)(200,000)
310,130(100,000)
100,000(31,132)(773)(651,634)
315,249
210,512–(47,649)

10,000(10,000)––––
13,100(1,310)

1,855

4,033

(18,297)(16,441)(45,387)(29,563)

109,01035,771

179,344
2,061,316
2,240,661

1,438,643
2,240,661
3,679,304

(5) Notes to consolidated financial statements
Notes on premise of going concern
No items to report.
Changes in accounting policies(Application of accounting standard for revenue recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020)
and relevant ASBJ regulations from the beginning of the fiscal year ended December 31, 2022, and it has recognized revenue
at the time the control of promised goods or services is transferred to the customer at the amount expected to be received uponexchange of said goods or services.
The Group earns revenues (upfront payments, milestone-related revenues, royalty income, etc.) from licensing agreementsthat allow third parties to research, develop, manufacture and sell pharmaceuticals and other products and to use theirtechnologies.
With regard to upfront payments and milestone-related revenues, when performance obligations are satisfied at a point in time,
contractual performance obligations are deemed to be satisfied at the time when development, marketing, and other rights are
granted, or at the time when the contractually stipulated milestone is achieved. These revenues are recognized as businessrevenue at the point when contractual performance obligations are deemed to be satisfied.
Royalty income is consideration based on license agreements, etc., calculated based on the sales revenue of the contract partner,
etc. This income is recognized as business revenue with consideration to the point in time at which it is incurred.
The application of the Accounting Standard for Revenue Recognition and its guidance is subject to the transitional treatment
provided in the proviso to paragraph 84 of the Accounting Standard for Revenue Recognition. The cumulative effect of theretrospective application assuming the new accounting policy had been applied to periods prior to the start of the fiscal year
ended December 31, 2022, was added to or subtracted from the opening balance of retained earnings of the fiscal year ended
December 31, 2022, and thus the new accounting policy is applied from such opening balance; provided, however, that the
new accounting policy is not retrospectively applied to contracts where recognitions of nearly all the revenue amounts forperiods prior to the start of the fiscal year ended December 31, 2022, are subject to the previous treatment by applying themethod provided for in paragraph 86 of the Accounting Standard for Revenue Recognition. Furthermore, by applying themethod set forth in item (1) of the supplementary provisions of paragraph 86 of the Accounting Standard for Revenue
Recognition, modifications to contracts carried out prior to the beginning of the fiscal year ended December 31, 2022 were
accounted for based on the contractual terms after all contract modifications were reflected. Consequently, this cumulative
effect was added to or deducted from the opening balance of retained earnings of the fiscal year ended December 31, 2022.
As a result, there was no effect on the consolidated financial statements for the fiscal year ended December 31, 2022. In
addition, there was no effect on the opening balance of retained earnings.
In accordance with the transitional treatment provided for in paragraph 89-2 of the Accounting Standard for Revenue
Recognition, figures for the previous fiscal year have not been restated in accordance with the new approach to presentation.
(Application of accounting standard for fair value measurement, etc.)
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019)and relevant ASBJ regulations from the beginning of the fiscal year ended December 31, 2022, and it has applied the new
accounting policy provided for by the Accounting Standard for Fair Value Measurement, etc. prospectively in accordance withthe transitional measures provided for in paragraph 19 of the Accounting Standard For Fair Value Measurement, and paragraph44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019).
Note that there was no effect on the consolidated financial statements.
Additional information(Application of tax effect accounting for transition from consolidated taxation system to group tax sharing system)
As for items regarding the transition to the group tax sharing system introduced in the “Act Partially Amending the Income
Tax Act” (Act No. 8 of 2020) and items revised on non-consolidated taxation system in connection with the transition to thegroup tax sharing system, the Company and its consolidated subsidiaries have not applied the provisions of paragraph 44 of
the “Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, February 16, 2018) as allowedby the provisions of paragraph 3 of the “Tax Effect Accounting for the Transition from the Consolidated Taxation System to
the Group Tax Sharing System” (ASBJ PITF No. 39, March 31, 2020). Accordingly, amounts of deferred tax assets anddeferred tax liabilities are determined in accordance with the provisions of the tax law before revision.
(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.

- 16 -

Segment information, etc.
[Segment information]
I. Fiscal year ended December 31, 2021
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, 2022
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, 2021

Fiscal year ended
December 31, 2022

Net assets per share (Yen)

227.97261.65

Basic earnings per share

36.07

34.50

Diluted earnings per share

36.04

34.47

Notes: 1. The basis for calculation of net assets per share is as follows:
As of December 31, 2021
Total net assets

As of December 31, 2022

(Thousands of yen)

4,788,004

5,496,981

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

10,8508,372[10,850][8,372]

4,777,154

5,488,609

20,955,092

20,977,131[Share acquisition rights included therein (Shares)](Thousands of yen)Amount of net assets at the end of period related tocommon shares(Thousands of yen)

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

2. The basis for calculation of basic earnings per share and diluted earnings per share is as follows:
Fiscal year ended
December 31, 2021

Fiscal year ended
December 31, 2022

755,788723,390––755,788723,390

20,953,020

20,969,376––

19,084

13,764––

Basic earnings per share
Amount of profit attributable to owners of parent(Thousands of yen)Amount not attributable to common shareholders(Thousands of yen)Amount of profit attributable to owners of parent
related to common shares(Thousands of yen)

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- 18 -――――――

Significant subsequent event(Issuance of new shares and the 16th series of share acquisition rights through third-party allotment)
At a meeting of the Board of Directors on December 20, 2022, the Company resolved to issue new shares (the “Shares”) andthe 16th series of stock acquisition rights (the “Share Acquisition Rights”) through third-party allotment, and the payment
procedure was completed on January 5, 2023.
The funds to be procured through the issuance and exercise of the Shares and Share Acquisition Rights will be used for clinicaldevelopment of existing programs and new compounds, exploratory activities for new modalities, investment related to AI
drug discovery, and enhancement of laboratory facilities. The planned amount to be procured is 2,723 million yen (excluding
27 million yen for issuance expenses).
A summary of the Shares and Share Acquisition Rights issued is as follows:1.

Overview of the Share Issuance(1)

Payment date

January 5, 2023

(2)

Number of new shares issued

625,000 shares of common shares(3)

Issue price

1,258 yen per share(4)

Amount of procured funds

786,250,000 yen(5)

Amount of capital to be
increased

393,125,000 yen(6)

Amount of legal capitalsurplus to be increased(7)

Method of offering or
allotment

Third-party allotment(8)

Allottee

CVI Investments, Inc.

393,125,000 yen- 19 -

2.

Overview of the Share Acquisition Right Issuance(1)

Allotment date

January 5, 2023

(2)

Number of new shareacquisition rights issued

12,500(3)

Issue priceTotal: 19,362,500 yen (per share acquisition right: 1,549 yen)(4)

Number of potential shares
due to the issuance

Potential shares: 1,250,000 (100 shares per share acquisition right)
The exercise price will not be revised.

(5)

Amount of procured funds(value of assets to becontributed upon exercise ofshare acquisition rights)

1,945,000,000 yen (Note)(6)

Exercise price and conditions
for revision of exercise price

Exercise price: 1,556 yen; the exercise price will not be revised.

(7)

Exercise period

From January 6, 2023 to January 5, 2028

(8)

Method of offering or
allotment

Third-party allotment(9)

Allottee

CVI Investments, Inc.

The purchase agreement for the Share Acquisition Rights (the “Purchase
Agreement”) provides for the following:(1) The issuance of the Share Acquisition Rights shall be subject to thefulfillment of the following conditions, etc.:(i)
That the Company’s representations and warranties set forth in thePurchase Agreement are accurate in all material respects and that theCompany has complied with its material covenants(ii) No injunction order, etc. has been issued with respect to the issuanceof the Share Acquisition Rights(iii) The Company’s shares have not been delisted(iv) No material adverse event has occurred with respect to the Company(v) The Company has not communicated to the Allottee any undisclosed
material facts concerning the Company(10) Other(vi) The securities registration statement filed under the Financial
Instruments and Exchange Act with respect to the Share Acquisition
Rights is in effect(2) Any transfer of the Share Acquisition Rights shall require the approval of
the Company’s Board of Directors (however, from the perspective of
reducing administrative costs at the Allottee, transfers to Bank of America,
J.P. Morgan, Goldman Sachs & Co. and their affiliates shall be excluded).
Even in the event of a transfer, the rights and obligations of the Allottee
will be taken over by the recipient.
In addition, the Purchase Agreement stipulates provisions pertaining to thepurchase of the Share Acquisition Rights and provisions pertaining to lock-ups
regarding the issuance of new shares, etc.
Note: The amount of procured funds will be reduced if the Share Acquisition Rights are not exercised within the exercise
period or if the Share Acquisition Rights acquired by the Company are canceled.

- 20 -