Annual Securities Report
From April 1, 2018 to March 31, 2019
(The 142nd Fiscal Year)

Takeda Pharmaceutical C o mpany Limited

As used in this annual securities report, references to the “Company,” “Takeda,” “we,” “us” and “our” are to Takeda
Pharmaceutical Company Limited and, except as the context otherwise requires, its consolidated subsidiaries.
In this annual securities report, we present our audited consolidated financial statements as of March 31, 2018 and 2019 andfor the fiscal years ended March 31, 2018 and 2019. Our consolidated financial statements are prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The term
IFRS also includes International Accounting Standards (“IAS”) and the related interpretations of the committees (Standard
Interpretations Committee and International Financial Reporting Interpretations Committee).
As used in this annual securities report, “ADS” means an American Depositary Share, representing 0.5 shares of theCompany’s common stock, and “ADR” means an American Depositary Receipt evidencing one or more ADSs.
As used in this annual securities report, except as the context otherwise requires, the “Companies Act” means the Companies
Act of Japan.
Amounts shown in this annual securities report have been rounded to the nearest indicated digit unless otherwise specified. Intables and graphs with rounded figures, sums may not add up due to rounding.

Table of Contents
Part 1. Information on Takeda .................................................................................................................................. 2
Overview of Takeda ....................................................................................................................................... 2

I.
1.

Key Financial Data ....................................................................................................................................... 22.

History .......................................................................................................................................................... 4

3.

Business Overview........................................................................................................................................ 6

4.

Overview of Subsidiaries and Associates ..................................................................................................... 8

5.

Employees ................................................................................................................................................... 12

II. Operating and Financial Review and Prospects ....................................................................................... 13
1. Management Policy, Management Environment and Management Issues.................................................. 13
2. Risk Factors ................................................................................................................................................. 18
3. Management’s Analysis of Financial Position, Operating Results and Cash Flows.................................... 20
4. Material Contracts ........................................................................................................................................ 41
5. Research and Development .......................................................................................................................... 43
III. Property, Plant, and Equipment................................................................................................................. 68
1.

Overview of Capital Expenditures .............................................................................................................. 68

2.

Major Facilities ........................................................................................................................................... 68

3.

Plans for new facility construction, old facility disposal, etc ..................................................................... 72

IV. Information on the Company ..................................................................................................................... 74
1. Information on the Company’s Shares......................................................................................................... 74
2. Acquisition of Treasury Stock and Other Related Status............................................................................. 95
3. Dividend Policy ........................................................................................................................................... 96
4. Corporate Governance ................................................................................................................................. 96
V. Financial Information................................................................................................................................ 129
1. Consolidated Financial Statements and Others .......................................................................................... 130
2. Unconsolidated Financial Statements and Others ...................................................................................... 211
VI. Overview of Administrative Procedures for shares of the Company ................................................... 230
VII. Reference Information on the Company ................................................................................................ 231
1. Information on the Parent Company .......................................................................................................... 231
2. Other Reference Information ..................................................................................................................... 231

Part 2. Information on Guarantors for Takeda ................................................................................................... 233
Independent Auditor’s Report
Internal Control Report
Confirmation Note

[Cover][Document Filed]Annual Securities Report[Applicable Law]

Article 24, paragraph 1 of the Financial Instruments and Exchange Act of Japan[Filed with]

Director, Kanto Local Finance Bureau[Filing Date]

June 27, 2019

[Fiscal Year]

The 142nd Business Term (from April 1, 2018 to March 31, 2019)[Company Name]

Takeda Pharmaceutical Company Limited[Title and Name of Representative]

Christophe Weber, Representative Director, President & Chief Executive Officer[Address of Head Office]1-1, Doshomachi 4-chome, Chuo-ku, Osaka(The above address is the registered head office location and the ordinary business
operations are conducted at the “Nearest Place of Contact”)[Telephone Number]

Not applicable[Name of Contact Person]

Not applicable[Nearest Place of Contact]

1-1, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo(Global Headquarters)[Telephone Number]+81-3-3278-2111 (Main telephone number)[Name of Contact Person]

Norimasa Takeda, Head of Global Consolidation and Japan Reporting, Global
Finance[Place for Public Inspection]

Takeda Pharmaceutical Company Limited (Global Headquarters)(1-1, Nihonbashi Honcho 2-chome, Chuo-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)Fukuoka Stock Exchange(14-2, Tenjin 2-chome, Chuo-ku, Fukuoka)
Sapporo Stock Exchange(14-1, Minamiichijonishi 5-chome, Chuo-ku, Sapporo)

1

Part 1. Information on Takeda
I. Overview of Takeda
1. Key Financial Data
(1) Consolidated Financial Data

JPY (millions), unless otherwise indicatedFiscal Year

138th

139th

140th

141st

142nd

Year Ended

March 31, 2015

March 31, 2016

March 31, 2017

March 31, 2018

March 31, 2019

Revenue

1,777,824

1,807,378

1,732,051

1,770,531

2,097,224

Profit (loss) before tax(145,437)

120,539

143,346

217,205

94,896

Net profit (loss) for the year

(143,034)

83,480115,513

186,708

109,014

Net profit (loss) for the year attributable toowners of the Company(145,775)

80,166

114,940

186,886

109,126

Total comprehensive income (loss) for
the year(180,860)(39,602)

93,142

242,664

99,192

Total equity

2,206,176

2,011,203

1,948,965

2,017,409

5,163,588

Total assets

4,296,192

3,824,085

4,346,794

4,106,463

13,872,322

Equity attributable to owners of theCompany per share (JPY)

2,719.27

2,487.04

2,425.92

2,556.51

3,318.53

Basic earnings (loss) per share (JPY)(185.37)102.26147.15239.35113.50

Diluted earnings (loss) per share (JPY)(185.37)101.71146.26237.56112.86

Ratio of equity attributable to owners of theCompany to total assets (%)

49.7

51.0

43.6

48.6

37.2

Return on equity attributable to owners of
the Company (%)

(6.3)

3.9

6.0

9.6

3.0

−

50.2

35.5

21.7

39.8

Net cash from (used in) operating activities

182,517

25,491

261,363

377,854

328,479

Net cash from (used in) investing activities

91,347(71,208)(655,691)(93,342)(2,835,698)

Net cash from (used in) financing activities(300,998)(124,839)

289,896(326,226)

2,946,237

Cash and cash equivalents at the end of theyear

655,243

451,426

319,455

294,522702,093

Number of employees (Number of persons)

31,32831,16829,90027,23049,578

Price earnings ratio (Times)

Notes:(1) The consolidated financial statements have been prepared and presented in accordance with International Financial
Reporting Standards (IFRS).
(2) Revenue does not include consumption taxes.
(3) All figures shown are rounded to the nearest million JPY.
(4) The considerable decrease of net profit for the 138th fiscal year was due to the recognition of provision for litigation
settlements.
(5) Price earnings ratio for the 138th fiscal year is not shown due to the net loss for the year.
(6) Financial data for the 142nd fiscal year includes the impact of acquisition of Shire plc completed in January 2019.

2

(2) Non-consolidated Financial Data
JPY (millions), unless otherwise indicatedFiscal Year

138th

139th

140th

141st

142nd

Year Ended

March 31, 2015

March 31, 2016

March 31, 2017

March 31, 2018

March 31, 2019

Net sales

776,222776,998

737,803659,462

651,347

Ordinary income

239,509292,895

81,915125,944

17,514

Net income

60,714

263,023

108,369

187,004

88,231

Share capital

64,04464,766

65,203

77,914

1,643,585

Total number of shares issued (Thousandsof shares)

789,924790,284

790,521794,688

1,565,006

Total equity

1,477,854

1,572,199

1,530,447

1,565,913

4,647,171

Total assets

2,591,184

2,699,455

3,093,070

2,948,562

9,534,645

Net assets per share (JPY)

1,877.88

2,003.90

1,957.76

2,002.29

2,987.94

Dividend per share (JPY)[Interim dividend per share (JPY)]

180.00[90.00]180.00[90.00]180.00[90.00]180.00[90.00]180.00[90.00]

Basic earnings per share (JPY)

77.20

335.48138.73239.4791.76

Diluted earnings per share (JPY)

77.10

334.88138.60239.1891.72

Equity ratio (%)

57.0

58.2

49.4

53.1

48.7

Return on equity (%)

4.0

17.3

7.0

12.1

2.8

Price earnings ratio (Times)

77.7

15.3

37.7

21.6

49.3

Payout ratio (%)

233.2

53.7

129.8

75.2

196.2

Number of employees (Number of persons)

6,780

6,780

6,638

5,461

5,291

Total Shareholders Return[Comparative indicator: TOPIX Net Total
Return] (%)

126.3[130.7]112.3[116.5]117.9[133.7]120.7[154.9]110.8[147.1]Highest stock price (JPY)

6,657

6,609

5,527

6,693

5,418

Lowest stock price (JPY)

4,337.5

5,010

4,098

5,105

3,498

Notes:(1) Net sales do not include consumption taxes.
(2) All figures shown are rounded to the nearest million JPY.
(3) We have adopted partial amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No.28
issued on February 16, 2018) at the beginning of the current fiscal year, and financial data presented for the previous
fiscal year has been retrospectively adjusted.
(4) The highest and lowest stock prices are from the first section of the Tokyo Stock Exchange.

32. History
June
May

1781
1871

Started business selling Japanese and Chinese medicines
Began import of Western medicines

August1914

Set up research division

October

1915

Established Takeda Pharmaceutical Company (currently the Osaka Plant)

August1921

Established Daigo Nutritive Chemicals, Ltd. (currently Nihon Pharmaceutical Co., Ltd., a consolidated
subsidiary)

June

1922

Established Takeda Pure Chemicals Ltd. (later renamed to Wako Pure Chemical Industries, Ltd. in
October 1947)

January

1925

Established Chobei Takeda & Co., Ltd.

August1943

Changed name to Takeda Pharmaceutical Industries, Ltd.

May
May
August

1946
1949
1962

Established the Hikari Plant in Yamaguchi prefecture
Listed on the Tokyo Stock Exchange and Osaka Exchange
Established Takeda Pharmaceuticals Taiwan, Ltd. (currently a consolidated subsidiary) in Taiwan

April

1984

Established dual headquarters in Osaka and Tokyo

May

1985

Established TAP Pharmaceuticals Inc., a joint venture with Abbott Laboratories Inc., in the U.S. (TAP
Pharmaceuticals was first a wholly owned subsidiary according to the business reorganization in
April 2008, and then, merged with Takeda Pharmaceuticals U.S.A., Inc., a consolidated subsidiary, in
June 2008)

January

1988

Established Tsukuba Research Laboratories in Ibaraki prefecture

January

1992

Moved head office to its current location: 1-1, Doshomachi 4-chome, Chuo-ku, Osaka

March

1993

Established Takeda America, Inc. in the U.S. (Takeda America first merged with Takeda America
Holdings, Inc. and others, and was renamed to Takeda America Holdings, Inc. in July 2001. It wasthen merged with Takeda Pharmaceuticals U.S.A., Inc. in March 2016)

October

1997

Established Takeda Global Research and Development Center, Inc. (currently Takeda Development
Center Americas, Inc., a consolidated subsidiary) in the U.S.

October

1997

Established Takeda Ireland Limited (currently a consolidated subsidiary) in Ireland

December 1997

Established Takeda America Holdings, Inc. in the U.S. (later merged with Takeda America Inc. in
July 2001)

May

1998

Established Takeda Pharmaceuticals America, Inc. (currently Takeda Pharmaceuticals U.S.A., Inc., aconsolidated subsidiary) in the U.S.

September 1998

Established Takeda Europe Research & Development Centre Ltd. (currently Takeda Development
Centre Europe Ltd., a consolidated subsidiary), in the U.K.

March

2005

Acquired Syrrx, Inc. (currently Takeda California, Inc., a consolidated subsidiary) in the U.S.

April

2005

Transferred shares of five companies including Japan EnviroChemicals, Ltd., engaged in lifeenvironment business, to Osaka Gas Chemicals Co., Ltd., a subsidiary of Osaka Gas Co., Ltd.

June

2005

Transferred shares of Takeda Schering-Plough Animal Health K.K., engaged in animal health business,to Schering-Plough Corporation

January

2006

Transferred shares of BASF Takeda Vitamin K.K., engaged in sales of bulk vitamins, to BASF Japan
Ltd.

April

2006

Transferred shares of Mitsui Takeda Chemicals, Inc., engaged in chemicals business, to Mitsui
Chemicals, Inc.

August2006

Established Takeda Pharmaceuticals Europe Limited (liquidated in July 2018) in the U.K.

April

2007

Transferred shares of Takeda- Kirin Food Corporation, engaged in food business, to Kirin Brewery Co.,
Ltd.

October

2007

Transferred shares of House Wellness Foods Corporation, engaged in beverage and food business, toHouse Foods Corporation

October

2007

Transferred shares of Sumitomo Chemical Takeda Agro Company, Ltd., engaged in agrochemicalbusiness, to Sumitomo Chemical Co., Ltd.

March

2008

Acquired Amgen K.K., a wholly owned subsidiary of U.S. Amgen Inc. (The entire business wastransferred to the Company in April 2014 and liquidated in September 2014)

4

May

2008

Acquired Millennium Pharmaceutical Inc., (currently a consolidated subsidiary) through a publictender offer

September 2008

Established Takeda Clinical Research Singapore Private Limited (currently Takeda Development
Center Asia, Pte. Ltd., a consolidated subsidiary) in Singapore

February

Established Shonan Research Center in Kanagawa prefecture

2011

September 2011

Acquired Nycomed A.S. (currently Takeda A/S, a consolidated subsidiary, planned to be liquidated)in Switzerland

June

2012

Acquired URL Pharma, Inc. in the U.S. The core business was merged with Takeda Pharmaceuticals
U.S.A., Inc. in October 2012, and other businesses were divested in February 2013

October2012

Acquired LigoCyte Pharmaceuticals, Inc. (currently Takeda Vaccines, Inc., a consolidated subsidiary)in the U.S.

November 2012

Acquired Envoy Therapeutics, Inc. in the U.S. It was later merged with Takeda California, Inc. (asurviving company) in December 2013

May

2013

Acquired Inviragen, Inc. in the U.S. It was later merged with Takeda Vaccines, Inc. (a surviving
company) in December 2013

April

2015

Transferred shares of Mizusawa Industrial Chemicals, Ltd., engaged in chemical manufacturing andsales, to Osaka Gas Chemicals Co., Ltd.

April

2016

Split off long listed products business by an absorption-type split and transferred it to a wholly owned
Japanese subsidiary of Israel-based Teva Pharmaceutical Industries Ltd., and acquired shares of Teva
Pharma Japan Inc. (currently Teva Takeda Pharma Ltd., an associate accounted for using the equity
method)February2017

Acquired ARIAD Pharmaceuticals, Inc. (currently a consolidated subsidiary) in the U.S through apublic tender offer

April

2017

Split off Japan consumer healthcare business unit of the Company by an absorption-type split andtransferred it to Takeda Consumer Healthcare Company Limited (currently a consolidated subsidiary)

April

2017

Transferred shares of Wako Pure Chemical Industries, Ltd., engaged in reagent, chemical products, andclinical diagnostics agent business, to FUJIFILM Corporation

June

2018

Acquired TiGenix NV (currently a consolidated subsidiary) in Belgium through a public tender offer

January2019

Acquired Shire plc (currently a consolidated subsidiary) through a scheme of arrangement53. Business Overview
Takeda consists of 377 companies: Takeda Pharmaceutical Company Limited (hereafter referred to as “the Company”),
357 consolidated subsidiaries (including partnerships), and 19 affiliates accounted for using the equity method. The
major business of Takeda is research, development, manufacturing and marketing of pharmaceutical products.
The outline of the roles of subsidiaries which compose Takeda as of March 31, 2019 is as follows.
Segment information is omitted as Takeda operates a single reportable segment.
In Japan, the Company, Shire Japan Co., Ltd., and Nihon Pharmaceutical Co., Ltd. as well as some other subsidiaries
are engaged in the manufacturing and marketing of pharmaceutical products.
In the areas other than Japan, subsidiaries and associates located in each country are mainly engaged in the
manufacturing and marketing operations. Among these subsidiaries and associates, major subsidiaries are Takeda
Pharmaceuticals U.S.A. Inc, Baxalta. US Inc. and others in the U.S and Takeda GmbH and Baxalta GmbH and others in
Europe and Canada. Major manufacturing and marketing companies in the other areas include Takeda Pharmaceuticals
Limited Liability Company, Takeda Distribuidora Ltda. and others.
Regarding research and development, Takeda focuses on four core therapeutic areas ( Oncology, Gastroenterology(GI), Rare Diseases, and Neuroscience), and on two business units (plasma-derived therapies and Vaccines), and carriesout research and development activities to enhance Takeda's pipeline mainly in R&D centers located in Japan and the
U.S.

6

7

4. Overview of Subsidiaries and Associates(Consolidated subsidiaries (including partnerships))
As of March 31, 2019
Ownership of Voting Rights(%)
RegionCompany Name

TakedaPharmaceuticals
International, Inc.
TakedaPharmaceuticals
U.S.A., Inc.

Address

Capital or
Principal Business Direct- IndirectInvestment
Owners Ownershi
hip
p (%)
(%)

Relationship with the Company

Total Concurrent Financial(%) Position of AssistanceDirectors

Deerfield, IL,
U.S.A.

US$1 Pharmaceuticals

─

100.0

100.0

✔

Deerfield, IL,
U.S.A.

US$1
thousand Pharmaceuticals

58.1

41.9

100.0

─

Millennium
Pharmaceuticals,
Inc.

Cambridge,
MA, U.S.A.

US$0.1 Pharmaceuticals

―

100.0

100.0

─

ARIAD
Pharmaceuticals,
Inc.

Cambridge,
MA, U.S.A.

US$6
thousand Pharmaceuticals

―

100.0

100.0

―

Takeda California, San Diego, CA,
U.S.A.
Inc.

US$1 Pharmaceuticals

―

100.0

100.0

―

Takeda Vaccines,
Inc.

Deerfield, IL,
U.S.A.

US$1 Pharmaceuticals

―

100.0

100.0

―

TakedaDevelopment
CenterAmericas, Inc.

Deerfield, IL,
U.S.A.

US$1 Pharmaceuticals

―

100.0

100.0

―

─

Business
Transaction

Others──

Purchases─ drugs from the─Company
Conducts
research
Guarant
anddevelopment of ees for― drugs on behalf
leasepaymenof thets
Company andcontracts out tothe Company―

─Conducts
research ofdrugs― on behalf of theCompany andcollaborative
research with
the Company
Conducts
researchand― development ofdrugs on behalfof theCompany
Conducts
developmentof drugs and― acquisition of
approval
on behalf of theCompany

―

―

―

―

Baxalta
Incorporated(*)

Bannockburn,IL, U.S.A

US$10 Pharmaceuticals

―

100.0

100.0

―

―

Guarant
ees for― redemp
tion ofbond

Baxalta, US, Inc.

Bannockburn,IL, U.S.A

US$1 Pharmaceuticals

―

100.0

100.0

―

―

―

―

Shire Human
Lexington, MA,
Genetic Therapies,
U.S.A.
Inc.

US$1 Pharmaceuticals

―

100.0

100.0

―

―

―

―

Shire ViroPharma Lexington, MA,
Incorporated
U.S.A.

US$1 Pharmaceuticals

―

100.0

100.0

―

―

―

―

Shire NPS
Pharmaceuticals,
Inc.

Lexington, MA,
U.S.A.

US$1 Pharmaceuticals

―

100.0

100.0

―

―

―

―

Dyax Corp.(*)

Lexington, MA,
U.S.A.

US$215 Pharmaceuticals

―

100.0

100.0

―

―

―

―

Meritage Pharma, Lexington, MA,
U.S.A.
Inc.

US$1 Pharmaceuticals

―

100.0

100.0

―

―

―

―

US$100 Pharmaceuticals

―

100.0

100.0

―

―

―

―

Shire
Development,
LCC.

Lexington, MA,
U.S.A.

8

Shire North
American Group,
Inc.

Florence, KY,
U.S.A.

US$1
thousand Pharmaceuticals

―

100.0

100.0

TakedaPharmaceuticals
International AG

Zurich,Switzerland

4 million Pharmaceuticals
CHF

100.0

―

100.0

Takeda GmbH

Konstanz,
Germany€11 Pharmaceuticals
million―

100.0

Takeda Italia
S.p.A.

Rome, Italy€11 Pharmaceuticals
million―

100.0

Takeda Austria
GmbH

Linz, Austria€15 Pharmaceuticals
million―Takeda France
S.A.S.

Paris, France€3 million Pharmaceuticals

―

100.0

Takeda Pharma
A/S

Taastrup,
Denmark949
million Pharmaceuticals
DKK

100.0

Takeda AS

Asker,
Norway273
million Pharmaceuticals
NOK─

Takeda UK
LimitedBuckinghamshi
re,UnitedKingdom£50─Pharmaceuticals

million

―

―

―

―

100.0

―

―

Purchases drugs
from theCompany

―

100.0

―

─

―

─

―

─

―

─

100.0

―

―

―

―

―

100.0

―

―

―

―

100.0

100.0

―

─

─

─

―

─

100.0

100.0

100.0

100.0

Europe and Canada

―

―

―

―

100.0

―

―

―

―

100.0

100.0

―

―

―

―

100.0

100.0

―

―

―

―

―

100.0

―

Shire Plc(*)

Jersey£46.27
Pharmaceuticals
million

100.0

―

100.0

Shire
Pharmaceuticals
Holdings Ireland
Limited (*)

Dublin,IrelandUS$2,516 Pharmaceuticals
million

―

100.0

Shire
Pharmaceuticals
International
Unlimited
Company(*)

Dublin,IrelandUS$9,009.45 Pharmaceuticals
million―Dublin,Ireland€100
Pharmaceuticals
thousand―

Shire Ireland
Finance Trading
Limited (*)

Dublin,IrelandShire Pharma
Canada ULC

Vancouver,
CanadaUS$3,662.37 Pharmaceuticals
million
1.89
million Pharmaceuticals
CAD

Guarantees forpayments ofrental― fees forrealestate
and
other

―

100.0

US$20 Pharmaceuticals

Purchases
Borrows
drugs from thefund
Company―

London, United£800 Pharmaceuticals
Kingdomthousand

Shire Acquisitions
Investments Ireland Dublin,
DesignatedIreland
Activity Company―

Conducts
developmentof drug s andacquisition of
approval
on behalf of theCompany

TakedaDevelopment
CentreEurope Ltd.

Shire
Pharmaceuticals
Ireland Limited

―

―

100.0

100.0

―

✔

Guarantees for― redemp
tion of
bond

―

100.0

100.0

―

―

―

―

―

100.0

100.0

―

―

―

―

Paris,
Shire France S.A.S. France€5.4
Pharmaceuticals
million

―

100.0

100.0

―

―

―

―

Shire Germany
GmbH

€25
Pharmaceuticals
thousand

―

100.0

100.0

―

―

―

―

Berlin,Germany

920
thousand Pharmaceuticals
CHF

―

100.0

100.0

―

―

―

―

€5.5
Pharmaceuticals
million

―

100.0

100.0

―

―

―

―

£727
thousand Pharmaceuticals

―

100.0

100.0

―

―

―

―

€796
Pharmaceuticals
thousand

―

100.0

100.0

―

―

―

―

€100
Pharmaceuticals
thousand

―

100.0

100.0

―

―

―

―

€2 million Pharmaceuticals

―

100.0

100.0

―

―

―

―

€36.34
Pharmaceuticals
million

―

100.0

100.0

―

―

―

―

London,UnitedKingdom£230.61
million Pharmaceuticals

―

100.0

100.0

―

―

―

―

Neuchatel,
Switzerland€20
Pharmaceuticals
thousand

―

100.0

100.0

―

―

―

―

Shire International Zug,GmbH
Switzerland

100
thousand Pharmaceuticals
CHF

―

100.0

100.0

―

―

―

―

Russia/CIS

TakedaPharmaceuticals
Limited Liability
Company

Moscow,
Russia26
thousandPharmaceuticals
Russian
Ruble

―

100.0

100.0

―

─

―

─

Latin
America

Takeda
Sao Paulo,
Distribuidora Ltda. Brazil

11 million
Brazilian Pharmaceuticals
Reals

―

100.0

100.0

―

―

─

―

US$75 Pharmaceuticals
million

100.0

―

100.0

―

―

―

―

US$62 Pharmaceuticals
million

―

100.0

100.0

―

―

―

―

2,000
million
Korean Pharmaceuticals
Won

―

100.0

100.0

―

―

―

―

Singapore

S$5
Pharmaceuticals
million

100.0

―

100.0

―

Conducts
development of― drugs on behalfof theCompany―

Singapore

S$32 Pharmaceuticals
million

100.0

―

100.0

―

―

―

―

Shanghai,
China

CNY0

Pharmaceuticals

―

100.0

100.0

―

―

―

―

Chiyoda-ku,
Tokyo, Japan¥490 Pharmaceuticals
million

100.0

―

100.0

―

― Sells drugs, etc.,
to the Company―

Chuo-ku,
Tokyo, Japan¥760 Pharmaceuticals
million

87.3

―

87.3

―

― Sells drugs, etc.,
to the Company―

Chiyoda-ku,
Tokyo, Japan¥2,000
Pharmaceuticals
million

―

100.0

100.0

―

✔

―

Baxalta GmbH

Shire
Pharmaceuticals
Iberica S.L.U.
Shire
Pharmaceuticals
LimitedShire Italy S.p.A
Baxter AG

Zug,
Switzerland
Madrid,Spain
London,UnitedKingdom
Milan,
Italy
Vienna,Austria

Baxalta
Neuchatel,
Manufacturing,
Switzerland
S.a.r.l.
BaxatlaVienna,Innovations GmbH Austria
Shire
Pharmaceuticaldevelopment
LimitedBaxalta
Recombinant
S.a.r.l.

Takeda (China)
Holdings
Co., Ltd.

Shanghai,
China

Asia

TakedaPharmaceutical(China) Company Taizhou, China
LimitedTakedaPharmaceuticals
Seoul, Korea
Korea Co., Ltd.
TakedaDevelopment
CenterAsia, Pte. Ltd.

Japan

Takeda Vaccines
Pte. Ltd.
Shire BioScience(Shanghai)Co., Ltd
Takeda Consumer
Healthcare
Company Limited
Nihon
PharmaceuticalCo., Ltd.
Shire Japan Co.,
Ltd.
Other 301
subsidiaries

10―

(Associates accounted for using the equity method)
As of March 31, 2019
Principal
Business

Ownership of Voting Rights
Relationship with the Company(%)
DirectIndirectConcurrent Financial Business
Total
OthersOwnership Ownership (%) Position of AssistancTransaction(%)
Directorse(%)

Company Name Address

Boston,Cerevance, LLC MA,
U.S.A.

US$916 Pharmaceuticals

―

27.8

27.8

―

―

―

―

Amato
ToyonakPharmaceutical a City,
Osaka,
Products, Ltd. Japan¥96 million Pharmaceuticals

30.0

―

30.0

―

Sells overthe-counter― drugs to theCompany―

Nakamura-ku,
Nagoya,Japan¥100 million Pharmaceuticals✔

Contracts
out sale of― drugs to theCompany―

Japan

RegionUnited States

Capital or
Investment

Teva Takeda
Pharma Ltd.

49.0

―

49.0

Other 16
subsidiaries

Notes:(1) The amounts in the “Capital or Investment” are rounded to the nearest million of applicable currency if
the company’s capital or investment is one million or more. If the company’s capital is one thousand or
more but less than one million, they are rounded to the nearest thousand of applicable currency.
(2) The “Principal business” column represents business segment information.
(3) Revenue of Takeda Pharmaceuticals U.S.A. Inc. (excluding internal revenue among consolidated
companies) accounts for more than 10% of Takeda's revenue. The key financial information is as follows:(1) Revenue(2) Operating profit(3) Net profit for the year(4) Total equity(5) Total assets

430,759 million JPYJPYJPY
96,951
82,394
1,931,498
2,328,002(4) The term for concurrent position of directors is as follows:
Concurrent holding of positions: When the Takeda’s directors are the directors of companies concerned.
(5) (*) is a specified subsidiaries.

115. Employees(1) Takeda

As of March 31, 2019
Operating Segment

Number of Employees

Pharmaceuticals

49,578

Total

49,578Notes:(1) The number of employees represents the number of permanent employees excluding temporary employees. It is
calculated on full-time equivalent basis(*).
(*) If there are part-time workers among permanent employees, they are counted by converting into fulltime employees.
(2) The number of employees sharply increased compared to the prior fiscal year primarily due to the acquisition of
Shire plc (currently a consolidated subsidiary) on January 8, 2019.
(2) The Company
Number of Employees

Average Length ofService (years)

Average Age

5,291

41.5

Operating Segment

As of March 31, 2019
Average Annual Salary(JPY (thousands))

15.1

10,940

Number of Employees

Pharmaceuticals

5,291

Total

5,291

Notes:(1) The number of employees represents the number of permanent employees excluding temporary employees. It is
calculated on a full-time equivalent basis(*).
(*) If there are part-time workers among permanent employees, they are counted by converting into fulltime employees.
(2) The average annual salary includes bonuses and extra wages.

(3) Workers’ Union
In 1948, the Federation of All Takeda Workers’ Unions (FATWU: a coalition of unit union at each workplaceorganized in 1946) was founded. In July 1968, the coalition was unified and reorganized as the Takeda
Pharmaceutical Workers’ Union. The number of members is 4,591 in total as of March 31, 2019.
Regarding the workers’ union of Takeda, the National Council of Takeda-Related Workers’ Unions (NCTWU) was
founded as a friendship organization in 1948 together with six workers’ unions which have capital and business
relationships with the Company. The union was renamed to TAKEZENKYO in 1969, and TAKEZENREN (National
Federation of Takeda and Related Enterprise Based Unions) was founded as a federation in 2006. TAKEZENKYO
was integrated into TAKEZENREN in 2009, and as of March 31, 2019, 11 enterprise-based unions including theCompany, and Nihon Pharmaceutical Co., Ltd., a consolidated subsidiary of the Company, joined TAKEZENREN.
On June 9, 2017, the Federation of NCTG Workers Union was founded with enterprise-based unions including
Axcelead Drug Discovery Partners, Inc., a partnership company in research and development of the Company, Takeda
PRA Development Center KK and SPERA PHARMA, Inc.
The unions also join a superior body, UA ZENSEN (The Japanese Federation of Textile, Chemical, Food,
Commercial, Service and General Workers' Unions), which is under the umbrella of RENGO (Japanese Trade
Union Confederation) and TAKEZENREN through the Federation of NCTG Workers Union.
There are no significant matters to report regarding labor-management relationships.

12II. Operating and Financial Review and Prospects
1. Management Policy, Management Environment and Management Issues
The Company’s stated mission is to “strive towards Better Health and Brighter Future for people worldwide through leading
innovation in medicine.” Our culture is based on the achievement of this mission by acting with Integrity, Fairness, Honesty,and Perseverance and prioritizing the Patient (putting the patient at the center), Trust (building trust with society), Reputation(reinforcing our reputation), and Business (developing the business).
Over the past four years, The Company has been on a transformation journey, focused on becoming an agile, research anddevelopment (R&D) driven, global biopharmaceutical company that is well positioned to deliver innovative medicines andtransformative care to patients around the world.The Company has continued to strengthen its reputation through its products
and innovation, while remaining true to its values.
The Company has a strong track record of cross-border merger and acquisition activities and post-acquisition integration,
including the acquisition of TiGenix NV in 2018, ARIAD Pharmaceuticals in 2017, Nycomed in 2011 and Millennium
Pharmaceuticals in 2008.
Most recently, in January 2019, we completed our acquisition of Shire plc (“Shire”). With the acquisition of Shire, we havetaken the next major step in our transformation into a global, values-based, R&D driven biopharmaceutical company, with an
attractive geographic footprint. The Shire acquisition strengthens The Company’s presence in gastroenterology (GI) andneuroscience, which are two of its three core therapeutic areas, and provides leading positions in rare diseases and plasmaderived therapies. It also creates a highly complementary, robust, modality-diverse pipeline and a strengthened R&D engine
focused on innovation. The Shire acquisition delivers compelling financial benefits for the combined group, enhancing The
Company’s cash flow profile, with management committed to delivering substantial synergies and generating returns forshareholders.
The Company’s management team is experienced and diverse and has a proven track record of executing complex businessintegrations and large-scale transformations. The Company is dedicated to carrying out integration efforts in a mannerconsistent with The Company’s core values.
The following three clear strategic priorities are set to drive sustainable mid- to long-term growth of the Company.
1) Business Area Focus
Focus on five key business areas: GI, rare diseases, plasma-derived therapies, oncology, and neuroscience. See “List of
Principal Products” for further information on the principal products in each business area.
2) R&D Engine
Strengthen the R&D engine based on the therapeutic area focus, a leading partnership model, and patient-centric, sciencedriven culture of innovation. In particular, we focus our research and development efforts on our four key therapeutic areas:
Oncology, GI, rare diseases, neuroscience, plus plasma derived therapies and vaccines, and we continue to transform ourresearch and development structure. In order to deliver values in areas of high unmet medical needs, we strive to progress
our pipelines with the focus on innovative medicines.
3) Financial Strength
The Company’s financial strength involves a focus on driving margin expansion in mid-to long-term and generating cash
flow to invest in the business, de-leverage and return cash to shareholders. We also continue selected disposal of non-core
assets to generate cash in order to accelerate the pace of deleveraging.
The acquisition of Shire has expanded our geographic footprint, especially in the United States, an important and innovationdriven market. We have organized our operations into four regions: United States, Japan, Europe & Canada, and a Growthand Emerging Market region comprising China, Latin America, Middle East, Asia Pacific, Russia and the Commonwealth of
Independent States in order to manage the execution of our strategy in each region. The execution of our integration plan isunderway and we expect the integration will have relatively minimal disruption on the business and our pipeline due to thestrong strategic and geographic fit of the two companies. Throughout our integration we will continue to follow our three
guiding principles: (i) Patient-Centric (developing more innovative medicines supported by services and support capabilities),(ii) Agile & Simple (minimizing complexity and empowering local leaders to make local decisions), and (iii) Lean &Focused (concentrating our efforts on the five key business areas).

13[List of Principal Products]
Business
Area

Principal Product

DescriptionGI

ENTYVIO (vedolizumab)

A treatment for moderate to severe ulcerative colitis and Crohn’s disease.
Sales of ENTYVIO have grown strongly since its launch in 2014 to become
our top selling product in the fiscal year ended March 31, 2019. ENTYVIO is
now approved in more than 50 countries worldwide, and we continue toseek approval for ENTYVIO in additional countries.
In the fiscal year ended March 31, 2019, our revenue from ENTYVIO was
269.2 billion JPY.

TAKECAB (vonoprazan
fumurate)

A treatment for acid-related diseases. TAKECAB was launched in Japan in2015 and has achieved significant growth following the expiration of theprescription limitation period in March 2016.
In the fiscal year ended March 31, 2019, our revenue from TAKECAB was
58.2 billion JPY.

GATTEX/REVESTIVE(teduglutide [rDNA
origin]) for injection

The first prescription medicine for the long-term treatment of adults withshort bowel syndrome (“SBS”) who are dependent on parenteral support.
We added GATTEX/REVESTIVE to our GI portfolio with the acquisition of
Shire, which was completed in January 2019. In May 2019, the FDA
approved extending the indication of GATTEX for children 1 year of age
and older with SBS.
In the fiscal year ended March 31, 2019, our revenue
GATTEX/REVESTIVE was 12.8 billion JPY.

ALOFISEL(darvadstrocel)

fromPreviously Cx601, a treatment for complex perianal fistulas in adult patientswith nonactive/mildly active luminal Crohn’s disease, when fistulas haveshown an inadequate response to at least one conventional or biologic
therapy. ALOFISEL was approved in the EU in 2018 which marked the firstallogenic stem cell therapy to receive central marketing authorization(“MA”) approval in Europe.
In the fiscal year ended March 31, 2019, our revenue from ALOFISEL was
0.05 billion JPY.

Rare diseases

NATPARA/NATPAR(parathyroid hormone) for
injection

Indicated as an adjunct to calcium and vitamin D to control hypocalcemia inpatients with hypoparathyroidism (“HPT”). HPT is a rare condition in which
the parathyroid glands fail to produce sufficient amounts of parathyroid
hormone (“PTH”) or where the PTH lacks biologic activity. We added
NATPARA/NATPAR to our rare diseases portfolio with the acquisition of
Shire, which was completed in January 2019.
In the fiscal year ended March 31, 2019, our revenue
NATPARA/NATPAR was 7.1 billion JPY.

ADYNOVATE/ADYNOVI(antihemophilic factor(recombinant)[PEGylated])

An extended half-life recombinant factor VIII treatment for hemophilia A
based on ADVATE. ADYNOVATE/ADYNOVI uses the same manufacturing
process as ADVATE and adds a proven technology, PEGylation (a chemical
process that prolongs the amount of time a compound remains incirculation, potentially allowing for fewer injections), which we exclusively
licensed from Nektar Therapeutics. We added ADYNOVATE/ADYNOVI to
our rare diseases portfolio with the acquisition of Shire, which wascompleted in January 2019.
In the fiscal year ended March 31, 2019, our revenue
ADYNOVATE/ADYNOVI was 10.7 billion JPY.

TAKHZYRO(lanadelumab-flyo)

from

from

Injection, a fully human monoclonal antibody that specifically binds anddecreases plasma kallikrein. TAKHZYRO is the only monoclonal antibody(mAb) that provides targeted inhibition of plasma kallikrein, an enzyme
which is chronically uncontrolled in people with hereditary angioedema(“HAE”), to help prevent attacks. We added TAKHZYRO to our rarediseases portfolio with the acquisition of Shire, which was completed in

14

Business
Area

Principal Product

Description
January 2019.
In the fiscal year ended March 31, 2019, our revenue from TAKHZYRO was
9.7 billion JPY.

ELAPRASE (idursulfase)An enzyme replacement treatment for Hunter syndrome (also known as
Mucopolysaccharidosis Type II or MPS II). We added ELAPRASE to ourrare diseases portfolio with the acquisition of Shire, which was completed in
January 2019.
In the fiscal year ended March 31, 2019, our revenue from ELAPRASE was
15.1 billion JPY.

REPLAGAL (agalsidase
alfa for infusion)

An enzyme replacement marketed for the treatment of Fabry disease outsideof the U.S. Fabry disease is a rare, inherited genetic disorder resulting froma deficiency in the activity of the lysosomal enzyme alpha-galactosidase A,
which is involved in the breakdown of fats. We added REPLAGAL to ourrare diseases portfolio with the acquisition of Shire, which was completed in
January 2019.
In the fiscal year ended March 31, 2019, our revenue from REPLAGAL was
11.4 billion JPY.

Plasmaderived
therapies(Note)VPRIV (velaglucerase alfa
for injection)

An enzyme replacement treatment for type 1 Gaucher disease. We added
VPRIV to our rare diseases portfolio with the acquisition of Shire, which
was completed in January 2019. In the fiscal year ended March 31, 2019,
our revenue from VPRIV was 8.7 billion JPY.

GAMMAGARD LIQUID(Immune Globulin
Intravenous (Human)
10%),

A liquid formulation of the antibody replacement therapy immunoglobulin
product. GAMMAGARD LIQUID is used to treat adult and pediatric patients
two years of age or older with primary immunodeficiencies (“PID”) and canbe administered either intravenously or subcutaneously.
GAMMAGARD LIQUID is also used to treat adult patients with multifocal
motor neuropathy (“MMN”) administered intravenously. KIOVIG is thebrand name used for GAMMAGARD LIQUID in many countries outside of
the U.S. KIOVIG is approved in Europe for use by patients with PID andcertain secondary immunodeficiencies, and for adults with MMN.
We added GAMMAGARD LIQUID to our plasma-derived therapies
portfolio with the acquisition of Shire, which was completed in January
2019.

GAMMAGARD S/D[Immune Globulin
Intravenous (Human)] IgAless than 1 μg/mL in a 5%
solution

Indicated for the treatment of PID in patients two years old and older.
GAMMAGARD S/D is also indicated for prevention of bacterial infections in
hypogammaglobulinemia and/or recurrent bacterial infections associatedwith Bcell chronic lymphocytic leukemia (“CLL”), treatment of adultpatients with chronic idiopathic thrombocytopenic purpura (“ITP”) to
increase platelet count and to prevent and/or control bleeding, andprevention of coronary artery aneurysms associated with Kawasaki
Syndrome in pediatric patients.
GAMMAGARD S/D is provided for patients who require a low IgA content
in their IV treatment (IgA less than 1 μg/mL in a 5% solution).
We added GAMMAGARD S/D to our plasma-derived therapies portfoliowith the acquisition of Shire, which was completed in January 2019.

HYQVIA [Immune
Globulin Infusion 10%(Human) with
Recombinant Human
Hyaluronidase]

A product consisting of human normal immunoglobulin (“IG”) andrecombinant human hyaluronidase (licensed from Halozyme). HYQVIA is
the only subcutaneous IG treatment for PID patients with a dosing regimen
requiring only one infusion up to once per month and one injection site perinfusion to deliver a full therapeutic dose of IG.
We added HYQVIA to our plasma-derived therapies portfolio with theacquisition of Shire, which was completed in January 2019. HYQVIA is15

Business
Area

Principal Product

Description
approved in Europe for use by patients with PID syndromes and myeloma
or CLL with severe secondary hypogammaglobulinemia and recurrent
infections, and in the United States for adults with PID.

CUVITRU

an Immune Globulin Subcutaneous (Human) (“IGSC”), 20% Solution
indicated as replacement therapy for primary humoral immunodeficiency inadult and pediatric patients two years of age and older. CUVITRU is also
indicated in the EU for the treatment of certain secondary
immunodeficiencies.
CUVITRU is the only 20% subcutaneous IG treatment option without
proline and with the ability to infuse up to 60 mL (12 grams) per site and 60
mL per hour, per site as tolerated, resulting in fewer infusion sites andshorter infusion durations compared to other conventional subcutaneous IG
treatments.
We added CUVITRU to our plasma-derived therapies portfolio with theacquisition of Shire, which was completed in January 2019.

FLEXBUMIN

FLEXBUMIN (Human Albumin in a bag) and Human Albumin (glass) areavailable as 5% and 25% solutions. Both products are indicated for
hypovolemia, hypoalbuminemia due to general causes and burns, and foruse during cardiopulmonary bypass surgery as a component of the pumpprime. FLEXBUMIN 25% is also indicated for hypoalbuminemia associatedwith adult respiratory distress syndrome (“ARDS”) and nephrosis, andhemolytic disease of the newborn (“HDN”).
We added FLEXBUMIN to our plasma-derived therapies portfolio with theacquisition of Shire, which was completed in January 2019..

Oncology

NINLARO (ixazomib)

The first oral proteasome inhibitor for the treatment of multiple myeloma(“MM”). NINLARO has experienced a strong uptake in sales sincelaunching in the United States in 2015.
NINLARO was approved in the EU in 2016 and in Japan in 2017, and we are
seeking marketing authorization in a number of additional countries.
In the fiscal year ended March 31, 2019, revenue from NINLARO was 62.2
billion JPY.

ADCETRIS (brentuximab
vedotin)An anti-cancer agent used to treat Hodgkin lymphoma (“HL”) and systemic
anaplastic large cell lymphoma (“sALCL”). ADCETRIS was launched in the
United States, the EU and Japan in 2011, 2012 and 2014, respectively.
ADCETRIS has received marketing authorization by regulatory authorities
in more than 60 countries worldwide. We jointly develop ADCETRIS with
Seattle Genetics, Inc. and have commercialization rights in countries outside
the United States and Canada.
In the fiscal year ended March 31, 2019, our revenue from ADCETRIS was
42.9 billion JPY.

ALUNBRIG (brigatinib)

An orally administered small molecule anaplastic lymphoma kinase(“ALK”) inhibitor used to treat non-small cell lung cancer (“NSCLC”).
ALUNBRIG was developed by ARIAD Pharmaceuticals. ALUNBRIG was
granted accelerated approval in the United States in April 2017, and theEuropean Commission granted the product marketing authorization in
November 2018.
In the fiscal year ended March 31, 2019, our revenue from ALUNBRIG was
5.2 billion JPY.

Neuroscience

VYVANSE(lisdexamfetamine
dimesylate)

A stimulant medication indicated for the treatment of attention deficit
hyperactivity disorder (“ADHD”) in patients ages six and above and for thetreatment of moderate to severe binge eating disorder in adults. We added
VYVANSE to our neuroscience portfolio with the acquisition of Shire, which

16

Business
Area

Principal Product

Description
was completed in January 2019.
In the fiscal year ended March 31, 2019, our revenue from VYVANSE was
49.4 billion JPY.

TRINTELLIX(vortioxetine)

An antidepressant indicated for the treatment of major depressive disorderin adults. TRINTELLIX was co-developed with H. Lundbeck A/S, and waslaunched in 2014 in the United States. We have commercialization rights in
the United States and Japan.
In the fiscal year ended March 31, 2019, our revenue from TRINTELLIX
was 57.6 billion JPY in the United States.

Note: Revenue from plasma-derived therapies for the fiscal year ended March 31, 2019 was 111.7 billion JPY.

17

2. Risk Factors

Our business performance is subject to various present and future risks, and may experience unexpected fluctuations whensuch risks are realized. The risks discussed below are those that we believe are material and we could face in our business. We
have made efforts to take necessary measures to prevent those risks and will take appropriate measures when such risks are
realized based on the considerations of the likelihood that such risks are realized.
The future events contained in the following statements are envisioned based on the assumptions as of March 31, 2019.
(1) Risks relating to research and development
While we make efforts to effectively conduct the research and development activities aiming for bringing new products tomarkets, including Japan, the United States, Europe and Asia as early as possible, launching pharmaceutical products,
whether in-house developed or licensed compounds, is allowed only when they have been approved through rigorous
examinations of efficacy and safety as stipulated by the regulatory bodies.
If we recognize that the efficacy and safety of the compounds do not meet the required standard for regulatory approval, or
if the reviewing authorities express concern regarding the conformity of such compounds with the relevant standards, we
may decide to abandon the research and development activities of the compounds at that point or conduct additional clinicalor non-clinical trials. As a result, we may not able to recoup the development costs, may experience delays in bringing
products to the market and may be forced to revise our research and development strategies.
(2) Risks relating to intellectual property rights
Our pharmaceutical products are generally protected for a defined period by various patents (including those covering drug
substance, drug product, approval indications, methods of administration, methods of manufacturing, formulations anddosages).
Although we strictly manage our intellectual property rights and continuously monitor potential patent infringement by
third parties, if our intellectual property rights are infringed by other third parties, we may fail to realize anticipatedrevenues. Moreover, if our products infringe the intellectual property rights of others, we may be subject to claims seeking
the termination of manufacturing and sale of the relevant products and/or compensation for damages.
(3) Risks of sales decrease following patent expirations
While we make efforts to extend product life cycles, including the addition of new indications and formulations, genericdrugs inevitably penetrate the market following patent expiration of most branded products. In Japan, active promotion ofgeneric use by the relevant authorities and price reductions for long-listed products have led to decreases in our sales.
Moreover, the introduction of generic drugs due to patent expiration of competitive products and prescription-to-OTC
switches also intensifies competition, both in domestic and overseas markets. Our sales of pharmaceutical products may
decrease sharply as a result of these trends.
(4) Risks of adverse effects
Although pharmaceutical products are launched after the regulatory approval of manufacturing and sales following rigorous
reviews by regulatory bodies around the world, accumulated data during the post-marketing period may reveal adverse
effects that were not anticipated at the time of launch. In the case when such adverse effects are identified, we are required
to describe the adverse effects on the “precaution” section of the package insert or restrict usage of products. We may also
be forced to either recall or terminate sales of the product and be subject to loss and product liability.
(5) Risks of price-reduction due to the movements to curtail drug costs
In the United States, the largest market for our products, there has been increasing promotion for low-price generic use andpricing pressure of branded products from managed care groups and institutional and governmental purchasers. In Japan,
the price of products listed on the National Health Insurance price list has been decreased and the government is promoting
periodic reductions of prices of long-listed products. In Europe, prices of products have also decreased due to the policies toreduce medical costs and the increase of parallel imports. These reductions in prices of products could have a material
adverse effect on financial conditions and results of operations.
(6) Influence on fluctuations in foreign exchange rates
For the fiscal year ended March 31, 2019, sales outside Japan amounted to 1,526.2 billion JPY, which accounted for 72.8%
of our consolidated revenue and revenue in the United States in particular amounted to 829.0 billion JPY, or 39.5% of ourconsolidated revenue. Although a decrease in the value of the Japanese yen relative to other currencies has a positive effecton revenue, expenses incurred with foreign currencies such as research and development expenses can be downward factor

18

that contributes to decreases in consolidated revenue. Therefore, our financial conditions and results of operations are
considerably affected by fluctuation in foreign exchange rates and as such cannot be mitigated.
(7) Risks relating to corporate acquisitions
We regularly pursue acquisitions to continue to grow our business. However, there is a possibility that anticipated benefits
and synergies resulting from acquisitions may not be realized, as business activities in countries around the world expose us
to many risks including, but not limited to, changes in laws and regulations, political unrest, economic uncertainties anddifferences in business practices. In addition, our results of operations and financial conditions could be adversely affected
if valuation losses are recognized due to a decrease in value of acquired assets or if we fail to realize the anticipated benefits
from the integration of businesses acquired.
We completed the acquisition of Shire in January 2019. If we are unable to achieve the anticipated benefits of thisacquisition, including growth opportunities from acquired products, including pipeline products under development, andsynergies leading to cost savings we expect from combining the business or to manage the relevant risks appropriately,
including the integration process and regulatory and taxation risks incurred from Shire business, we could be required torecognize impairment losses related to such goodwill and intangible assets and our results of operations and financial
conditions could be adversely affected.
We have substantial debt, including a significant amount incurred from financing arrangements in connection with theShire Acquisition from financial institutions. If we are unable to promote deleverage immediately through realization of thebenefit and deposition of non-core assets as initially envisioned, and others, out credit ratings may be downgraded and it
may negatively influence the terms for refinancing of our existing debt or new borrowings. We are also required to comply
with certain covenants within various financing arrangements and violations of such covenants may require the accelerationand immediate repayment of the indebtedness, which may in turn have a material adverse effect on our financial conditions.
(8) Country risks of the countries and regions in which we operate
In developing our business globally, we have established risk management structure to mitigate risks, including politicalinstabilities, the deterioration of economic conditions and social disruptions in the countries and regions in which we
operate. However, in the case where we face unexpected situations related to such risks, our results of operations andfinancial conditions could be adversely affected.
(9) Risks relating to the stable supply
In response to the continued globalization of our sales network, we are strengthening our global supply chain and quality
assurance system. However, in the event of technical or legal / regulatory issues in our or our subcontractors’ production or
distribution facilities, or other disruptions due to natural disasters or accidents, we may experience a substantial delay in the
supply of products, which could adversely affect our results of operations and financial conditions.
(10) Risks relating to litigation and other legal matters
Regarding our operational activities, in addition to the ongoing litigation, there is a possibility that lawsuits may be filed inrelation to adverse effects from pharmaceutical products, product liability, labor issues, fair trade or other issues that may
have an adverse effect on our results of operations and financial conditions.
(11) Risks relating to environment
We make efforts to comply with environmental regulations related to use, manufacture, handling, storage and disposal ofhazardous materials in the countries and regions in which we operate. Despite our compliance efforts, if risks of accidental
contamination and any resultant injury from these materials are realized, we may incur or be subject to expenses, claims or
liability in the future which may fall outside of or exceed our insurance coverage.
Furthermore, changes to current environmental laws and regulations may impose further compliance requirements on usthat may impair our research, development and production efforts as well as our other business activities.

(12) Risks relating to IT security and information management
The size and complexity of our information technology and information security systems, including those of our third-party
service providers, make such systems potentially vulnerable to service interruptions or to security breaches frominadvertent or intentional actions by our employees or service providers, or from attacks by malicious third parties (such as
cyberattack). While we have invested in the protection of data and information technology, system shutdowns due to such
incidents could adversely affect our business operations and/or result in a loss of critical or sensitive confidential
information or intellectual property, and could result in financial, legal, and reputational damages to us.

19

3. Management’s Analysis of Financial Position, Operating Results and Cash Flows(1) Overview of Operating Results
1) Financial Position and Operating Results
JPY (billions) unless otherwise indicatedChange over the previous year

Amount
2,097.2+326.7+18.5%

R&D expense

368.3

+42.9

+13.2%

Operating profit

205.0

-36.8

-15.2%

Profit before tax

94.9-122.3-56.3%Net profit for the year

109.0

-77.7

-41.6%EPS (JPY)

113.50-125.85-52.6%

Total assets

13,872.3+9,765.9+237.8%

Total liabilities

8,708.7+6,619.7+316.9%Total equity

5,163.6+3,146.2+156.0%

Revenue

Operating results by each segment have been omitted since Takeda is comprised of a single segment ofPharmaceuticals business.
2) Cash Flows(Refer to "(2) Management Discussion and Analysis on Business Performance")3) Production, Orders received and Sales(a) Production
The amount of production for the year ended March 31, 2019 is as follows:
Name of Segment

Amount (JPY (millions))

Pharmaceuticals
Total

Year-on-year Basis (%)

619,3530.2

619,353

0.2

Notes:(1) Takeda's reportable segment is a single segment of Pharmaceuticals.
(2) The amount of production is based on the sales price, not including consumption tax and others.

(b) Orders received
Takeda carries out production according to production plans, which are based primarily on sales plans. Make-to-orderproduction is carried out in certain businesses, but is not significant in the total amount of orders received or balances.

20

(c) Sales
The amounts of sales for the year ended March 31, 2019 are as follows:
Name of Segment

Amount (JPY(millions))

Year-on-year Basis (%)

Pharmaceuticals

2,097,224

18.5<Japan><571,016><(1.6)><Overseas><1,526,208><28.2>

Consolidated Statement of Income

2,097,224

18.5<Royalty and service income ><70,951><(7.5)>

Notes:(1) Takeda's reportable segment is a single segment of Pharmaceuticals.
(2) The amounts show sales revenues from external customers.
(3) The amounts of sales for major customers and their percentage of total sales are as follows:
For the fiscal year ended March 31,
2018

Name of Customer

2019

AmountMedipal Holdings
Corporation and its group companies

Amount(JPY(millions))

Percentage of
total sales(JPY(millions))

Percentage of
total sales

220,249

12.4

225,962

10.8(4) The amounts do not include consumption taxes, etc.

21

(2)

Management Discussion and Analysis on Business Performance

1) Management Discussion and Analysis on Business Performance for the current fiscal year(a) Analysis of Consolidated Operating Results(i) Factors Affecting Our Results of Operations
Overview
We have grown both organically and through acquisitions, completing a series of major transactions that have resulted
in growth in our areas of therapeutic, geographic and pipeline focus. In particular, our acquisition of Shire in January
2019 strengthened our presence in GI and neuroscience, while providing us with a leading position in rare disease andplasma driven therapies. It also enhanced our research and development pipeline and created a highly complementary,robust, modality-diverse pipeline. Commercially, the Shire Acquisition significantly strengthened our presence in the
United States. As a result of the acquisition of Shire, we incurred significant indebtedness to finance the cash portion of
the consideration. We plan to de-lever following the Shire Acquisition using cash flows from operations and we are
initiating disposals of non-core assets to accelerate the pace of deleveraging and to refocus our business on our key
business areas of GI, rare diseases, plasma-derived therapies, oncology, and neuroscience.
We organize our business as a single operating segment, reflecting the presentation of information to our management
for the purposes of allocating resources, measuring performance and forecasting future periods. In the fiscal year ended
March 31, 2019, our revenue was 2,097.2 billion JPY, our operating profit was 205.0 billion JPY.
Factors Affecting Our Results of Operations
Our results are affected by the global industry trends and operating environment and other factors as described below.
Acquisitions
We may acquire new businesses to expand our research and development capabilities (including expanding into new
methodologies) and to acquire new products (whether in the development pipeline or at the marketing stage) or otherstrategic regions. Similarly, we regularly divest businesses and product lines to maintain our focus on our key growth
drivers and to manage our portfolio.
We account for these acquisitions as business combinations and record the assets and liabilities acquired at fair value.
Our results are impacted due to the impacts of purchase accounting, which typically includes fair value step-ups ofinventory and property, plant and equipment and recognized material intangible assets which result in costs related tounwind of the step up and amortization expense, respectively, in future periods. Our results are also impacted due toadditional interest expenses when an acquisition is financed with incremental borrowings.
On January 8, 2019, we acquired Shire for an aggregate consideration of 6.21 trillion JPY, of which 3,029.4 billion
JPY was paid in cash and the remainder mainly in share of our common stock. We incurred 3,295.9 billion JPY in
indebtedness in order to finance the cash portion of the consideration, and as a result of the Shire Acquisition assumed
1,603.2 billion JPY of indebtedness of Shire which is included in our consolidated statement of financial position. We
recorded goodwill of 3,087.4 billion JPY and intangible assets of 3,899.3 billion JPY in relation to the Shire
Acquisition. The acquisition of Shire has significantly changed our business through, among other things, thesignificant expansion of our product portfolio and geographic presence. Our results will be significantly impacted by
the Shire Acquisition with an increase to our revenues, and associated costs, and the impact of the acquisition
including incremental amortization expenses related to the acquired intangible assets, incremental cost of sales
resulting from the unwinding of the inventory fair value step up, the interest expense associated with the borrowings
used to fund the acquisition, and the costs incurred to integrate the business. We are actively engaged in integrating
Shire and expect to be able to achieve significant, recurring pre-tax synergies of approximately 2.0 billion USD
annually by the end of the third fiscal year after the completion of the Shire Acquisition, originating from efficiencies
in the combined company’s sales, marketing and administrative functions, research and development rationalization
efforts and product manufacturing and supply. We estimate that the realization of these synergies will require nonrecurring costs of approximately 3.0 billion USD in the first three fiscal years following the completion of the Shire
Acquisition. We believe that the substantial cash flow generation expected to result from the Shire Acquisition will
enable us to maintain our well-established dividend policy, and de-lever following completion. We have begun
initiating the disposal of certain non-core assets and businesses to increase the pace of de-leveraging our debt.

22

On February 16, 2017, we acquired ARIAD Pharmaceuticals, Inc. for a net consideration of 583.1 billion JPY.
Headquartered in Cambridge, Massachusetts in the United States, ARIAD was a commercial-stage biotechnology
company focusing on discovering, developing and commercializing precision therapies for patients with rare forms ofchronic and acute leukemia, lung cancer and other rare cancers.
As a result of our acquisitions, and the impacts described above, our results year over year may not be comparable.
Divestitures
In addition to acquisitions, we divest businesses and product lines to maintain our focus on our key growth drivers andto manage our portfolio and to provide additional cash flow to accelerate the repayment of long term borrowings.
In April 2017, we completed the sale of our shares in Wako Pure Chemical to FUJIFILM Corporation for a sale priceof 198.5 billion JPY, for which we recognized a gain of 106.3 billion JPY in the fiscal year ended March 31, 2018.
Wako Pure Chemical generated revenue of 76.6 billion JPY and 79.1 billion JPY for the fiscal years ended March 31,
2016 and 2017, respectively. There was no revenue recognized related to Wako Pure Chemical for the fiscal year
ended March 31, 2018.
In April 2016, we transferred certain long-listed products in Japan to Teva Takeda Yakuhin Ltd., a wholly-owned
subsidiary of Teva Takeda Pharma Ltd., a joint venture we formed with Teva Pharmaceutical Industries Ltd. in which
we hold a 49% interest, representing shares of Teva Takeda Pharma Ltd. received as consideration for the transfer. At
the time of the transfer, we recognized a gain for the difference between the fair value consideration received (sharesof Teva Takeda Pharma Ltd.) and the carrying value of the business to the extent we disposed of the business. The
remainder of the gain was deferred and will be amortized over a period of 15 years from the date of the transfer,representing the estimated useful life of the intangible assets associated with the products transferred. In the fiscal year
ended March 31, 2017, we recognized a gain related to this transfer of 115.4 billion JPY. 102.9 billion JPY of suchamount was the amount of the gain recognized at the time of disposal. The remainder represents the amount of thedeferred gain amortized during such fiscal year. We receive income from the joint venture in the form of a supply anddistribution fee, in addition to a 49% share of the joint venture’s income or losses.
We have communicated our intention to continue to divest businesses that are not core to our operations and to reduce
our borrowings with the proceeds. In May 2019, we announced the sale of Xiidra® (lifitegrast ophthalmic solution),
which we obtained as part of the Shire Acquisition and the sale of Tachosil™ as described further in Note 33 to ourconsolidated financial statements.
Patent Protection and Generic Competition
For pharmaceutical products in particular, patent protection and/or regulatory exclusivity benefit our results ofoperations by restricting competition. Newly introduced products, particularly those which treat conditions for whichalternative treatments may not be readily available, in particular may significantly contribute to sales. However, evenprotected products must compete with products of other manufacturers based on efficacy, lack of adverse reactions
and price. On the other hand, the loss or expiration of patent protection or regulatory exclusivity with respect to any ofour principal products could have a material adverse effect on our results of operations, as generic products, which
tend to be quickly adopted once introduced, may enter the market. Some of our principal products face, or are
expected to face, considerable competition due to the expiration of patent or other intellectual property protection. For
example, following the expiration of patent protection over bortezomib, the active ingredient in VELCADE, one of ourlargest selling products in the United States, a competing bortezomib-containing product has been introduced. This
has led to a decrease in sales of VELCADE, and further entry of competing products could result in substantial
additional declines. In certain cases, generic competitors may successfully challenge the validity of patents, or the
manufacturer may decide that the benefits of prematurely launching “at risk” the generic drug outweigh the costs ofdefending infringement litigation. In situations where the validity of patents or the value of the protection ischallenged, we may record impairment losses with respect to the relevant intangible property.
Impact of the Availability of Raw Materials
Our results of operations may be impacted if we are not able to internally or externally source critical raw materials.
For example, human plasma is a critical raw material in our plasma derived therapies. Efforts to increase the collectionof plasma may include the contracting and regulatory approval of additional plasma collection facilities and plasma

23fractionation facilitates. During the year ended March 31, 2019, our results of operations were impacted by the factthat the demand to produce plasma derived therapies was greater than the supply of critical raw material needed.
Foreign Exchange Fluctuations
In the fiscal year ended March 31, 2019, 72.8% of our revenue was from outside of Japan, and we expect this ratio tofurther increase when we consolidate a full year of Shire results. Changes in foreign exchange rates, particularly for
the U.S. dollar and the euro, relative to the yen, which is our reporting currency, will impact our revenues andexpenses. When the yen weakens against other currencies, our revenues attributable to such other currencies increase,having a positive impact on our results of operations, which may be offset by increased expenses denominated in suchcurrencies. Conversely, when the yen strengthens against other currencies, our revenues attributable to such currencies
decrease, having a negative impact on our results of operations, which may be offset by decreased expenses
denominated in such currencies. To mitigate the risk exposed by foreign exchange fluctuations, we utilize certain
hedging measures with respect to some of our significant foreign currency transactions, primarily forward exchange
contracts, currency swaps and currency options for individually significant foreign currency transactions.
Periodic trends
Our revenues, operating profit and net income were lower in the fourth quarter of each of the fiscal years ended March
31, 2017, 2018 and 2019, due mainly to fluctuations in sales in Japan. Japanese pharmaceutical product wholesalers
generally control their inventory more tightly towards their fiscal year ends, typically March 31, which causes
decreased revenue in the fourth fiscal quarter. Japanese pharmaceutical product wholesalers also tend to increasepurchases ahead of the New Year holidays, causing a concentration of sales in our third fiscal quarter, from October 1
to December 31.

(ii) Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS. The preparation of ourconsolidated financial statements requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period. On an ongoing basis, management
evaluates its estimates and assumptions. Management bases its estimates and assumptions on historical experience andon various other factors that it believes to be reasonable at the time the estimates and assumptions are made. Actual
outcomes may differ from those estimates and assumptions.
We believe the following critical accounting policies are affected by management’s estimates and assumptions,changes to which could have a significant impact on our consolidated financial statements.
Revenue Recognition
Our revenue is primarily related to the sale of pharmaceutical products and is generally recognized when control of the
products is passed to the customer in an amount that reflects the consideration to which we expect to be entitled in exchange forthose products. Our gross sales are subject to various deductions, which are primarily composed of rebates anddiscounts to retail customers, government agencies, wholesalers, health insurance companies and managed healthcareorganizations. These deductions represent estimates of the related obligations, requiring the use of judgement whenestimating the effect of these sales deductions on gross sales for a reporting period. These adjustments are deductedfrom gross sales to arrive at net sales. The U.S. market has the most complex arrangements related to revenue
deductions.
The following summarizes the nature of the most significant adjustments to revenue:•

U.S. Medicaid and Medicare: The U.S. Medicaid Drug Rebate Program is administered by state governments
using state and federal funds to provide assistance to certain vulnerable and needy individuals and families.
Calculating the rebates to be paid related to this program involves interpreting relevant regulations, which are
subject to challenge or change in interpretative guidance by government authorities. Provisions for Medicaid
rebates are calculated using a combination of historical experience, product and population growth, productpricing and the mix of contracts and specific terms in the individual state agreements. The U.S. Federal Medicare
Program, which funds healthcare benefits to individuals age 65 or older and certain disabilities, provides

24prescription drug benefits under Part D section of the program. This benefit is provided and administrated throughprivate prescription drug plans. Provisions for Medicare Part D rebates are calculated based on the terms ofindividual plan agreements, product sales and population growth, product pricing and the mix of contracts. Thereis often a time lag of several months between us recording the revenue deductions and our final accounting for
Medicare and Medicaid rebates.
•

Customer rebates: Customer rebates are offered to purchasing organizations, health insurance companies,
managed healthcare organizations and other direct and indirect customers to sustain and increase market share,
and to ensure patient access to our products. Since rebates are contractually agreed upon, the related provisions
are estimated based on the terms of the individual agreements, historical experience, and projected productgrowth rates.

•

Wholesaler chargebacks: We have arrangements with certain indirect customers whereby the customer is able tobuy products from wholesalers at reduced prices. A chargeback represents the difference between the invoice
price to the wholesaler and the indirect customer’s contractual discounted price. Provisions for estimating
chargebacks are calculated based on the terms of each agreement, historical experience and product growth rates•

Return reserves: When we sell a product providing a customer the right to return it, we record a provision for
estimated sales returns based on our sales return policy and historical return rates. We estimate the proportion ofrecorded revenue that will result in a return by considering relevant factors, including past product returns activity,
the estimated level of inventory in the distribution channel and the shelf life of products.

Because the amounts are estimated, they may not fully reflect the final outcome, and the amounts are subject tochange dependent upon, amongst other things, the type of purchasing organization, end consumer, and product sales
mix.
Historically, our adjustments of estimates, to reflect actual results or updated expectations, have not been material to
our overall business. Product-specific rebates, however, can have a significant impact on year- over-year individual
product growth trends. If any of our ratios, factors, assessments, experiences or judgments are not indicative or
accurate predictors of our future experience, our results could be materially affected. The sensitivity of our estimatescan vary by program, type of customer and geographic location.
Impairment of Goodwill and Intangible Assets
We review long-lived intangible assets for impairment whenever events or changes in circumstance indicate that theasset’s balance sheet carrying amount may not be recoverable. Goodwill and other currently not amortized intangible
assets are reviewed for impairment at least annually. As of March 31, 2019, we have 4,161.4 billion JPY of goodwill
and 4,860.4 billion JPY of intangible assets which in aggregate represent 65.0% of our total assets.
Intangible assets related to commercially marketed products are amortized using the straight-line method over theestimated useful life, which is based on expected exclusivity period, ranging from three to 20 years. Intangible assets
related to in-process research and development (“IPR&D”) product rights are not amortized until the product isapproved for sale by regulatory authorities in specified markets. At that time, we will determine the useful life of theasset and begin amortization.
Assets are generally considered impaired when their balance sheet carrying amount exceeds their estimatedrecoverable amount. The recoverable amount is estimated for each individual asset or at the larger cash generating unit
level when cash is generated in combination with other assets. Goodwill is allocated to cash generating units, orgroups of cash generating units based on expected synergies as determined and the recoverable amount is estimated at
the cash generating unit level. Our cash generating units are identified base on the smallest identifiable group of assetsthat generate independent cash inflows and are represented by the countries where we sell our products. The
estimation of recoverable value requires us to make a number of assumptions including:•amount and timing of projected future cash flows;•

behavior of competitors (launch of competing products, marketing initiatives, etc.);•

probability of obtaining regulatory approvals;•

future tax rates;•

terminal growth rate; and•discount rate.

25

Events that may result in the change in cash flows include IPR&D projects which are not successfully developed,
and/or commercially marketed products whose value becomes impaired, fail during development, are abandoned or
subject to significant delay or do not receive the relevant regulatory approvals. If these events were to occur, we may
not realize the future cash flows that we have estimated nor recover the value of the initial or subsequent R&D
investments made subsequent to acquisition of the asset project.
Due to changes in these assumptions in subsequent periods, we have recognized impairments and reversal of
impairments related to intangible assets during the periods presented. See Notes 11 and 12 to our consolidated
financial statements.

Retirement and Other Post-Employment Benefit Plans
We sponsor pension and other post-employment benefit plans that cover a significant portion of our employees. We
are required to make significant assumptions and estimates about future events in calculating the expense and thepresent value of the liability related to these plans. These include assumptions about the interest rates we apply toestimate future defined benefit obligations and net periodic pension expense, as well as rates of future pension
increases. In addition, our actuarial consultants provide our management with historical statistical information such as
withdrawal and mortality rates in connection with these estimates. Assumptions and estimates used by us may differ
materially from the actual results we experience due to changing market and economic conditions, higher or lower
withdrawal rates, and longer or shorter life spans of participants among other factors. See Note 22 to our consolidated
financial statements for sensitivity information related to the most significant assumptions. A significant change in theassumptions in future periods could have a material impact on our consolidated financial statements. As of March 31,
2019, we have net defined benefit liabilities of 156.5 billion JPY.
Business Combination – Fair value
Accounting for a business combination requires us to estimate the fair value of the assets acquired and liabilities
assumed and the value of any contingent consideration. The estimate of fair value requires us to make a number ofassumptions including estimated future cash flows, discount rates, development and approval milestones, expectedmarket performance and for contingent consideration the likelihood of payment.
Contingent consideration is recorded at fair value at the end of each period. The changes in the fair value based ontime value of money are recognized in Finance expenses while other changes are recognized in Other operating
income or Other operating expenses on the consolidated statement of income. During the year ended March 31, 2019,the change in fair value of contingent consideration reduced the amount to be paid to us by 2.2 billion JPY.
Our estimates are based on our prior experiences and industry knowledge. We believe that our estimates arereasonable, but actual outcomes could differ significantly from our estimates. A significant change in our estimatesused to value acquired asset groups or business combinations could result in future write-downs of tangible orintangible assets acquired by us and could, therefore, materially impact our financial position and profitability. If thevalue of the liabilities assumed by us, including contingent liabilities, is determined to be significantly different fromthe amounts previously recorded in purchase accounting, we may need to record additional expenses, which could
materially impact our financial position and profitability.
Legal Contingencies
We are involved in various legal proceedings primarily related to product liability and commercial liability arising in
the normal course of our business. These contingencies are described in detail in Note 32 to our consolidated financial
statements.
These and other contingencies are, by their nature, uncertain and based upon complex judgments and probabilities.
The factors we consider in developing our provision for litigation and other contingent liability amounts include themerits and jurisdiction of the litigation, the nature and the number of other similar current and past litigation cases, thenature of the product and the current assessment of the science subject to the litigation, and the likelihood ofsettlement and current state of settlement discussions, if any. In addition, we record a provision for product liability
claims incurred, but not filed, to the extent we can formulate a reasonable estimate of their costs based primarily on
historical claims experience and data regarding product usage. We also consider the insurance coverage we have to26

diminish the exposure for periods covered by insurance. In assessing our insurance coverage, we consider the policy
coverage limits and exclusions, the potential for denial of coverage by the insurance company, the financial conditionof the insurers, and the possibility of and length of time for collection. Any provision and the related estimatedinsurance recoverable have been reflected on a gross basis as liabilities and assets, respectively, on our consolidatedbalance sheets. As of March 31, 2019, we have a provision of 46.8 billion JPY for outstanding legal cases and otherdisputes.

Income Taxes
We prepare and file our tax returns based on an interpretation of tax laws and regulations, and we record estimates
based on these judgments and interpretations. In the normal course of business, our tax returns are subject toexamination by various taxing authorities, which may result in additional tax, interest or penalty assessment by theseauthorities. Inherent uncertainties exist in estimates of many tax positions due to changes in tax law resulting fromlegislation, regulation, and/or as concluded through the various jurisdictions’ tax court systems. When we conclude
that it is not probable that a taxing authority will accept an uncertain tax position, we recognize the best estimate of theexpenditure required to settle a tax uncertainty. The amount of unrecognized tax benefits is adjusted for changes infacts and circumstances. For example, adjustments could result from significant amendments to existing tax law, theissuance of regulations or interpretations by the taxing authorities, new information obtained during a tax examination,or resolution of a tax examination. We believe our estimates for uncertain tax positions are appropriate and sufficient
based on currently known facts and circumstances.
We also assess our deferred tax assets to determine the realizable amount at the end of each period. In assessing therecoverability of deferred tax assets, we consider the scheduled reversal of taxable temporary differences, projected
future taxable profits, and tax planning strategies. Based on the level of historical taxable profits and projected futuretaxable profits during the periods in which the temporary differences become deductible, we determine the amount the
tax benefits we believe are realizable. As of March 31, 2019, we had unrecognized deferred tax benefits of 259.4
billion JPY. A change in our assumptions in future periods could have a significant impact on our income tax
provision.

Restructuring Costs
We incur restructuring costs associated with planned initiatives to reduce our costs and in connection with the
integration of our acquisitions. Our most significant restructuring costs are severance payments and lease termination
costs. We establish a provision for restructuring costs when the plan has been approved, the cost can be estimated andthe amount is probable of payment. The recognition of restructuring provision requires a number of estimates
including timing of payments and the number of individuals that will ultimately remain with the company to receive
severance. As a result of these estimates, the actual restructuring costs could differ from our estimates.
We expect to incur additional restructuring costs in the future related to the integration efforts associated with ouracquisitions and divestitures. As of March 31, 2019, we have a provision of 49.7 billion JPY for restructuring costs.
See Note 23 to our audited consolidated financial statements included in this annual report for a further description of
our restructuring provisions and the change between periods.
(iii) Results of Operations
The following table provides selected consolidated statements of income information for the years ended March 31,2018 and 2019.
JPY (billions)

Revenue
Cost of Sales
Selling, general and administrative expenses
Research and development expenses
Amortization and impairment losses on intangible assets associated with products

27

2018

2019

¥

¥ 2,097.2(659.7)(717.6)(368.3)(203.4)

1,770.5(495.9)(628.1)(325.4)(122.1)

2018

Other operating income
Other operating expenses
Operating profit
Finance income
Finance expenses
Share of loss of investments accounted for using the equity method
Profit before tax
Income tax (expense) benefit

2019

169.4
(126.6)241.8
39.5(31.9)(32.2)
217.2(30.5)Net profit for the year

¥

159.9
(103.2)205.0
16.8(83.3)(43.6)
94.9
14.1
¥

186.7

109.0

Our results of operations for the fiscal year ended March 31, 2019 have been significantly impacted the Shire
Acquisition. The following summarizes the impact on our results of operations in the year end March 31, 2019 andon the change in our results between years.
JPY (billions) except for percentages
For the fiscal year ended March 31,
Impact from the Shire
Remaining Changeacquisition

Consolidated Financial
Results

Revenue

Impact of Acquisition
Purchase /Integratio
Accounting n Costs

2019

Change Versus
Previous Year

Shire
Operations¥ 2,097.2¥ 326.7 18.5%¥ 309.2¥—

2019

Change Versus
Previous Year—%¥ 1,788.0¥ 17.5

1.0%

Cost of sales(659.7)(163.8)33.0(101.6)(81.7)—(476.4)

19.6

(3.9)

Selling, general, andadministrative expenses(717.6)(89.5)

14.2(98.5)(0.6)(23.8)(594.7)

33.4

(5.3)

(368.3)(42.9)

13.2(43.0)—(1.6)(323.7)

1.7

(0 5)

(203.4)(81.2)

66.5

(0.0)

(99.2)—(104.1)

18.0(14.7)

Research and development
Expenses
Amortization andimpairment losses on
intangibles assets
associated with products
Other operating income

159.9

(9.5)

(5.6)

(1.4)

—

—

161.2

(8.2)

(4.8)

Other operating expenses(103.2)23.4 (18.5)

(4.9)

—

(59.6)(38.6)

88.0(69.5)

Operating profit

205.0(36.8) (15.2)

59.8(181.6)(85.0)

411.8

170.0

70.3

Finance income

16.8(22.7) (57.4)

—

0.2

—

16.6

(22.9) (57.9)

Finance expense(83.3)(51.4)

160.9(10.6)(4.2)(41.3)(27.1)

4.8 (15.1)

Share of profit (loss) ofinvestments accounted forusing the equity method(43.6)(11.4)

35.5

0.3

—

—

(43.9)(11.7)

36.4

Profit before Income tax

94.9(122.3) (56.3)

49.4(185.6) (126.3)

357.4

140.2

64.5

Income tax expenses

14.1

44.6 (146.3)(11.3)

26.1(44.6)(14.1)

46.3

Net profit for the year

109.0

(77.7) (41.6)

38.1(141.7) (100.2)

312.8

126.1

67.5

44.0

Revenue. Revenue increased 326.7 billion JPY, or 18.5%, to 2,097.2 billion JPY for the fiscal year ended March
31, 2019, including 309.2 billion JPY resulting from the Shire Acquisition.
The remaining increase of 17.5 billion JPY, or 1.0%, resulted from the continued expansion from three businessareas (GI, oncology, and neuroscience), which was partially offset by the divestitures and the unfavorable impactof foreign currency movements.

Revenue by Region

The following shows revenue by geographic region:28

JPY(billions) except for percentages
For the fiscal year ended March 31,
Revenue:
Japan

2018

¥

2019

580.3

32.8%

United States

598.3

Europe and Canada

¥

571.0

27.2%

33.8

829.0

39.5

313.7

17.7

405.6

19.3

Russia/ CIS

68.2

3.9

59.7

2.8

Latin America

75.7

4.3

88.1

4.2

Asia (excluding Japan)

104.0

5.9

105.4

5.0

Other (1)

30.2

1.7

38.3

1.8

Total
1,770.5
100.0
Note: Other region includes Middle East, Oceania and Africa.

2,097.2

100.0

We rely on our key prescription drug products to generate a significant portion of our revenue. The following
products had the most significant impact on our results of operations.

For the fiscal year ended March 31,
2018

2019

Change versus theprevious year

(JPY (billions), except for percentages)
GI:
ENTYVIO
DEXILANTPANTOPROZOLETAKECABAMITIZA
Oncology:
VELCADELEUPRORELIN
NINLAROADCETRISICLUSIG
ALUNBRIG
Neuroscience:
TRINTRELLIX
Others:AZILVA.
ALOGLIPTINULORIC
COLCRYS
Products acquired from Shire:
IMMUNOGLOBULINVYVANSEADVATEALBUMINGATTEX/REVESTIVEADYNOVATE
TAKHZYRONATPARA

¥

29

201.4
65.7
65.8
48.5
33.8

¥

269.2
69.2
61.6
58.2
33.0

¥ 67.8
3.5
(4.2)
9.8
(0.9)

33.7%
5.3
(6.4)
20.1
(2.5)

137.3
108.1
46.4
38.5
23.1
2.8

127.9
110.1
62.2
42.9
28.7
5.2

(9.4)
2.0
15.7
4.4
5.6
2.4

(6.9)
1.9
33.9
11.4
24.1
84.0

48.4

57.6

9.2

19.0

64.0
50.2
46.8
40.3

70.8
54.8
51.1
30.0

6.8
4.6
4.3
(10.3)

10.6
9.1
9.1
(25.4)

—
—
—
—
—
—
—
—

62.2
49.4
32.1
15.8
12.8
10.7
9.7
7.1

62.2
49.4
32.1
15.8
12.8
10.7
9.7
7.1

—
—
—
—
—
—
—
—

Change in revenue was primarily attributable to the following products:

GI. In GI, revenue was driven by Takeda's top-selling product ENTYVIO (for ulcerative colitis and Crohn's
disease) with sales of 269.2 billion JPY in the fiscal year ended March 31, 2019, an increase of 67.8 billion
JPY, or 33.7%. This increase was mainly attributable to ENTYVIO's steady expansion of patient share in the
bio-naïve segment. Takeda obtained an NDA approval in July 2018 in Japan for the treatment of patientswith moderately to severely active ulcerative colitis and launched the product in November 2018.
Sales of TAKECAB (for acid-related diseases) were 58.2 billion JPY in the fiscal year ended March 31,
2019, an increase of 9.8 billion JPY, or 20.1%, versus the previous year. The increase was driven by the
expansion of new prescriptions in the Japanese market due to TAKECAB's efficacy in reflux esophagitis
and the prevention of recurrence of gastric ulcers during low-dose aspirin administration.



Oncology. In Oncology, sales of NINLARO (for multiple myeloma) were 62.2 billion JPY, an increase of
15.7 billion JPY, or 33.9%, versus the previous year. Strong performance in several regions, particularly in
the United States continued to contribute to the growth. NINLARO is a once-weekly oral proteasome
inhibitor with a profile of efficacy, safety, and convenience. Additionally, sales of ADCETRIS (formalignant lymphomas) increased by 4.4 billion JPY, or 11.4%, reflecting strong performance particularly inJapan and Brazil. Sales of ICLUSIG (for leukemia) and ALUNBRIG (for lung cancer), obtained through theacquisition of ARIAD in February 2017, grew by 5.6 billion JPY, or 24.1% and 2.4 billion JPY, or 84.0%,
respectively. Sales of VELCADE (for multiple myeloma), which lost market exclusivity in the United Statesin previous year, decreased by 9.4 billion JPY, or 6.9%.



Neuroscience. In Neuroscience, sales of TRINTELLIX (for major depressive disorder) were 57.6 billion JPY in
the fiscal year ended March 31, 2019, an increase of 9.2 billion JPY, or 19.0%, versus the previous year.
Prescribers and patients increasingly made TRINTELLIX part of their comprehensive approach to treat major
depressive disorder.
The decrease in revenue resulting from divestitures was primarily due to the sale of seven long-listed products inJapan to Teva Takeda Yakuhin Ltd. in May 2017, the disposition of Guangdong Techpool Bio-Pharma Co., Ltd. in
May 2018, and the terminating Takeda's co-promotion and distribution of Xeljanz in Japan in March 2018.

30

Shire contributed 309.2 billion JPY to our revenue from the date of acquisition. As part of the integration,
Takeda's distribution channel policies were applied to the products acquired from Shire. This resulted in a onetime destocking at wholesalers as they lowered their days-on-hand of inventory of commercial products, which
resulted in lower revenue for products acquired from Shire. The sales were primarily from the following products:

GI. In GI, revenue was 21.5 billion JPY primarily from the sales of GATTEX/REVESTIVE (for the treatmentof short bowel syndrome) that were 12.8 billi1 on JPY.,

Rare diseases. In rare diseases, revenue was 111.2 billion JPY including sales of ADVATE andADYNOVATE (both for the treatment of hemophilia A), TAKHZYRO (for the preventive treatment ofhereditary angioedema), and NATPARA (for the treatment of hypoparathyroidism)of 32.1 billion JPY, 10.7
billion JPY, 9.7 billion JPY, and 7.1 billion JPY, respectively.



Plasma derived therapies. In plasma derived therapies, revenue was 96.3 billion including sales of
IMMUNOGLOBULIN (mainly for the treatment of primary immunodeficiency and multifocal motor
neuropathy) and ALBUMIN (primarily used for the hypovolemia and hypoalbuminemia) of 62.2 billion JPY
and 15.8 billion JPY, respectively.



Neuroscience. In Neuroscience, revenue was 60.1 billion JPY including sales of VYVANSE (for thetreatment of ADHD and moderate to severe binge eating disorder) of 49.4 billion JPY.
Cost of Sales. Cost of Sales increased 163.8 billion JPY, or 33.0%, to 659.7 billion JPY for the fiscal year
ended March 31, 2019. This includes 101.6 billion JPY related to sales of products acquired as part of theShire Acquisition and the impact of 81.7 billion JPY mainly due to non-cash charge from the unwinding of thefair value step up on the inventory from the Shire Acquisition. This increase was offset by a decrease inremaining Cost of Sales of 19.6 billion JPY, or 3.9%, primarily due to a more favorable product mix.
Selling, General and Administrative (SG&A) expenses. SG&A expenses increased 89.5 billion JPY, or 14.2%,
to 717.6 billion JPY for the fiscal year ended March 31, 2019, primarily due to acquisition of Shire's operations
in our results of 98.5 billion JPY and related acquisition costs of 23.8 billion JPY. This increase was partially
offset by a decrease of remaining SG&A expenses of 33.4 billion JPY due to a favorable impact of our global
operating expense reduction initiative as well as lower long-term share-based incentive payments tomanagement.

Research and Development expenses. Research and development expenses increased 42.9 billion JPY, or 13.2%, to368.3 billion JPY, primarily resulting from the acquisition of Shire. The remainder of our research and development
expenses remained steady compared to the previous year.

Amortization and Impairment Losses on Intangible Assets Associated with Products. Amortization and Impairment
Losses on Intangible Assets Associated with Products increased by 81.2 billion JPY, or 66.5%, to 203.4 billion JPY
for the fiscal year ended March 31, 2019. This represents an increase of 99.2 billion JPY related to amortization of
intangible assets recorded in the Shire Acquisition and a 22.6 billion JPY reversal of the COLCRYS impairment
recorded in the previous year. This increase was offset by lower amortization expense of 36.7 billion JPY, which
related to the VELCADE intangible asset being fully amortized within the previous year.

Other Operating Income. Other Operating Income decreased 9.5 billion JPY, or 5.6%, to 159.9 billion JPY for the
fiscal year ended March 31, 2019. The decrease was primarily due to the net impact of 106.3 billion JPY gain on thesale of Wako Pure Chemical Industries, Ltd. recorded in the previous year, whereas we recorded a 50.3 billion JPY
gain on sale of Property, Plant & Equipment and Investment Property including Takeda's old headquarter building inTokyo as well as a 38.2 billion JPY gain on sale of shares of the subsidiary, to which respective real estate businesses
were transferred in the current year.

31Other Operating Expenses. Other Operating Expenses decreased 23.4 billion JPY, or 18.5%, to 103.2 billion JPY for
the fiscal year ended March 31, 2019, which was a decrease of 88.0 billion JPY partially offset by 59.6 billion JPY of
Shire integration costs. The decrease was primarily due to a decrease of 22.8 billion JPY in restructuring expense, andother costs incurred in the prior year that did not reoccur in the current fiscal year such as a 41.5 billion JPY loss on
the liquidation of a foreign subsidiary.

Net Financial Income (Expense). Net Financial Expense was 66.4 billion JPY in the current year, an increase of 74.1
billion JPY compared to the previous year, which includes 41.3 billion JPY mainly related to interest on borrowings
used to partially fund the Shire Acquisition. The remaining increase is primarily due to a gain on an investment of 30.4
billion JPY that was included in financial income in the prior year and is no longer be included in financial income
upon adoption of a new accounting standard.

Shares of Loss of Associates Accounted for Using the Equity Method. Shares of Loss of Associates Accounted for
Using the Equity Method were 43.6 billion JPY, an increase of 11.4 billion JPY from the previous year. This primarily
relates to Takeda's share of an impairment charge recognized by Teva Takeda Pharma Ltd. Teva Takeda Pharma Ltd.
operates a business of long-listed products and generics, and conducted a revaluation of its assets in response tochanges in the business environment.

Income Tax Expenses. Income Tax Expenses decreased 44.6 billion JPY, or 146.3% from 30.5 billion JPY for the
fiscal year ended March 31, 2018 to tax benefit of 14.1billion JPY for the fiscal year ended March 31, 2019. Thisdecrease was mainly due to tax benefit of 58.7 billion JPY resulting from the Shire acquisition. Excluding the Shireacquisition impact, the remaining Income Tax Expenses increased 14.1 billion JPY mainly due to an increase in Profit
Before Tax, as well as the impact from the enactment of the Tax Cuts and Jobs Act (Tax Reform) in the U.S. in theprevious year. These factors were partially offset by capital loss related to restructuring of subsidiaries in the current
year.

32

(iv) Underlying Growth (April 1, 2018 to March 31, 2019)
Takeda uses the concept of "Underlying Growth" for internal planning and performance evaluation purposes.
For the year ended March 31, 2019, the impact of Shire acquisition has been excluded from our Underlying
measures to allow comparison to prior year Underlying measures.
Underlying Growth compares two periods (quarters or years) of financial results under a common basis and isused by management to assess the business. These financial results are calculated on a constant currency basis
and excludes the impacts of divestitures and other amounts that are unusual, non-recurring items or unrelated toour ongoing operations. Although these are not measures defined by IFRS, Takeda believes Underlying Growthis useful to investors as it provides a consistent measure of our performance.
Takeda uses "Underlying Revenue (1) Growth", "Underlying Core Earnings (2) Growth", and "Underlying Core
EPS (3) Growth" as key financial metrics.

Legacy Takeda Underlying Growth
Change from the previous year
Underlying Revenue+5.3%+89.1 billion JPY

Underlying Core Earnings+38.7%+109.5 billion JPY

Underlying EPS+29.0%+77.88 JPY(1) Underlying Revenue represents revenue on a constant currency basis and excluding non-recurring items and theimpact of divestitures occurred during the reporting periods presented and excludes the impact of the Shire
Acquisition.
In this period, the underlying revenue excludes the impact of the sale of seven long-listed products in Japan toTeva Takeda Yakuhin Ltd. which is a subsidiary of Teva Takeda Pharma Ltd. and the impact of the divestitures ofMultilab lndustria e Comércio de Produtos Farmacêuticos Ltda. and Guangdong Techpool Bio-Pharma Co., Ltd.
(2) Underlying Core Earnings represents Core Earnings based on a constant currency basis and further adjusted to
exclude the impacts of divestitures that occurred during the reported periods and the impact of the Shireacquisition. Core Earnings represents net profit adjusted to exclude income tax expenses, our share of profit orloss of investments accounted for using the equity method, finance expenses and income, other operating
expenses and income, amortization and impairment losses on acquired intangible assets and other items thatmanagement believes are unrelated to our core operations, such as purchase accounting effects and transaction
related costs.
In this period, the significant items in calculating underlying Core Earnings include transaction related costs of theShire Acquisition.
Underlying Core Earnings represents the amount on a constant currency basis in calculating the impact ofdivestitures incurred during the reporting period.
In this period, divestitures include the impact of the sale of seven long-listed products in Japan to Teva Takeda
Yakuh1n Ltd., and the impact of the divestitures of Multilab lndustria e Comércio de Produtos Farmacêuticos
Ltda. and Guangdong Techpool Bio-Pharma Co., Ltd.
(3) Underlying Core EPS represents net income based on a constant currency basis, adjusted to exclude the impact ofdivestitures , the impact of the Shire acquisition , items excluded in the calculation of Core Earnings, and othernon-operating items (e.g. amongst other items, fair value adjustments and the imputed financial charge
related to contingent consideration) that are unusual, non-recurring in nature or unrelated to its ongoing
operations and the tax effect of each of the adjustments, divided by the outstanding shares (excluding treasury
shares) as of the end of the comparative period.

In this period, the other non-operating significant items that are excluded in calculating Underlying Core EPS
include the financial costs such as incremental interest costs from loans payable related to the Shire acquisition in
addition to fair value adjustments and the imputed financial charge related to contingent consideration

33

Underlying Revenue. Legacy Takeda Underlying Revenue growth was +5.3% compared to the same period of theprevious year, driven by the strong performance of Takeda's Growth Drivers and more specifically products such as
ENTYVIO (for ulcerative colitis and Crohn's disease) +34.8%, NINLARO (for multiple myeloma) +36.1%,
ICLUSIG (for leukemia) +24.6%, TAKECAB (for acid-related diseases) +20.1% and TRINTELLIX (for major
depressive disorder) +19.4%. The Underlying Revenue of Takeda's Growth Drivers grew by +11.1%, which is
63.3% of total revenue.
Underlying Core Earnings. Legacy Takeda Underlying Core Earnings growth was +38.7%, reflecting strong
Underlying Revenue growth and the positive impact of the Global Opex Initiative(4). Underlying Cost of Sales as apercentage of sales improved by +1.4pp driven by a more favorable sales mix. Underlying Operating Expenses as apercentage of sales improved by +3.9pp driven by the impact of the Global Opex Initiative. The combination of theabove factors led to an improvement in the Core Earnings Margin by 5.4pp to 22.3%.
(4)Takeda's global operating expense reduction initiative with the aim of delivering annual margin improvements driven
by reduced consumption, procurement initiatives and organizational optimization.

Underlying Core EPS. Legacy Takeda Underlying Core EPS growth was +29.0% compared to the same periodof the previous year reflecting strong Underlying Core Earnings growth of +38.7%.

34

(b) Consolidated Financial Position[Assets] Total Assets as of March 31, 2019 were 13,872.3 billion JPY, reflecting an increase of 9,765.9
billion JPY compared to the previous fiscal year-end. Goodwill and Intangible Assets increased by 3,132.2
billion JPY and 3,846.1 billion JPY, respectively, mainly due to the Shire acquisition.

[Liabilities] Total Liabilities as of March 31, 2019 were 8,708.7 billion JPY, reflecting an increase of 6,619.7
billion JPY compared to the previous fiscal year-end. Bonds and Loans increased by 4,765.3 billion JPY to
5,751.0 billion JPY (Note) mainly due to an issuance of bonds and execution of loans to finance funds for the Shireacquisition. In addition, Deferred Tax Liabilities also increased by 776.3 billion JPY to 867.1 billion JPY due tothe Shire acquisition.
Note: The carrying amount of Bonds and Loans as of March 31, 2019 was 3,196.4 billion JPY and 2,554.6
billion JPY, respectively. Breakdown of bonds and loans is as follows.
Bonds:Name of Bonds (Denominated in Foreign Currency)

Issuance

Maturity

14th Unsecured straight bonds
15th Unsecured straight bonds
Unsecured US dollar dominated senior notes(1,925 million USD)
Unsecured US dollar dominated senior notes(12,100 million USD)
Unsecured US dollar dominated senior notes(500 million USD )July, 2013
July, 2013

July 2019
July 2020
June 2020 —June 2045
September 2019 —September 2026

June, 2015
September, 2016

JPY (billions)
Carrying
Amount
60.0
60.0
211.9
1,278.5

July, 2017

January 2022

55.1

Unsecured Euro dominated senior notes(7,500 million EUR)

November, 2018

November 2020 —November 2030

925.6

Unsecured US dollar dominated senior notes(5,500 million USD )November, 2018

November 2020 —November 2028

605.3

Total

3,196.4

Loans:JPY (billions)
Carrying
AmountName of Loans (Denominated in Foreign Currency)

Execution

Maturity

Syndicated Loans

July, 2013

July 2019 —July 2020

120.0

Syndicated Loans

April, 2016

April 2023 —April 2026

200.0

Syndicated Loans
Syndicated Loans(1,500 million USD )Syndicated Loans
Syndicated Loans January, 2019
(3,987 million USD)
Syndicated Loans January, 2019
(3,047 million EUR)

April, 2017

April , 2027

113.5

April, 2017

April, 2027

165.6

January, 2019

July, 2019

500.0

January, 2019

January, 2024

441.1

January, 2019

January, 2024

378.3

January, 2019

December, 2025

409.3

Japan Bank for International Cooperation January, 2019
(3,700 million USD)
Other
Total

226.8
2,554.6[Equity] Total Equity as of March 31, 2019 was 5,163.6 billion JPY, an increase of 3,146.2 billion JPY
compared to the previous fiscal year-end. Share Capital and Share Premium increased by 1,565.7 billion JPY and1,559.5 billion JPY, respectively, as a result of the issuance of shares 3,131.3 billion JPY due to the acquisitionof Shire.

35

(c) Sources and Uses of Liquidity
Our liquidity requirements mainly relate to operating cash, capital expenditures, contractual obligations, repayment of
indebtedness and payment of interest and dividends. Our operating cash requirements include cash outlays forresearch and development expenses, milestone payments, sales and marketing expenses, personnel and other generaland administrative costs and raw material costs. Income tax payments also require significant cash outlays as well asworking capital financing.
Our capital expenditures for tangible assets consist primarily of enhancing and streamlining our production facilities,
replacing fully depreciated items, and promoting efficiency of our operations. Our capital expenditures for intangible
assets represent mainly milestone payments related to licensed products, where such assets have been acquired fromthird-party partners, as well as software development expenditures. Our capital expenditures, which consist ofadditions to property, plant and equipment and intangible assets recorded on our consolidated balance sheets, were148.1 billion JPY, 124.1 billion JPY and 244.6 billion JPY for the fiscal years ended March 31, 2017, 2018 and 2019respectively. As of March 31, 2019, we had contractual commitments for the acquisition of property, plant andequipment of 34.0 billion JPY.
Our dividend payments for the fiscal years ended March 31, 2017, 2018 and 2019 were 141.7 billion JPY,
141.9 billion JPY and 143.0 billion JPY, respectively. It is our intention to continue to return capital to shareholders
using dividends at an annual level of 180 JPY per share, consisting of interim and fiscal year-end dividends of 90 JPY
per share.
We are required to make interest and principal payments on our outstanding borrowings. As of March 31, 2019, we
have 122.7 billion JPY of interest due within one year and 988.1 billion JPY of principal payments on our borrowings
due within one year.
Our sources of liquidity include cash and cash equivalents on hand, short-term commercial paper, committed
borrowing lines from financial institutions and long-term debt financing from global capital markets. We monitor andadjust the amount of foreign cash based on projected cash flow requirements. As the majority of our business isconducted outside Japan, we hold a significant portion of cash outside of Japan. Our ability to use foreign cash to fundcash flow requirements in Japan may be impacted by local regulations and, to a lesser extent, income taxes associatedwith transferring cash to Japan.
As of March 31, 2019, we held 702.1 billion JPY in cash and cash equivalents on hand and 300.0 billion JPY in
undrawn commitment line. We believe that working capital is sufficient for our current business requirements.
Furthermore, we continually seek to ensure that our level of liquidity and access to capital market funding continues tobe maintained to successfully support our business operations.

36

The following table shows information about our consolidated cash flows during the fiscal years ended March 31,2018 and 2019:
JPY (billions)
For the fiscal year
ended March 31,
2018

2019

Net cash from (used in) operating activities
Net cash from (used in) investing activities
Net cash from (used in) financing activities¥ 377.9(93.3)(326.2)¥ 328.5(2,835.7)
2,946.2

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalent
Net increase (decrease) in cash and cash equivalents resulting from atransfer to assets held for sale
Cash and cash equivalents at the end of the year

¥ (41.7)
319.5
(4.6)

¥ 439.0
294.5(31.3)

21.3¥ 294.6(0.1)¥ 702.1

Net cash from operating activities was 328.5 billion JPY for the fiscal year ended March 31, 2019 compared to 377.9
billion JPY for the fiscal year ended March 31, 2018. The decrease of 49.4 billion JPY was driven by a decrease in net
profit of 77.7 billion JPY and the impacts of certain unfavorable adjustments including the lower income tax expensesof 44.6 billion JPY primarily attributable to non-cash tax benefit on the impact of purchase accounting of the Shireacquisition, the loss on liquidation of foreign operations of 41.5 billion JPY recorded in the previous fiscal year, as
well as the effect of changes in assets and liabilities such as higher employee bonus payment in the fiscal year ended
March 31, 2019.
These were partially offset by certain favorable non-cash adjustments such as the increase in depreciation andamortization of 90.3 billion JPY mainly attributable to intangible assets recorded upon the acquisition of Shire and thedecrease in inventories by 45.0 billion JPY primarily attributable to unwinding of the fair value step up recorded inrelation to the Shire acquisition. This also includes other favorable adjustments such as the increase in net financial
income and expenses by 74.1 billion JPY primarily due to the financial expense recorded in connection with theacquisition of Shire.
Net cash used in investing activities was 2,835.7 billion JPY for the fiscal year ended March 31, 2019, compared to93.3 billion JPY for the fiscal year ended March 31, 2018. This significant increase was primarily attributable to2,891.9 billion JPY of net consideration paid for the acquisition of Shire. This was offset by 50.7 billion JPY proceedsfrom the sale of real estate primarily attributable to the sale of our former headquarters building in the current fiscal
year.
Net cash used in financing activities was 2,946.2 billion JPY for the fiscal year ended March 31, 2019, compared to
net cash used in financing activities of 326.2 billion JPY for the fiscal year ended March 31, 2018. The current fiscal
year mainly includes an increase of short-term loans of 367.3 billion JPY and 2,795.9 billion JPY proceeds frombonds and long-term loans of mainly for the acquisition of Shire.
Borrowings and Financial Obligations
Our total bonds and loans are 985.7 billion JPY and 5,751.0 billion JPY as of March 31, 2018 and 2019, respectively.
These borrowings include unsecured bonds and senior notes issued by Takeda in prior years, syndicated loans enteredinto by Takeda in prior years, borrowings obtained to fund a portion of the Shire acquisition, and debt assumed inconnection with the Shire acquisition and included in our consolidated statement of financial position. Our borrowings
are mainly linked to acquisitions and therefore are not exposed to seasonality.
The increase in bonds and loans relates to financing obtained to fund a portion of the Shire Acquisition and the debt
assumed from Shire. In connection with the Shire Acquisition, we entered into various borrowing arrangements as
described in further detail below, including bridge financing that was subsequently repaid. The borrowings enteredinto during the fiscal year ended March 31, 2019 that remain outstanding at the end of the fiscal year are as follows:37

Term Loan Credit Agreement with a total aggregate principal amount of 7.5 billion USD denominated in U.S.
dollar and Euro was entered into on June 8, 2018 and fully drawn in early January 2019. The proceeds drawn
were used to fund a portion of the cash consideration payable in connection with the Shire Acquisition. The
borrowings under the Term Loan Credit Agreement are unsecured and accrue interest based on floating rates, andwill mature on January 3, 2024.

Euro denominated senior notes with a total aggregate principal amount of 7.5 billion EUR were issued in
November 2018 together with U.S. dollar denominated senior notes with a total aggregate principal amount of 5.5
billion USD(collectively, the “2018 Notes”). The 2018 Notes were issued in the following series:◦€1,250.0 million aggregate principal amount of 0.375% Senior Notes due November 21, 2020, €1,000.0
million aggregate principal amount of the Senior Floating Rate Notes due November 21, 2020, €1,500.0
million aggregate principal amount of 1.125% Senior Notes due November 21, 2022, €750.0 million
aggregate principal amount of the Senior Floating Rate Notes due November 21, 2022, €1,500.0 million
aggregate principal amount of 2.250% Senior Notes due November 21, 2026, and €1,500.0 million
aggregate principal amount of 3.000% Senior Notes due November 21, 2030.

◦$1,000.0 million aggregate principal amount of 3.800% Senior Notes due November 26, 2020, $1,250.0
million aggregate principal amount of 4.000% Senior Notes due November 26, 2021, $1,500.0 million
aggregate principal amount of 4.400% Senior Notes due November 26, 2023, and $1,750.0 million
aggregate principal amount of 5.000% Senior Notes due November 26, 2028.

The 2018 Notes were issued in private placements in reliance on exemptions from registration under the U.S.
Securities Act of 1933 (the “Securities Act”). Interest on the series of 2018 Notes, which are subject to fixed rates,
is payable annually (in the case of the Euro-denominated 2018 Notes) or semi-annually (in the case of the dollardenominated 2018 Notes) in arrears. Interest on the series of 2018 Notes which are subject to floating rates isdetermined by reference to three-month EURIBOR plus an applicable spread, reset quarterly, and is payable
quarterly in arrears.
An unsecured JBIC Loan Agreement for an aggregate principal amount 3.7 billion USD was entered into
December 2018. The JBIC Loan was fully drawn down in early January 2019 and will mature on December 11,
2025. The borrowings under the Term Loan Credit Agreement are unsecured and accrue interest based on
floating rates.

A 500 billion JPY Senior Short –Term Loan ("SSTL") Facility Agreement entered into in October 2018. The
SSTL was fully drawn in early January 2019 and the proceeds were used to fund a portion of the cash
consideration payable in connection with the Shire Acquisition. The SSTL has a maturity of up to six months
from the date of draw down at our option. In October 2018, we entered into a Subordinated Loan Agreement
providing for borrowings up to the same principal amount of the SSTL, in order to allow for the refinancing of
any borrowings under the SSTL. However, the SSTL was repaid in June 2019 using the proceeds from theoffering of our Hybrid Bonds, described below, and no borrowings were made under the Subordinated Loan
Agreement. Both the SSTL and Subordinated Loan Agreement were cancelled in June 2019.

In connection with the Shire Acquisition, various borrowing arrangements previously held by Shire as described infurther detail below were assumed and are included in our consolidated statement of financial position. Suchborrowings assumed from Shire that remain outstanding at the end of the fiscal year are as follows:• USD denominated senior notes (the “SAIIDAC Notes”) issued by Shire Acquisitions Investments Ireland
Designated Activity Company (“SAIIDAC”), a wholly-owned subsidiary of Shire, and guaranteed by us. The
SAIIDAC Notes have a total aggregate principal amount of $12.1 billion as of March 31, 2019. Interest is
payable semi-annually in arrears. The following series of SAIIDAC Notes were outstanding as of March 31,
2019: $3,300.0 million aggregate principal amount of 1.900% notes due September 23, 2019, $3,300.0 million
aggregate principal amount of 2.400% notes due September 23, 2021, $2,500.0 million aggregate principal
amount of 2.875% notes due September 23, 2023 and $3,000.0 million aggregate principal amount of 3.200%
notes due 2026.
• USD denominated senior notes (the "Baxalta Notes") issued by Baxalta and guaranteed by us. The Baxalta

38

Notes have a total aggregate principal amount of $1.925 billion as of March 31, 2019. Interest on the Baxalta
Notes is payable semi-annually in arrears. The following series of Baxalta Notes were outstanding as of March
31, 2019: $404.5 million aggregate principal amount of 2.875% senior notes due June 23, 2020, $219.4 million
aggregate principal amount of 3.600% senior notes due June 23, 2022, $800.5 million aggregate principal
amount of 4.000% senior notes due June 23, 2025 and $500.4 million aggregate principal amount of 5.250%
senior notes due June 23, 2045.

The Hybrid Bonds will mature on June 6, 2079. Under the terms and conditions of the Hybrid Bond, we may make anearly repayment of the entire principal of the Hybrid Bonds on each interest payment date beginning October 6, 2024.
Interest is payable semi-annually at a rate per annum subject to revision. The Hybrid Bonds are unsecured and we are
not subject to any financial covenants.
We currently have a Japanese unsecured commercial paper program in place to facilitate short-term liquidity
management. We further have short-term commitment line of 300 billion JPY which are undrawn as of March 31,
2019. .
We have certain borrowings outstanding as of March 31, 2019 that have restrictive financial covenants. The mostrestrictive of these covenants is that our profit before tax must not be negative for two consecutive years which iscontained in the JBIC Loan Agreement described above. As of March 31, 2019, we are in compliance with all suchcovenants. There are no restrictions on the ability to draw from the commitment line.
For further description of our borrowings, see Note 20 to our audited consolidated financial statements included in thisannual securities report.

Credit Ratings
Our credit ratings, which reflect each rating agency’s opinion of our financial strength, operating performance andability to meet our obligations, as of the date of this annual securities report are as follows:
Rating Agency

Category

S&P Global Ratings Issuer credit rating/foreign
currency long-term and local
currency long-term

Moody’sIssuer credit rating (short-term)Long-term issuer rating andLong-term senior unsecured
ratingRatingRating Structure

BBB+

Fourth highest of 11 rating categories
and first within the category based on
modifiers (e.g. BBB+, BBB and BBBare within the same category).
Second highest of six rating categories
Fourth highest of nine rating categories
and second highest within the category
based on modifiers (e.g., Baa1, Baa2 andBaa3 are within the same category).

A-2
Baa2

The ratings are not a recommendation to buy, sell or hold securities. The ratings are subject to revision or withdrawal
at any time by the assigning rating agency. Each of the financial strength ratings should be evaluated independently.

Off-Balance Sheet Arrangements.
Milestone Payments
Under the terms of our collaborations with third parties for the development of new products, we may be required tomake payments for the achievement of certain milestones related to the development of pipeline products and thelaunch and subsequent marketing of new products. As of March 31, 2018, and 2019, the contractual amount ofpotential milestone payments totaled 517.0 billion JPY and 655.5 billion JPY, respectively, in each case excluding
potential commercial milestone payments for pipeline products under development.

39

Tabular Disclosure of Contractual Obligations.
The following table summarizes our contractual obligations as of March 31, 2019.
Total
Contractual
Amount(1)Bonds and loans: (2) (3)
Bonds
Loans
Purchase obligations for property, plant and equipment
Finance lease obligations
Operating lease obligations
Contributions to defined benefit plans(4)Total(5) (6)¥ 3,790.2
2,780.3
34.0
333.1
233.6
7.8
¥ 7,179.0

One toLess thanThree
Three to More than
One YearYears
Five Years Five Years(JPY (billions))¥ 507.2
603.6
34.0
6.9
31.2
7.8
¥ 1,190.7¥ 1,197.7
228.1
—
18.4
52.7
—
¥ 1,496.9¥ 849.0 ¥ 1,236.3
978.4
970.2
—
—
19.4
288.5
38.4
111.3
—
—
¥ 1,885.2 ¥ 2,606.3

Notes:(1) Obligations denominated in currencies other than yen have been translated into yen using period-end exchange rates
for the fiscal year ended March 31, 2019 and may fluctuate due to changes in exchange rates.
(2) Repayment obligations may be accelerated if we breach the relevant covenants under the relevant instruments.
(3) Includes interest payment obligations.
(4) Pension and post-retirement contributions cannot be determined beyond the fiscal year ending March 31, 2020
because the timing of funding is uncertain and dependent on future movements in interest rates and investment
returns, changes in laws and regulations and other variables.
(5) Does not include contractual obligations whose timing we are unable to estimate, including defined benefit
contribution obligations, litigation reserves and long-term income tax liability and does not include liabilities
recorded at fair value as amounts will fluctuate based on any changes in fair value including derivative liabilities andcontingent consideration. Milestone payments that are dependent on the occurrence of certain future events are notincluded.
(6) Does not include purchase orders entered into for purchases made in the normal course of business.

2) Information on the difference regarding the major items related to the overview of operating results
The difference between the major items related to the overview of operating results in consolidated financial statements
under IFRS and Japanese GAAP is as follows:
For the fiscal year ended March 31, 2018

For the fiscal year ended March 31, 2019

(Treatment of goodwill)(Treatment of goodwill)

Takeda previously amortized the positive andTakeda previously amortized the positive andnegative goodwill for certain periods under Japanese

negative goodwill for certain periods under Japanese

GAAP. However, goodwill is not amortized but is

GAAP. However, goodwill is not amortized but isrequired to be tested for impairment annually underrequired to be tested for impairment annually under

IFRS. This difference resulted in decrease of “Selling,

IFRS. This difference resulted in decrease of “Selling,

general and administrative expenses” by 57.8 billion

general and administrative expenses” by 98.2 billion

JPY under IFRS compared to Japanese GAAP.

JPY under IFRS compared to Japanese GAAP.

40

4. Material Contracts

TiGenix NV
In connection with our acquisition of TiGenix NV, on January 5, 2018, we entered into an Offer and Support Agreementwith TiGenix NV, whereby we commenced an all cash voluntary and conditional public takeover bid for 100% of the
securities with voting rights or giving access to voting rights of TiGenix NV that are not already owned by Takeda or its
affiliates, at a price of €1.78 per share in cash and an equivalent price for the ADSs, warrants to acquire shares and 9%
senior unsecured convertible bonds due March 6, 2018 of TiGenix NV. On July 31, 2018, we acquired all outstanding
ordinary shares as well as the ADSs and warrants of TiGenix NV following the expiration of the squeeze-out period and
TiGenix NV became a wholly-owned subsidiary of Takeda. Following the acquisition of all outstanding ordinary shares,
ADSs and warrants of TiGenix NV, TiGenix NV was delisted from Euronext Brussels and from Nasdaq.
Shire Acquisition
In connection with the Shire Acquisition, on May 8, 2018, we entered into a Co-operation Agreement with Shire, governing
certain matters leading to the closing of the Shire Acquisition. The Shire Acquisition was completed on January 8, 2019.
On May 8, 2018, we entered into the Bridge Credit Agreement totaling commitments of $30.85 billion with, among others,
JPMorgan Chase Bank N.A., Sumitomo Mitsui Banking Corporation and MUFG Bank, Ltd. On June 8, 2018, we enteredinto the Term Loan Credit Agreement for an aggregate principal amount of $7.5 billion with, among others, JPMorgan
Chase Bank N.A., Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd. and Mizuho Bank, Ltd., and on the same dateentered into Amendment No. 1 to the Bridge Credit Agreement to make certain technical changes thereto. On October 26,
2018, we entered into the SSTL with an aggregate commitment of ¥500.0 billion, with Sumitomo Mitsui Banking
Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., The Norinchukin Bank and Sumitomo Mitsui Trust Bank, Limited,and on the same date entered into Amendment No. 2 to the Bridge Credit Agreement to make certain technical changes
thereto. On October 26, 2018, we also entered into the Subordinated Loan Agreement, with aggregate commitments of¥500.0 billion, with Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., The Norinchukin Bankand Sumitomo Mitsui Trust Bank, Limited, which may be used, at our option to refinance all or a portion of the borrowings
under the SSTL following the completion of the Shire Acquisition. On November 21, 2018, we entered into a Fiscal
Agency Agreement with MUFG Bank, Ltd., as Fiscal Agent, under which we issued a total aggregate principal amount of€7.5 billion of senior notes on the same day. On November 26, 2018, we entered into an Indenture with MUFG Union Bank,
N.A., as Trustee (the "Indenture"), under which we issued a total aggregate principal amount of $5.5 billion of senior noteson the same day. On December 3, 2018, we entered into the JBIC Loan with the Japan Bank for International Cooperation,
for an aggregate principal amount of up to $3.7 billion. On December 20, 2018 we entered into Amendment No. 1 to theTerm Loan Credit Agreement to make certain technical changes thereto and entered into Amendment No. 1 to the SSTL to
make certain technical changes thereto. On December 21, 2018, we cancelled in full the remaining commitments under the
Bridge Credit Agreement. On December 25, we entered into Amendment No. 1 to the JBIC Loan to make certain technicalchanges thereto. On June 6, 2019, we issued the Hybrid Bonds with an aggregate principal amount of ¥500 billion, and weused the proceeds from the Hybrid Bonds offering to repay the SSTL. The Hybrid Bonds will mature on June 6, 2079 and,
under the terms and conditions of the Hybrid Bonds, we may make an early repayment of all of the principal of the Hybrid
Bonds on each interest payment date beginning October 6, 2024. Interest on the Hybrid Bonds is payable semi-annually at a
rate per annum subject to revision. The Hybrid Bonds are unsecured and we are not subject to any financial covenants
related to these bonds.
For a description of the agreements mentioned above as well as the effect of the Shire Acquisition on our financial
condition and results of operations, see II. Operating and Financial Review and Prospects, 3. Management’s Analysis ofFinancial Position, Operating Results and Cash Flows, (2) Management Discussion and Analysis on Business Performance”

41Letter Agreement with Baxter
On January 11, 2016, Baxter International Inc. (“Baxter”), Shire and Baxalta entered into a letter agreement (the “Letter
Agreement”) in connection with the Shire’s acquisition of Baxalta, which, among other things, addresses certain aspects ofa tax matters agreement entered into between Baxter and Baxalta prior to their separation in July 2015.
Under the Letter Agreement, from and after the closing of Shire’s acquisition of Baxalta (which occurred on June 3, 2016),
Baxalta agreed to indemnify, and Shire agreed to guarantee such indemnity to, Baxter and each of its affiliates and each of
their respective officers, directors and employees against certain tax-related losses resulting from the acquisition (other thanlosses resulting from any disposition of Baxalta common stock by Baxter (i) that are not attributable to the acquisition and(ii) other than in the initial distribution on July 1, 2015 and certain debt-for-equity exchanges, exchange offers, contributionof Baxalta shares to Baxter’s U.S. pension fund or a dividend distribution to Baxter’s stockholders (in each case ascontemplated by the Letter Agreement).

42

5. Research and Development
Research and development expenses for the period ending March 31, 2019 were 368.3 billion JPY.
Research and development of pharmaceutical products is a lengthy and expensive process that can span more than 10 years.
The process includes evaluations of the product’s efficacy and safety, application for approval and investigation and approval byregulatory authorities. Only a small number of compounds pass such detailed investigation and are used in clinicaltreatments. Once approved, there is ongoing research and development support for marketed products, including medical
affairs and other investments.
Clinical trials, which comply with regional and international regulatory guidelines, generally take five to seven years or longer
and require substantial expenditures. As a result, only a small fraction of compounds that enter the clinical trials results incommercially viable products. In general, clinical trials are performed in accordance with the guidelines set by theInternational Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use.
The relevant regulatory authorities are the MHLW for Japan, the FDA for the United States and the EMA for the EU.

The three phases of human clinical trials, which may overlap with each other, are as follows:
Phase I (“P-I”) clinical trials
Conducted using a small group of healthy adult volunteers in order to evaluate safety
and absorption, distribution, metabolism and excretion of the drug.
Phase II (“P-II”) clinical trials Conducted using a small group of patient volunteers in order to evaluate safety, efficacy,
dosage and administration methods. P-II clinical trials may be divided into two subcategories, P-IIa and P-IIb. P-IIa are usually pilot studies designed to demonstrateclinical efficacy or biological activity. P-IIb studies look to find the optimum dose atwhich the drug shows biological activity with minimal side-effects.
Phase III (“P-III”) clinical Conducted using a large number of patient volunteers in order to evaluate safety andt efficacy in comparison to other medications already available or placebo.
Of these three phases, Phase III requires the largest expenditures and thus the decision to proceed with Phase III testing is a
critical business decision in the drug development process. For those drug candidates that pass Phase III clinical trials, a
New Drug Application ("NDA") or a Marketing Authorization Application (“MAA”) is submitted to the relevant
governmental authorities for approval and subsequent launch of the drug. The preparation of an NDA or MAA involves
considerable data collection, verification, analysis and expense. Even after the launch of the product, health authorities
require post-marketing surveillance of adverse events, and they may request a post-marketing study to provide additional
information regarding the risks and benefits of the product.

In July 2016, we initiated a five-year research and development transformation program to re-invigorate the pipeline and build
an agile, global research and development organization driven by innovative science. A significant component of the
program has been an intensive focus in the following three key areas:•••

Therapeutic area focus: Leveraging therapeutic area expertise to progress innovative assets.
Partnerships and capabilities: Enhancing capabilities internally and through external collaborations.
Innovative research engine: Developing new technologies and new modalities to treat disease.

Our research and development efforts are focused in four key therapeutic areas of oncology, GI, rare diseases and neuroscience,plus the plasma-derived therapies and vaccines business areas.

We have also concentrated our in-house research and development operations in Japan and the United States. We intend tointegrate the legacy Shire research and development operations into ours.

43Our key in-house research and development facilities include:•

Shonan Heath Innovation Park: Located in Fujisawa and Kamakura in Kanagawa Prefecture in Japan, the Shonan HealthInnovation Park ("Shonan iPark") was established in 2011 as the Shonan Research Center, and is our primary location
for neuroscience research. In April 2018, we launched Shonan iPark by transforming the Shonan Research Center toenhance scientific innovation. Shonan iPark aims to gather 3,000 researchers by the year 2020 and become a place whereexperts from the pharmaceutical industry, including venture start-ups, government and academia, can gather and incubate
and accelerate research initiatives to create health solutions.

•

Boston Research and Development Site: Our Boston research and development hub is located in Cambridge, Massachusettsin the United States. Our Boston site is the center of our global oncology and GI research and development and also
supports research and development in other therapeutic areas including plasma-derived therapies and vaccines, andresearch in immunomodulation and biologics.

•

San Diego Research and Development Site: Our research and development site located in San Diego, California in the
United States supports research and development of specialized technologies in the GI and neuroscience areas.

Research and Development Pipeline
Oncology
In oncology, Takeda endeavors to deliver novel medicines to patients with cancer worldwide through the commitment to breakthroughinnovation, and a passion for improving the lives of patients. Takeda focuses in 3 key areas in oncology; (1) building on thefoundational expertise in hematologic malignancies through continued investment in lifecycle management programs for marketed
products NINLARO, ADCETRIS, and ICLUSIG, as well as in pipeline assets in Multiple Myeloma, Acute Myeloid Leukemia,
Myelodysplastic Syndromes, and other blood cancers; (2) further developing its portfolio in lung cancer; and (3) pursuing novel
immuno-oncology targets and next-generation platforms with external partners as well as exploring innovative cell therapies.
[NINLARO/Generic name: ixazomib]- In July 2018, Takeda announced that the randomized, Phase 3 TOURMALINE-MM3 study met its primary endpoint, demonstratingthat single-agent oral NINLARO as a maintenance therapy resulted in a statistically significant improvement in progression-freesurvival (PFS) versus placebo. The trial evaluated the effect of NINLARO as a maintenance therapy in adult patients diagnosed withmultiple myeloma who responded to high-dose therapy (HDT) and autologous stem cell transplant (ASCT).
- In December 2018, the data from the Phase 3 TOURMALINE-MM3 study was presented at the 60th American Society of Hematology(ASH) annual meeting.
- In January 2019, Takeda announced that the data from the TOURMALINE-MM3 study had been submitted to the U.S. Food and Drug
Administration (FDA) in November 2018, and after further discussion with the authorities, the decision has been made to withdraw thefiling and to resubmit when more mature survival data are available.
- In April 2019, Takeda announced that it has submitted for a partial change to its manufacturing and marketing approval to Japanese
Ministry of Health, Labour and Welfare (MHLW) for NINLARO regarding the additional indication as a maintenance therapy for
multiple myeloma following ASCT.
- In June 2019, Takeda announced that the Phase 3 TOURMALINE-AL1 clinical trial in patients with relapsed or refractory systemic
light-chain (AL) amyloidosis did not meet the first of two primary endpoints. Treatment with NINLARO in combination withdexamethasone did not demonstrate a significant improvement in overall hematologic response compared to physician’s choice ofstandard of care regimens. As a result of this analysis, Takeda has decided to discontinue the trial.

44

[ALUNBRIG/Generic name: brigatinib]- In July 2018, Takeda announced that the global randomized, Phase 3 ALTA-1L trial met its primary endpoint at the first pre-specified
interim analysis, with ALUNBRIG demonstrating a statistically significant improvement in progression-free survival (PFS) comparedto crizotinib in adults with anaplastic lymphoma kinase-positive (ALK+) locally advanced or metastatic non-small cell lung cancer(NSCLC) who had not received a prior ALK inhibitor.
- In September 2018, the findings from the first interim analysis of the ALTA-1L trial were presented during the Presidential Symposium
at the International Association for the Study of Lung Cancer (IASLC) 19th World Conference on Lung Cancer (WCLC).
- In September 2018, Takeda announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human
Use (CHMP) had adopted a positive opinion, recommending the full approval of ALUNBRIG as a monotherapy for the treatment of
adult patients with ALK+ advanced NSCLC previously treated with crizotinib.
- In October 2018, Takeda announced that intracranial efficacy data from the Phase 3 ALTA-1L trial showed improved intracranial
progression-free survival (PFS) and intracranial objective response rate (ORR) with ALUNBRIG compared to crizotinib among ALK+NSCLC patients. Data for these secondary endpoints were presented in a poster discussion at the European Society for Medical
Oncology (ESMO) 2018 Congress.
- In December 2018, Takeda announced that the European Commission (EC) had granted marketing authorization for ALUNBRIG as amonotherapy for the treatment of adult patients with ALK+ advanced NSCLC previously treated with crizotinib.

[ADCETRIS/Generic name: brentuximab vedotin]- In September 2018, Takeda announced that it has obtained an additional indication and dosage and administration from the Japanese
Ministry of Health, Labour and Welfare (MHLW) for the use of ADCETRIS in combination with doxorubicin, vinblastine anddacarbazine as a frontline treatment option for CD30-positive Hodgkin lymphoma patients.
- In October 2018, Takeda announced that the Phase 3 ECHELON-2 clinical trial met its primary endpoint, demonstrating a statisticallysignificant improvement in progression-free survival (PFS) of ADCETRIS in combination with CHP (cyclophosphamide, doxorubicin,
prednisone) versus the control arm, CHOP (cyclophosphamide, doxorubicin, vincristine, prednisone) in previously untreated CD30expressing peripheral T-cell lymphoma . The ADCETRIS plus CHP arm also demonstrated superior overall survival (OS), a key
secondary endpoint, compared to CHOP).
- In December 2018, the data from the Phase 3 ECHELON-2 clinical trial were presented in an oral session at the 60th American Societyof Hematology (ASH) Annual Meeting.
- In December 2018, Takeda announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human
Use (CHMP) had adopted a positive opinion for the extension of the marketing authorization of ADCETRIS and recommended its
approval in combination with AVD (adriamycin, vinblastine, dacarbazine) in adult patients with previously untreated CD30+ Stage IV
Hodgkin lymphoma.
- In February 2019, Takeda announced that the European Commission (EC) extended the current marketing authorization of ADCETRIS
to include the treatment of adult patients with previously untreated CD30+ Stage IV Hodgkin lymphoma in combination with AVD.
- In March 2019, Takeda announced that it has submitted an application to the Japanese MMHLW for the additional indication anddosage and administration of ADCETRIS in the treatment of patients with CD30-positive peripheral T-cell lymphoma, in pediatricpatients with relapsed or refractory CD30-positive Hodgkin lymphoma, and in pediatric patients with anaplastic large cell lymphoma.

[Generic name: cabozantinib]- In April 2019, Takeda announced that it has submitted to the Japanese Ministry of Health, Labor and Welfare for manufacturing andmarketing approval for Cabozantinib for the treatment of unresectable and metastatic renal cell carcinoma. The application is based on
the results of an international phase-3 METEOR pivotal trial, an overseas phase-2 CABOSUN trial, and a Japanese phase-2
Cabozantinib-2001 trial that studied the efficacy and safety of Cabozantinib on 35 Japanese patients suffering from advanced renal cell45

carcinoma, which had progressed after prior vascular endothelial growth factor receptor tyrosine kinase inhibitor (VEGFR-TKI)
therapy.

[Development code: TAK-788]- In June 2019, Takeda presented new data of TAK-788 at TAK-788 during an oral session at the 2019 American Society of ClinicalOncology (ASCO) Annual Meeting. Results from a Phase 1/2 first-in-human, open-label, multicenter study showed TAK-788 yielded a
median progression-free survival (PFS) of 7.3 months and a confirmed objective response rate (ORR) of 43% in patients with locallyadvanced or metastatic non-small cell lung cancer (NSCLC) whose tumors harbor epidermal growth factor receptor (EGFR) exon 20
insertion mutations.

Gastroenterology
In GI, Takeda focuses on delivering innovative, life-changing therapeutics for patients with GI and liver diseases. Takeda is maximizing
the potential of our inflammatory bowel disease (“IBD”) franchise around ENTYVIO and ALOFISEL, expanding our position in
specialty GI with ENTYVIO GATTEX and progressing a pipeline built through partnerships exploring opportunities in motility disorders,celiac disease, liver disease and the microbiome.
[ENTYVIO/Generic name: vedolizumab]- In June 2018, Takeda announced a new analysis of real-world data comparing the safety data of the gut-selective biologic ENTYVIO
and tumor necrosis factor-alpha (TNFα)-antagonist therapy. The results showed numerically lower rates of serious infections (SIs) andsignificantly lower rates of serious adverse events (SAEs) in patients treated with ENTYVIO compared to TNFα-antagonist therapy.
This analysis of the VICTORY consortium was presented as an oral presentation at the 2018 Digestive Disease Week (DDW).
- In July 2018, Takeda announced that it has obtained a New Drug Application approval from the Japanese Ministry of Health, Labourand Welfare (MHLW) for ENTYVIO for the treatment of patients with moderately to severely active ulcerative colitis in Japan.
- In July 2018, Takeda announced that it has submitted a New Drug Application to the Japanese MHLW for ENTYVIO for the treatmentof adult patients with moderately to severely active Crohn’s disease.
- In July 2018, Takeda announced top-line results from the Phase 3 VISIBLE 1 clinical trial evaluating the efficacy and safety of aninvestigational subcutaneous (SC) formulation of vedolizumab for maintenance therapy in adult patients with moderately to severely
active ulcerative colitis who achieved clinical response* at week 6 following two doses of open-label vedolizumab intravenous (IV)induction therapy. In the primary endpoint of the trial, a statistically significant proportion of patients receiving vedolizumab SC
beginning at week 6 and every two weeks following achieved clinical remission** at week 52 compared to placebo.
* Clinical response is defined as a reduction in Mayo score of ≥3 points and ≥30% from baseline (week 0) with an accompanying decrease inrectal bleeding subscore of ≥1 point or absolute rectal bleeding subscore of ≤1 point.
** Clinical remission is defined as a complete Mayo score of ≤2 points and no individual subscore greater than >1 point.

- In October 2018, the results of the Phase 3 VISIBLE 1 clinical trial were presented at the 2018 United European Gastroenterology(UEG) Week congress.
- In March 2019, Takeda announced results from the Phase 3b head-to-head VARSITY study which demonstrated that ENTYVIO wassuperior to the anti-tumor necrosis factor-alpha (anti-TNFα) biologic adalimumab (Brand name: HUMIRA) in achieving clinicalremission* in patients with moderately to severely active ulcerative colitis at week 52. Data showed that 31.3% (n=120/383) of patients
receiving ENTYVIO intravenous achieved the primary endpoint of clinical remission compared to 22.5% (n=87/386) of patients treatedwith adalimumab subcutaneous at week 52, with the difference being statistically significant. These results were announced as an oralpresentation at the 14th Congress of the European Crohn’s and Colitis Organisation (ECCO).

46

* Primary endpoint: Clinical remission is defined as a complete Mayo score of ≤2 points and no individual subscore ˃1 point.

- In April 2019, Takeda announced that the European Medicines Agency (EMA) has accepted a Marketing Authorization Line Extension
Application for a SC formulation of vedolizumab for maintenance therapy in adults with moderately to severely active ulcerative colitis
or Crohn’s disease. Takeda proposes to make vedolizumab SC available in both pre-filled syringe and pen options.
- In May 2019, Takeda announced that the U.S. Food & Drug Administration (FDA) has accepted for review a Biologics License
Application (BLA) for a SC formulation of vedolizumab for maintenance therapy in adults with moderately to severely active
ulcerative colitis (UC). Takeda proposes to make vedolizumab SC available in both pre-filled syringe and pen options.
- In May 2019, Takeda announced that it has obtained approval from the Japanese MHLW for an additional indication for Entyvio for thetreatment of adult patients with moderately to severely active Crohn’s disease (CD).

[GATTEX/Generic name: teduglutide]- In May 2019, Takeda announced the FDA approved extending the indication of GATTEX for children 1 year of age and older withshort bowel syndrome who need additional nutrition or fluids from intravenous feeding (parenteral support).

Rare Diseases
Takeda acquired our rare disease business and pipeline through our acquisition of Shire. Takeda focuses on (1) rare immunology (e.g.,
Hereditary angioedema) including through recently launched TAKHZYRO to transform the treatment paradigm, (2) rare hematology withthe broadest portfolio across our competitors in hematology and (3) rare metabolic diseases, focused on addressing with approved
treatments for Fabry disease, Hunter syndrome and Gaucher disease.
- In February 2019, Takeda featured 12 presentations, including 11 posters and one oral presentation, at the 15th annual
WORLDSymposium™2019. Presentations and other company activities focused on research and development efforts in lysosomal
storage disorders including Hunter syndrome (also known as Mucopolysaccharidosis type II or MPS II), type 1 Gaucher disease, Fabry
disease, and metachromatic leukodystrophy (MLD).

[NATPARA/Generic name: parathyroid hormone]- In March 2019, Takeda presented new data at the Endocrine Society’s 2019 Annual Meeting (ENDO) revealing the burden of chronic
hypoparathyroidism on patients and caregivers, as well as potential long-term risks of renal and cardiovascular complications thatpatients treated with conventional therapy may experience. Takeda also presented six-year results from the open-label long-term safety
and efficacy RACE study, showing that treatment with rhPTH (1-84) in patients with chronic hypoparathyroidism had a safety profile
consistent with previous clinical studies, and impacted key measurements of mineral homeostasis, notably of urinary calcium.

[TAKHZYRO /Generic name: lanadelumab]- In June 2019, Takeda announced new data from an ad-hoc analysis of the Phase 3 HELP Study, designed to evaluate the onset ofaction for TAKHZYRO during days 0-69 of treatment. The analysis suggests that TAKHZYRO starts to prevent hereditaryangioedema (HAE) attacks during this early treatment phase, with patients experiencing an 80.1% decrease in mean monthly attack
rate compared to placebo.
Neuroscience
In neuroscience, Takeda aims to bring innovative medicines to patients suffering from neurologic and psychiatric diseases for whomthere are no treatments available. Takeda is expanding its presence in psychiatric diseases through continued investment in Trintellix
for Major Depressive Disorder, and the Attention Deficit Hyperactivity Disorder portfolio acquired from Shire. Takeda is also building
its pipeline in neurology (e.g. Alzheimer's disease, Parkinson's disease) and selected rare CNS diseases through a combination of in-47

house expertise and collaboration with partners.

[TRINTELLIX/Generic name: vortioxetine]- In May 2018, Takeda announced the U.S. Food and Drug Administration (FDA) approved a supplemental new drug application for
TRINTELLIX, making it the first FDA-approved treatment for Major Depressive Disorder (MDD) where the U.S. labelling now
includes data on an important aspect of cognitive function in acute MDD. The FOCUS and CONNECT studies showed that
TRINTELLIX had a positive effect on processing speed, an important aspect of cognitive function that may be impaired in adultpatients with acute MDD.
- In June 2018, Takeda announced positive results from a pivotal study in Japan evaluating vortioxetine in adults with Major Depressive
Disorder (MDD).
- In September 2018, Takeda announced the submission of a New Drug Application (NDA) to the Japanese Ministry of Health, Labourand Welfare (MHLW) for vortioxetine for the treatment of MDD in adults.
- In October 2018, Takeda announced that the FDA had approved a supplemental NDA for TRINTELLIX to add new data to its labelingdemonstrating superiority over escitalopram in improving selective serotonin reuptake inhibitor (SSRI)-induced sexual dysfunction in
adult patients with MDD. TRINTELLIX is the first antidepressant to include head-to-head data in its labeling that shows improvementin treatment-emergent sexual dysfunction (TESD) in MDD patients who switched from certain SSRI treatments.
[VYVANSE/Generic name: lisdexamfetamine]- In March 2019, Takeda announced that Shionogi obtained approval from the Japanese Ministry of Health, Labour and Welfare(MHLW) for manufacturing and distributing VYVANSE as a treatment for childhood attention deficit/hyperactivity disorder (AD/HD).
VYVANSE was collaboratively developed in Japan by Shionogi and Shire, based on a license agreement for joint development andcommercialization in Japan that the two companies entered in November 2011. On account of Takeda’s acquisition of Shire, Takeda
will be engaging in co-promotion activities.
[INTUNIV/Generic name: guanfacine hydrochloride]- In June 2019, Takeda announced that that a partial change has been approved from the Japanese MHLW for the indications for Intunivin the treatment of adult patients (aged 18 and over). The manufacturing and marketing rights for Intuniv are held by Shionogi, while
Takeda and Shionogi jointly provide information on the drug.

Plasma Derived Therapies
Takeda added a new global business unit to focus on Plasma-Derived Therapies (PDT) after the acquisition of Shire on January 8,
2019. PDT will focus on meeting the growing demand for plasma-derived products, which are essential for effectively treating patientswith a variety of rare, life-threatening, chronic and genetic diseases across the world.
[FLEXBUMIN /Generic name: Albumin (Human)]-In March 2019, Takeda announced that the U.S. Food and Drug Administration (FDA) has approved the company’s second
submission for its new plasma manufacturing facility near Covington, Georgia, for the production of FLEXBUMIN 25% [Albumin(Human)], USP, 25% Solution, indicated for hypovolemia, hypoalbuminemia, (burns, Adult Respiratory Distress Syndrome (ARDS),
and nephrosis), cardiopulmonary bypass surgery, and hemolytic disease of the newborn (HDN).

48

Vaccines
In vaccines, Takeda is applying innovation to tackle some of the world’s most challenging infectious diseases such as dengue, zika,
norovirus, and polio. To support the expansion of our pipeline and the development of our programs, we have entered partnerships
with government organizations (in Japan, the U.S., and Singapore) and leading global institutions. Such partnerships have been
essential towards building the critical capabilities necessary to deliver on our programs and realize their full potential.
[Dengue vaccine]- In January 2019, Takeda announced that the pivotal Phase 3 trial of its dengue vaccine candidate met the primary efficacy endpoint.
This first analysis of the TIDES study showed that the company’s investigational live-attenuated tetravalent dengue vaccine (TAK-003)
was efficacious in preventing dengue fever caused by any of the four serotypes of the virus.

Building a sustainable research platform / Enhancing R&D collaboration- In addition to our concentrated efforts to increase our in-house research and development capabilities, external partnerships with thirdparty partners are a key component of our strategy for enhancing our research and development pipeline. In the fiscal year ended
March 31, 2019, we entered into more than 40 such new partnerships. Our strategy to expand and diversify our external partnerships allows
us to take part in research of a wide variety of new products and increases the chances that we will be able to take part in a major
research-related breakthrough. See “–Licensing and Collaboration” for further information on our research and development
collaborations.
- In April 2018, Takeda and the Drugs for Neglected Diseases initiative announced that they have signed an agreement to collaborate in
conducting preclinical and Phase 1 clinical studies on drug candidate compounds that had been discovered among the aminopyrazole
compound class, aimed at developing an innovative drug for the treatment of visceral leishmaniasis (VL).
The project has been selected for funding by the Global Health Innovative Technology Fund (GHIT). GHIT is an international public
private partnership fund that facilitates global R&D partnerships for the discovery and development of new health technologies needed
in developing countries.
- In May 2018, Takeda announced that it has entered into a licensing agreement with ASKA Pharmaceutical Co., Ltd. (ASKA) of Japanto maximize the product value of Takeda-owned relugolix. Takeda grants ASKA exclusive commercialization rights for uterine fibroids
and exclusive development and commercialization rights for endometriosis for Japan. Under this agreement, no right of relugolix for
prostate cancer treatment in Japan has been granted to ASKA.
- In July 2018, Takeda and Ovid Therapeutics Inc. of the U.S. provided an overview of their TAK-935/OV935 broad clinicaldevelopment program. The companies plan to initiate three clinical trials: in pediatric patients with Dravet syndrome and LennoxGastaut syndrome, in pediatric patients with CDKL5 deficiency disorder (CDD) and Duplication 15q (Dup15q) syndrome, and an
extension trial for patients with developmental and epileptic encephalopathies (DEEs) who participated in a previous TAK-935/OV935
clinical study.
- In August 2018, Takeda and Ambys Medicines (Ambys) announced that they have entered into a partnership to support theadvancement of the Ambys platform and pipeline. Ambys is pioneering the application of novel modalities, including cell and genetherapy and gain-of-function drug therapy, to meet the urgent need for treatments that restore liver function and prevent the progression
to liver failure across multiple liver diseases that are untreatable or poorly treated today.
- In August 2018, Takeda and Japan-based alternative asset management firm, Whiz Partners, Inc. (Whiz) announced they have enteredinto an agreement to create a joint investment fund, aimed at promoting a drug discovery ecosystem in Japan. Under the terms of theagreement, Whiz established “Drug Discovery Gateway Investment Limited Partnership” (DDG Fund) and assumes the responsibilitiesof the general partner. Takeda invests Axcelead Drug Discovery Partners, a wholly owned subsidiary of Takeda and a drug discovery
platform company, in kind into the DDG Fund, in return for Limited Partner Shares.

49

- In December 2018, Takeda, the Global Antibiotic Research and Development Partnership (GARDP) and Eisai Co., Ltd. (Eisai) signed
an agreement for GARDP to access and screen components of Eisai and Takeda’s chemical libraries. Both libraries will be tested by theInstitut Pasteur Korea in the hope of discovering novel compounds with antibacterial activity. This multi-partner agreement supports
GARDP’s efforts to tackle serious bacterial infections by developing antibiotics while endeavouring to ensure their sustainable access.
- In January 2019, Takeda announced new research collaborations in immuno-oncology (I-O), an area of key strategic focus for thecompany. Through these collaborations, Takeda seeks to accelerate the discovery of next-generation cancer immunotherapies,
including novel cell therapy approaches that may provide important opportunities for addressing the needs of patients with hard-to-treat
cancers.


Takeda will collaborate with Memorial Sloan Kettering Cancer Center (MSK) to discover and develop novel chimeric antigen
receptor T-cell (CAR-T) products for the treatment of multiple myeloma, acute myeloid leukemia and additional solid tumor
indications.



Takeda exercised an option under its existing research collaboration with Noile-Immune Biotech Inc. (Noile), which originatedin September 2017. Due to the success of the collaboration, Takeda exclusively licensed NIB-102 and NIB-103 for thetreatment of various solid tumor indications, and will co-develop these CAR-T cell therapies with Noile utilizing thecompany’s proprietary “Prime” (proliferation inducing and migration enhancing) CAR-T platform.



Takeda exercised an option for an exclusive oncology-targeted Humabody license from Crescendo Biologics that will allow
Takeda to additionally evaluate Humabody VHs for the development of novel CAR-T therapeutics.

Current status of our pipeline
The following summarizes our research and development activities within each of our therapeutic and business areas. The
compounds in our pipeline disclosed within the key therapeutic and business areas below are in various stages of development, andthe contents of the pipeline may change as compounds currently under development are removed and new compounds are introduced.
Whether the compounds listed below are ever successfully released as products depends on various factors, including the results ofpre-clinical and clinical trials, market conditions for various drugs and regulatory approvals. The listings in the tables below arelimited to the U.S., EU, Japan, and China, but we are also conducting development activities in other regions. "Global" refers to U.S.,EU, Japan, and China.
Our oncology pipeline as of May 14, 2019 (the date of our annual earnings release), along with notes for major subsequentdevelopments, is as follows:
Development Code
<Generic Name>
Brand Name(Country/Region)(1)

SGN-35<Brentuximab
vedotin>
ADCETRIS (EU,Japan)

Drug Class(Administration
Route)

CD30 monoclonal
antibody-drug
Conjugate(injection)

Indications/
Additional
Formulations

Stage by Country/Region(2)Front line Peripheral
T-cell Lymphoma(“PTCL”)

EU
Japan

P-III
Filed (March 2019)

Relapsed/ refractory
Hodgkin lymphoma

China

Filed (March 2019)

Relapsed/ refractory
systemic anaplastic
large-cell
lymphoma(“sALCL”)

China

Filed (March 2019)50

In-house/
In-license

In-license(Seattle
Genetics, Inc.)Development Code
<Generic Name>
Brand Name(Country/Region)(1)Drug Class(Administration
Route)

Indications/
Additional
Formulations

Stage by Country/Region(2)1L ALK-positive
non-small cell lungcancer<brigatinib>
ALUNBRIG (U.S.,
EU)

MLN9708<ixazomib>
NINLAROALK inhibitor(oral)

2L ALK-positive
non-small cell lungcancer in patientspreviously treatedwith ALK inhibitors
2L ALK-positive
non-small cell lungcancer in patients
progress on 2nd
generation TKI(tyrosine kinase
inhibitors)
2L ALK-positive
non-small cell lungcancer (head to headwith alectinib)

U.S.
EU
China

P-III
P-III
P-I

Japan
China

P-II(a)P-II(a)In-house/
In-license

In-house
GlobalP-II

GlobalP-III

Newly diagnosed
multiple myeloma

GlobalP-III

Maintenancetherapy in patientswith newly
diagnosed multiple
myeloma following
autologous stem celltransplant

Japan
U.S.
EU
China

Filed (April 2019)
P-III
P-III
P-III

Maintenancetherapy in patientswith newly
diagnosed multiple
Proteasome inhibitor myeloma not treatedwith stem cell(oral)
transplant

Global

P-III

Relapsed/refractory
primary amyloidosis

Global

P-III

Relapsed/refractory
multiple myeloma(doublet regimen
withdexamethasone)

U.S.
EU
Japan

P-III
P-III
P-III

Relapsed/refractory
multiple myeloma(triplet regimen withdaratumumab anddexamethasone)

GlobalP-IIIn-house51

Development Code
<Generic Name>
Brand Name(Country/Region)(1)<ponatinib>
ICLUSIG

Drug Class(Administration
Route)BCR-ABL inhibitor(oral)

Indications/
Additional
Formulations

Stage by Country/Region(2)Front line
Philadelphia
chromosomepositive acutelymphoblastic
leukemia

U.S.

TAK-924<pevonedistat>

NEDD 8 activating
enzyme inhibitor(injection)

TAK-385<relugolix>

LH-RH antagonist(oral)

Prostate cancer

P-III

In-house

Dose ranging study
for TKI resistantpatients withchronic-phasechronic myeloid
leukemia
High-risk
myelodysplastic
syndromes,
chronic
myelomonocytic
leukemia,
low-blast acute
myelogenous
leukemia

In-house/
In-license

52

U.S.

P-II(b)

U.S.
EU
Japan

P-III
P-III
P-III

In-house

Japan
China

P-III
P-I

In-house

Development Code
<Generic Name>
Brand Name(Country/Region)(1)<cabozantinib><niraparib>

Drug Class(Administration
Route)

Multi-targetedkinase inhibitor(oral)

PARPl/2 inhibitor(oral)

Indications/
Additional
Formulations

Japan

2L renal cell
carcinomaJapan

Filed (April 2019)

2L hepatocellular
carcinomaJapan

P-II(a)Ovarian cancer maintenance

Japan

P-II

Ovarian cancer –salvage

Japan

P-II

In-license(GlaxoSmithKline
plc)

U.S.

P-II(b)In-house

Diffuse large 8-cell
lymphoma-P-II(a)Hematologic
malignancies-

P-I

Squamous
esophageal cancer,
squamous non-small
cell lung cancer-

P-II(a)In-house

Non-small cell lungcancer with Exon-20
insertion

GlobalP-IIIn-house

Relapsed/refractory
multiple myeloma-

P-I

Systemic lupus
erythematosus-

P-I

GI malignancies-

P-I

In-house-

P-I

In-license(Teva
PharmaceuticalIndustries Ltd.)

Multiple cancers-

P-I

In-house

Solid tumors-

P-I

In-license(Shattuck Labs, Inc.)

mTORCl/2 inhibitor Endometrial cancer(oral)

TAK-659<->

SYK/FLT3 kinase
inhibitor(oral)
CDC7 inhibitor(oral)

TAK-788<->

EGFR/ HER2 exon
20 inhibitor(oral)

TAK-079<->

Anti-CD38
monoclonal
antibody (injection)

TAK-164<->

Anti-guanylyl
cyclase C antibody
drug conjugate(injection)

TAK-573<- >CD38-targeted lgG4
geneticallyRelapsed/refractory
fused with an
Multiple myeloma
attenuated IFNa
(injection)

TAK-981<- >TAK-252/
SL-279252

SUMO inhibitor(injection)
PD-1-Fc-OX40L(injection)

In-house/
In-license

1L renal cell
carcinoma in
combination withnivolumab

TAK-228<sapanisertib>

TAK-931< ->Stage by Country/Region(2)P-III
In-license(Exelixis, Inc.)

In-house

In-house53

Our GI pipeline as of May 14, 2019 (the date of our annual earnings release), along with notes for major subsequent developments, isas follows:
Development Code
<Generic Name>
Brand Name(Country/Region)(1)

MLN0002<vedolizumab>
ENTYVIO

Cx601<darvadstrocel>
ALOFISEL (EU)Drug Class(Administration
Route)

Humanized
monoclonal
antibody
against a47 integrin(injection)

A suspension ofallogeneic expanded
adipose-derived
stem cell (injection)

Indications/
Additional
Formulations

Stage by Country/Region(2)Crohn's disease

Japan
China

Filed (July 2018)
P-III

Ulcerative colitis

China

Subcutaneous
formulation for
ulcerative colitis

U.S.
EU
Japan

Subcutaneous
formulation for
Crohn's disease

U.S.
EU
Japan

P-III
Filed (March 2019)
Filed (March 2019)
P-III
P-III
Filed (March 2019)
P-III

Adalimumab headto-head in patientswith ulcerative
colitisGlobalP-III

Graft-versus-hostdisease prophylaxis
in patients
undergoing
allogeneic
hematopoietic stem
cell transplantation

EuropeP-III

Refractory complex
perianal fistulas inpatients with
Crohn’s disease

U.S.
Japan

P-III
P-III

54

In-house/
In-license

In-house

In-house

Development Code
<Generic Name>
Brand Name(Country/Region)(1)Drug Class(Administration
Route)

Indications/
Additional
Formulations

Stage by Country/Region(2)In-house/
In-license

Acid-relateddiseases

China

Filed (February
2018)

Gastro-esophageal
reflux disease inpatients who have apartial response
following treatment
with a proton pumpinhibitorEU

P-II(b)U.S.

Filed (September
2018)

Japan

P-III

Japan

P-III

U.S.

P-III

In-house(Partnership with
UCSD and Fortis
Advisors)

Gastroparesis-

P-II(b)In-house

Post-operative
gastrointestinal
dysfunction-

P-II(b)In-license(Theravance
Biopharma, Inc.)

TIMP-GLIA<->

Tolerizing Immune
Modifying
Celiac diseasenanoParticle (TIMP)(injection)-

P-II(a)In-license (CourPharmaceutical
Development
Company, Inc.)

TAK-951<->

Peptide agent

Nausea andvomiting-

P-I

In-house

TAK-671<->

Protease inhibitor(injection)

Acute pancreatitis-

P-I

In-house

TAK-018/EB8018<->

FimH antagonist(oral)

Crohn's disease-

P-I

In-license(Enterome
Bioscience SA)

TAK-681<->
Kuma062<->

GLP-2 long-acting
analogue (injection)

Short bowel
syndrome-

P-I

In-house

Glutenase(oral)

Celiac disease-

P-I

In-license (PvP
Biologics, Inc.)

TAK-438<vonoprazan>
TAKECAB

TAK-633/SHP633<teduglutide>
GATTEX (U.S.)/REVESTIVE (EU)

Potassiumcompetitive acidblocker(oral)

GLP-2 analogue(injection)

In-house

Short bowel
syndrome, pediatricindication

In-house

Short bowel
syndrome, adultTAK-721/SHP621<Budesonide>

Glucocorti costeroid Eosinophilic(oral)
esophagitis

TAK-906(3)< ->Dopamine D2/D3
receptor antagonist(oral)
5-HT4hydroxytryptamine
receptor agonist(injection)

TAK-954<->

55

Our rare disease pipeline as of May 14, 2019 (the date of our annual earnings release), along with notes for major subsequentdevelopments, is as follows:
Development Code
<Generic Name>
Brand Name(Country/Region)(1)Drug Class(Administration
Route)

TAK-743/SHP643<lanadelumab>
TAKHZYRO(U.S., EU)

Plasma kallikreininhibitor (injection)

Antihemophilic
factorTAK-672/SHP672[recombinant],<->
OBIZUR (U.S., EU) porcine sequence(injection)
TAK-577/SHP677<->
VONVENDI U.S.),VEYVONDI (EU)

Indications/
Additional
Formulations

Stage by Country/Region(2)In-house/
In-license

Hereditaryangioedema

China

Congenital
hemophilia A with
inhibitors

U.S.
EU

P-III
P-III

Purchased (IPSEN)

Global

P-III

In-house

Global

P-III

In-house

Prophylactic
treatment of vonWillebrand disease

von Willebrandfactor [recombinant]Pediatric on-demand(injection)
treatment of vonWillebrand disease

Filed (December
2018)

In-house

TAK-660/SHP660<->
ADYNOVATE(U.S.), ADYNOVI(EU)Antihemophilic
Factor(recombinant),
PEGylated(injection)

Pediatric hemophilia
A

EU

P-III

In-house

TAK-755/SHP655<->

Replacement of the
deficientADAMTS13
enzyme (injection)

Congenital
thrombotic
thrombocytopenic
purpura

U.S.
EU

P-III
P-III

In-license (KM
Biologics, Co, Ltd.)

TAK-620/SHP620<maribavir>

Benzimidazole
riboside inhibitor(oral)

Cytomegalovirus
infection intransplant patients

U.S.
EU

P-III
P-III

In-license(GlaxoSmithKline
plc)

TAK-607 /SHP607<->

Insulin- like Growth
Factor / IGF
Chronic lung disease
Binding Protein(injection)

-

P-II

In-house

TAK-609/SHP609<->

Recombinant humaniduronate-2 Hunter syndrome
sulfatase forcentral nervous
intrathecal
system (“CNS”)
administration(injection)

U.S.
EU

P-II
P-II

In-house

cTAK-611/SHP611<->

Recombinant human
Metachromatic
arylsulfatase A
leukodystrophy(injection)-

P-I/II

In-house

TAK-754/SHP654<->

Gene therapy torestoreendogenous FVIII
expression

Hemophilia A-

P-I/II

In-license(Askepios
Biopharmaceuti
cal, Inc.)

TAK-531/SHP631<->

Fusion protein of
iduronate-2sulfatase+antibody(injection)

Hunter syndrome
CNS

-

P-I

In-license(ArmaGen, Inc.)

TAK-834/SHP634<->
NATPARA (U.S.),
NATPAR (EU)Parathyroid
hormone (injection)

Hypoparathyroidism

Japan

P-I

In-house56

Our neuroscience pipeline as of May 14, 2019 (the date of our annual earnings release), along with notes for major subsequentdevelopments, is as follows:
Development Code
<Generic Name>
Brand Name(Country/Region)(1)Drug Class(Administration
Route)

Indications/
Additional
Formulations

Stage by Country/Region(2)In-house/
In-license

Lu AA21004<vortioxetine>
TRINTELLIX
TAK-815/SHP615<midazolam>
BUCCOLAM (EU)

Multimodal antidepressant(oral)

Major depressive
disorderJapan

Filed (September
2018)

In-license(H. Lundbeck
A/S)

GABA Allosteric
Modulator(oral)

Status epilepticus(seizures)

Japan

P-III

In-house

TAK-831<->

D-amino acidoxidase (“DAAO”)
inhibitor (oral)

Negative symptoms
and/or cognitive
impairment
associated withschizophrenia-

P-II(a)In-house

TAK-935<->

CH24H inhibitor(oral)

Rare pediatricepilepsies-

P-II(a)In-house (Codevelopment with
Ovid Therapeutics)

Huntington's disease-

P-I/II

In-license(Wave Life
Sciences Ltd.)

Huntington's disease-

P-I/II

In-license(Wave Life
Sciences Ltd.)WVE-120101<->

WVE-120102<->

mHTT SNP1
antisense
oligonucleotide(injection)
mHTT SNP2
antisense
oligonucleotide(injection)

TAK-041<->

GPR139 agonist(oral)

Negative symptoms
and/or cognitive
impairment
associated withschizophrenia-

P-I

In-house

MEDI1341<->

Alpha-synuclein
antibody(injection)

Parkinson's disease-

P-I

In-license(AstraZeneca plc)

TAK-418<->

LSDl1 inhibitor(oral)

Kabuki syndrome-

P-I

In-house

TAK-653<->

AMPA receptor
potentiator(oral)

Treatment resistantdepression-

P-I

In-house

TAK-925<->

Orexin 2R agonist(injection)

Narcolepsy-

P-I

In-house57

Our plasma-derived therapies pipeline as of May 14, 2019 (the date of our annual earnings release), along with notes for major
subsequent developments, is as follows:
Development Code
<Generic Name>
Brand Name(Country/Region)(1)Drug Class(Administration
Route)

Indications/
Additional
Formulations

Stage by Country/Region(2)TAK-616/SHP616<->
CINRYZECl INH inhibits thecomplement system(injection)

Hereditaryangioedema

Japan

P-III

Pediatric indication
for primary
immunodeficiency

U.S.

P-III

Chronic
inflammatory
demyelinating
polyradiculoneuropa
thy

U.S.
EU

TAK-771/SHP671
Immunoglobulin<->(lgG) +<IG Infusion 10%
recombinant(Human)w/
hyaluronidase
Recombinant
replacement therapy
Human(injection)
Hyaluronidase>
HYQVIA (U.S., EU)

P-III
P-III

In-house/
In-license

In-house

In-house(Partnership with
Halozyme
Therapeutics, Inc.)

Our vaccines pipeline as of May 14, 2019 (the date of our annual earnings release), along with notes for major subsequentdevelopments, is as follows:
Development Code
<Generic Name>
Brand Name(Country/Region)(1)TAK-003<->TAK-214<->
TAK-021<->TAK-426<->

Drug Class(Administration
Route)

Indications/
Additional
Formulations

Tetravalent dengue
vaccine (injection)

Prevention of thedengue fever caused
by dengue virus

-

P-III

In-house

Norovirus vaccine(injection)

Prevention of theacute gastroenteritis
caused by norovirus-

P-II(b)In-house

EV71 vaccine(injection)

Prevention of hand,food, and mouthdisease caused byenterovirus 71-

P-I

In-house

P-I

In-house(Partnership with the
Biomedical
Advanced Researchand Development
Authority – U.S.
Government)

Zika vaccine(injection)

Stage by Country/Region(2)Prevention of zika
virus infection-

In-house/
In-license

Notes:(1)
Brand name and country/region indicate the brand name and country in which the specific asset has already been approved forany indication in any of the U.S., EU, Japan or China and Takeda has commercialization rights for such asset.
(2)
Country/region in this column denote where a clinical study is ongoing or a filing has been made with our specific intention to
pursue approval in any of the U.S., EU, Japan or China.
(3)TAK-906 was previously known as ATC 1906. In March 2017, Takeda executed its option right to acquire Altos Therapeutics,
LLC.

58

Licensing and Collaboration
In the ordinary course of business, we enter into arrangements for licensing and collaboration for the development andcommercialization of products with third parties. Our business does not materially depend on any one of these arrangements. Instead
they form a portion of our strategy and give us the ability to leverage a mix of internal and external resources to develop andcommercialize new products. Certain of the agreements which that have led to successful commercialization to date are summarized
below.
•ADCETRIS: We entered into a Collaboration Agreement with Seattle Genetics in 2009 for the global co-development of ADCETRIS and its
commercialization around the world (other than the U.S. and Canada, where ADCETRIS is commercialized by Seattle Genetics). We may berequired to pay milestone payments related to regulatory and commercial progress by us under the collaboration. We also pay tiered royalties
with percentages ranging from the mid-teens and to the mid-twenties based on net sales of ADCETRIS within our licensed territories. We andSeattle Genetics equally co-fund the cost of selected development activities conducted under the collaboration. Either party may terminate thecollaboration for cause, or by mutual consent. We may terminate the collaboration at will, and Seattle Genetics may terminate the collaborationin certain circumstances. If neither party terminates the collaboration agreement, then the agreement automatically terminates on the expirationof all payment obligations. As of March 31, 2019, our aggregate potential development and commercial milestone payments under the
ADCETRIS collaboration were $47.5 million.

•

TRINTELLIX: We entered into a License, Development, Supply and Commercialization Agreement with H. Lundbeck A/S in September 2007
for the exclusive co-development and co-commercialization in the United States and Japan of several compounds in Lundbeck’s pipeline forthe treatment of mood and anxiety disorders, under which agreement we commercialize TRINTELLIX in the U.S. TRINTELLIX has not yet
been launched in Japan. Under the agreement, we and Lundbeck have agreed to jointly develop the relevant compounds, with most ofdevelopment funding from us. Revenues for TRINTELLIX are booked by us, and we pay to Lundbeck a portion of our sales, as well as tiered
royalties ranging from the mid-teens to twenties on the portion of sales retained by us. We have also agreed to pay to Lundbeck certain
development and commercialization milestone payments relating to regulatory and commercial progress under the collaboration. The term of
the agreement is indefinite, but the agreement may be terminated by mutual decision of the parties or for cause. As of March 31, 2019, ouraggregate potential development and commercial milestone payments under the TRINTELLIX collaboration were $130.0 million.

•

AMITIZA: In October 2004, we entered into an agreement with Sucampo Pharmaceuticals (subsequently acquired by Mallinckrodt) topurchase, develop and commercialize AMITIZA for gastrointestinal indications in the U.S. and Canada. The initial term of the agreement isthrough December 31, 2020, after which the agreement continues automatically until terminated by us. We purchase AMITIZA fromMallinckrodt under the agreement at an agreed upon price and pay tiered royalties on sales in North America ranging from the high teens to
mid-twenties, resetting each year. Beginning on January 1, 2021, we will share equally with Mallinckrodt in the net annual sales revenue frombranded AMITIZA sales. We have agreed to fund development costs, including regulatory-required studies, subject to agreed-upon caps, withexcess costs being shared equally, with certain exceptions. We have a similar agreement with Mallinckrodt covering the rest of the world,
except for Japan and the People’s Republic of China. We have agreed to additional commercial milestone payments contingent on theachievement of certain net sales revenue targets, and to provide a minimum annual commercial investment during the term of the agreement,
which we may reduce when a generic equivalent enters the market. As of March 31, 2019, our aggregate potential commercial milestone
payments under the AMITIZA collaboration were $50.0 million.

Our other research and development licensing and collaboration arrangements include, but are not limited to, the following:
Partner

Oncology:
Adimab LLC

Country

Description of Collaboration

U.S.

Agreement for the discovery, development and commercialization of three monoclonal
antibodies and three CD3 Bi-Specific antibodies for oncology indications.

Centre d’Immunologie deMarseille-Luminy
ASKA Pharmaceutical Co.

FranceCrescendo Biologics Ltd.

UK

Collaboration agreement to bring together expertise of Bernard Malissen group in innate
biology with our BacTrap capabilities to identify novel targets and pathways in myeloid cells.
Licensing agreement to grant exclusive commercialization rights for uterine fibroids andexclusive development and commercialization rights for endometriosis for Japan to maximize
the product value of relugolix (TAK-385).
Collaboration and licensing agreement for the discovery, development and commercializationof Humabody®-based therapeutics for cancer indications.

Exelixis, Inc.

U.S.

GammaDelta Therapeutics Ltd.
("GammaDelta Therapeutics")

UK

HaemaLogiX Pty. Ltd.

Japan

Australia

Exclusive licensing agreement to commercialize and further clinical development ofcabozantinib in Japan. We receive exclusive commercial rights for all potential futurecabozantinib indications in Japan, including advanced renal cell carcinoma, for whichcabozantinib is marketed in the U.S. and EU as CABOMETYX™ tablets.
Collaboration agreement to develop GammaDelta Therapeutics' novel T cell platform based on
the unique properties of gamma delta T cells derived from human tissues. The companies
intend to use this novel platform to discover and develop new immunotherapies in oncology.
Research collaboration and licensing agreement for the development of new therapeutics tonovel antigens in multiple myeloma.

59

Partner

Country

Description of Collaboration

Heidelberg Pharma GmbHGermany

Antibody-drug-conjugate ("ADC") research collaboration on two targets and licensing
agreement (α-amanitin payload and proprietary linker).

ImmunoGen, Inc. ("ImmunoGen")

U.S.

Licensing agreement for exclusive rights to use ImmunoGen's ADC technology to develop andcommercialize targeted anticancer therapeutics for up to two undisclosed targets.

Maverick Therapeutics Inc.
(“Maverick”)

U.S.

Switzerland

Collaboration agreement for the development of Maverick’s T cell engagement platform
created specifically to improve the utility of T cell redirection therapy for the treatment ofcancer. Under the agreement, we have the exclusive right to purchase Maverick after five
years.
We granted Myovant an exclusive, worldwide license (excluding Japan and certain other Asian

Memorial Sloan Kettering Cancer
CenterU.S.

countries) to relugolix (TAK-385) and an exclusive, worldwide license to MVT-602 (TAK448).
Alliance
to discover and develop novel chimeric antigen receptor T (“CAR-T”) cell products

Molecular Templates, Inc.
(“MTEM”)

U.S.

National Cancer Center of JapanJapan

Nektar Therapeutics (“Nektar”)

U.S.

Noile-Immune Biotech Inc.
("Noile-Immune")Japan

Shattuck Labs Inc. ("Shattuck")

U.S.

GlaxoSmithKline plc

UK

Teva Pharmaceutical Industries
Ltd. ("Teva")

IsraelMyovant Sciences Ltd.
(“Myovant”)

for the potential treatment of hematological malignancies and solid tumors. This partnershippursues the development of therapies that redirect T cell immunity against liquid or solid
Collaboration agreement related to oncology drug discovery programs. The collaboration will
apply MTEM’s engineered toxin bodies technology platform to potential therapeutic targets.
In September 2018, this collaboration was expanded for the joint development andcommercialization of CD38-targeted engineered toxin bodies for the treatment of patients withdiseases such as multiple myeloma.
Partnership agreement with the National Cancer Center of Japan to develop basic research toclinical development by promoting exchanges among researchers, physicians, and others
engaged in anti-cancer drug discovery and cancer biology research.
Collaboration agreement to explore the combination of Nektar’s lead immuno-oncology
candidate, the CD122-biased agonist NKTR-214, with five oncology compounds from ourcancer portfolio.
Collaboration agreement to develop next generation CAR-T cell therapy. We have exclusive
options to obtain licensing rights for the development and commercialization of NoileImmune’s pipeline and products resulting from this partnership.
Collaboration agreement to explore and develop checkpoint fusion proteins using Shattuck’s
Agonist Redirected Checkpoint platform that have the potential to become highly
differentiated, next-generation immunotherapies. We will hold options for exclusive global
development and commercialization rights for up to four molecules resulting from the
Exclusive licensing agreement to develop and commercialize novel cancer therapy niraparib
for the treatment of all tumor types in Japan, and all tumor types excluding prostate cancer inSouth Korea, Taiwan, Russia and Australia.
Multi-target discovery collaboration agreement for access to Teva’s attenukine platform
including a license to TEV-48573, a CD38 targeted antibody fused with attenuated interferonalpha for the treatment of multiple myeloma.

60

PartnerGI:
Ambys Medicines (“Ambys”)

Country

Description of Collaboration

U.S.

Partnership to collaborate on transformative therapies for the treatment of serious liverdiseases. Ambys is applying novel modalities, cell and gene therapy to restore liver function
and prevent the progression to liver failure for diseases that are untreatable or poorly treatedtoday. Under the terms of the agreement, we receive an option to ex-U.S. commercializationrights for the first four products that reach an investigational NDA.

Arcturus Therapeutics, Inc.
("Arcturus")

U.S.

Beacon Discovery (“Beacon”)

U.S.

Cour Pharmaceutical Development
Company, Inc. (“Cour”)

U.S.

Enterome Bioscience SA

FranceFinch Therapeutics Group, Inc.
(“Finch”)

U.S.

Hemoshear Therapeutics, LLC("Hemoshear")U.S.

Janssen Pharmaceuticals, Inc.

Belgium

Agreement to develop RNA-based therapeutics for the treatment of non-alcoholicsteatohepatitis and other gastrointestinal related disorders using Arcturus' wholly-owned
LUNA™ lipid-meditated delivery systems and UNA Oligomer chemistry.
Multi-year drug discovery collaboration on a few G-protein coupled receptors ("GPCRs") thatplay an important role in the pathology of gastrointestinal disorders. The agreement grants us
worldwide rights to develop, manufacture and commercialize products resulting from thecollaboration
Agreement to research and develop novel immune modulating therapies for the potential
treatment of celiac disease and other gastrointestinal disease using Cour's Tolerizing Immune
Modifying nano Particle ("TIMP") platform to co-develop TIMP-Gliadin.
Agreement for a strategic drug discovery collaboration to research and develop potential new
therapeutics directed at microbiome targets thought to play crucial roles in gastrointestinal
disorders, including IBDs such as ulcerative colitis and motility disorders such as irritablebowel syndrome. The agreement includes a global license and co-development ofEB8018/TAK-018 in Crohn's disease.
Global collaboration agreement to jointly develop FIN-524, a live biotherapeutic productcomposed of cultured bacterial strains linked to favorable clinical outcomes in studies of
microbiota transplantations in IBD. We obtain the exclusive worldwide rights to develop andcommercialize FIN-524 and rights to follow-on products in IBD. We and Finch may elect toextend this collaboration to additional and related indications on similar terms.
Collaboration agreement for novel target and therapeutic development for liver diseases,
including nonalcoholic steatohepatitis. We will receive exclusive access to Hemoshear’s
proprietary disease modeling platform to discover and develop best-in-class therapeutics for
specific liver diseases.
Exclusive license agreement to develop and market prucalopride as a treatment for chronic
constipation in the U.S. Motegrity, approved in December 2018.

NuBiyota LLC (“NuBiyota”)

CanadaPvP Biologics, Inc. (“PvP”)

U.S.

Samsung Bioepis Co, Ltd

South
Korea

Theravance Biopharma Inc

Ireland

UCSD/Fortis Advisors LLC

U.S.

Agreement for the development of Microbial Ecosystem Therapeutic products for GI
indications with a high unmet medical need. We will collaborate with NuBiyota to advanceoral microbial consortia products developed by using NuBiyota’s microbiome platform for GI
Global agreement for the development of KumaMax, a novel enzyme designed to break down
the immune-reactive parts of gluten in the stomach. We will provide financing for PvP to
conduct research and development through Phase I proof-of-principle studies and obtain an
exclusive option to acquire PvP following receipt of a pre-defined data package.
Strategic collaboration agreement to jointly fund and co-develop multiple novel biologic
therapies in unmet disease areas. The program’s first therapeutic candidate is TAK-671, whichis intended to treat severe acute pancreatitis.
Global license, development and commercialization agreement for TD-8954, a selective 5HT4 receptor agonist being investigated for potential use in the treatment of GI motility
disorders, including enteral feeding intolerance (“EFI”). TD-8954 is being developed for the
short-term use with EFI to achieve early nutritional adequacy in critically ill patients at highnutritional risk, an indication for which the compound received the FDA Fast Track
Designation.
Technology license to develop oral budesonide formulation (TAK-721/SHP621) for treatmentof eosinophilic esophagitis.

Rare diseases:
AB Biosciences, Inc.

U.S.

ArmaGen, Inc.

U.S.

Research collaboration agreement to potentially develop assets for rare disease with panreceptor interacting molecules targeted for specific immunological conditions with a focus on
autoimmune modulated inflammatory diseases.
Worldwide licensing and collaboration agreement to develop AGT-182 (TAK-531/SHP631),
an investigational enzyme replacement therapy for potential treatment of both the central
nervous system ("CNS") and somatic (body-related) manifestations of Hunter syndrome.

61Partner

Country

Description of Collaboration

Asklepios Biopharmaceutical, Inc.

U.S.

Agreement for multiple research and development collaborations using FVIII gene therapy forthe treatment of hemophilia A and B.

BioMarin Pharmaceutical Inc.

U.S.

GlaxoSmithKline plc (“GSK”)

UK

Agreement for the in-license of enabling technology for the exogenous replacement of
iduronate-2-sulfatase with Idursulfase-IT in patients via direct delivery to the CNS for the
long-term treatment of Hunter syndrome in patients with cognitive impairment in order toslow progression of cognitive impairment (TAK-609/SHP609).
In-license agreement between GSK and University of Michigan for TAK-620/SHP620(marabivir) in the treatment of human cytomegalovirus.

Harrington Discovery Institute at
University Hospitals in Cleveland,
Ohio
IPSEN

U.S.

Collaboration agreement for the advancement of medicines for rare diseases.

France

KM Biologics Co., Ltd.

Japan

Purchase agreement to develop Obizur for the treatment of Acquired Hemophilia A, including
for patients with Congenital Hemophilia A with inhibitors indication in elective or emergency
surgery.
Collaboration agreement to jointly development TAK-755/SHP655 to overcome the
ADAMTS13 deficiency.

NanoMedSyn

FrancePre-clinical research collaboration agreement to evaluate a potential enzyme replacement
therapy using NanoMedSyn's proprietary synthetic derivatives named AMFA.

Novimmune SA

Switzerland

Agreement for the exclusive worldwide rights to develop and commercialize an innovative, bispecific antibody in pre-clinical development for the treatment of hemophilia A.

Rani Therapeutics

U.S.

Research collaboration agreement to evaluate a micro tablet pill technology for oral deliveryof FVIII therapy in hemophilia.

Ultragenyx Pharmaceutical Inc.

U.S.

Collaboration agreement to develop and commercialize therapies for rare genetic diseases.

Xenetic Biosciences, Inc.

U.S.

Exclusive research and development license agreement for PolyXen delivery technology forhemophilia factors VII, VIII, IX, X.

Neuroscience:
AstraZeneca plc ("AstraZeneca")UK

Collaboration agreement to jointly develop and commercialize MEDI1341, an alpha-synuclein
antibody currently in development as a potential treatment for Parkinson’s disease.
AstraZeneca will lead Phase I development while we will lead future clinical development
activities. The companies will share equally future development and commercialization costs
as well as any future revenues.
Strategic option and collaboration agreement to develop and commercialize up to three
specified therapeutic product candidates for neurodegenerative diseases incorporating Denali’s
antibody transport vehicle platform for increased exposure of biotherapeutic products in thebrain.
Collaboration to explore development of digital biomarkers for selected mental healthconditions, in particular schizophrenia and treatment-resistant depression.

Denali Therapeutics Inc.
("Denali")U.S.

Mindstrong HealthU.S.

Ovid Therapeutics Inc. ("Ovid")

U.S.

StrideBio Inc.

U.S.

Wave Life Sciences Ltd.

Singapore

Agreement to clinically develop and commercialize a novel, potent and highly selective
CH24H inhibitor, in rare pediatric epilepsies (TAK-935). We received equity in Ovid and may
be eligible to receive certain milestone payments based on the advancement of TAK-935. We
will lead commercialization in Japan and have the option to lead commercialization in Asiaand other selected geographies. Ovid will lead clinical development activities andcommercialization of TAK-935 in the United States, Europe, Canada and Israel.
Collaboration and license agreement to develop in vivo Adeno-Associated Virus (“AAV”)
based therapies for Friedreich’s Ataxia and two additional undisclosed targets.
Research, development and commercial collaboration and multi-program option agreement todevelop antisense oligonucleotides for genetically-defined neurological diseases. The firstcomponent of the collaboration will focus on programs targeting Huntington’s disease,amyotrophic lateral sclerosis, frontotemporal dementia and spinocerebellar ataxia type 3. The
second component of the collaboration provides us with the rights to exclusively license
multiple preclinical programs targeting other neurological disorders including Alzheimer’s
disease and Parkinson’s disease.

62

Plasma derived therapies:
Halozyme Therapeutics, Inc.
(“Halozyme”)

U.S.

Kamada Ltd.

IsraelVaccines:
Biological E. Limited

India

U.S.

In-license agreement for Halozyme’s proprietary ENHANZE™ platform technology toincrease dispersion and absorption of HyQvia. On-going development work for a US pediatricindication to treat primary and secondary immunodeficiencies and a Phase 3 indication in
Chronic Inflammatory Demyelinating Polyradiculoneuropathy.
In-license agreement to develop and commercialize Alpha-1 proteinase inhibitor (Glassia);
Exclusive supply and distribution of Glassia in the US, Canada, Australia and New Zealand;
Development of protocol for post market commitment trial ongoingWe agreed to transfer existing measles and acellular pertussis vaccine bulk production
technology to develop low-cost combination vaccines for India, China and low- and middleincome countries.
Partnership to develop a Zika vaccine (TAK-426, our Zika vaccination candidate) to support
the Zika response in the U.S. and affected regions around the world. Selected by BARDA, adivision of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”),
within the U.S. Department of Health and Human Services.
Partnership agreement to address the global threat of chikungunya and develop a chikungunya
vaccine an emerging infectious disease in Africa, Asia and the Indian subcontinent.

U.S. Government - The
Biomedical Advanced Researchand Development Authority("BARDA")
Zydus Cadila

India

Other / Multiple Therapeutic
Areas:
Bridge Medicines

U.S.

Partnership with Tri-Institutional Therapeutics Discovery Institute, Bay City Capital and
Deerfield Management in the establishment of Bridge Medicines. Research projects accepted
into the Tri-Institutional Therapeutics Discovery Institute will be able to graduate to Bridge
Medicines, where they will be given financial, operational and managerial support to moveseamlessly from validating proof-of-concept studies to clinical trials.

Center for IPS Cell Research
Application, Kyoto University

Japan

HiFiBiO Inc.

U.S.

HitGen Ltd.
("HitGen")

China

Ten-year collaboration and establishment of a joint research program to develop clinicalapplications of induced pluripotent stem cells in therapeutic areas including cancer, heart
failure, diabetes mellitus, neuro-degenerative disorders and intractable muscle diseases.
Collaboration for functional therapeutics high-throughput antibody discovery platform thatenables identification of antibodies for rare events, for discovery of therapeutic antibodies for
GI and Oncology therapeutic areas.
Agreement that HitGen will apply its advanced technology platform, based on DNA-encoded
library design, synthesis and screening, to discover novel leads which will be licensed
exclusively to us.

lsogenica Ltd.
("Isogenica")

UK

Numerate, Inc.

U.S.

Portal Instruments, Inc.
("Portal")U.S.

Collaboration with Portal to develop and commercialize Portal’s needle-free drug delivery
device for potential use with our investigational or approved biologic medicines.

Recursion Pharmaceuticals

U.S.

Agreement to provide pre-clinical candidates for our TAK-celerator™ development pipeline.

Schrödinger, LLC ("Schrödinger")U.S.

Seattle Collaboration

U.S.

Stanford University

U.S.

Multi-target research collaboration combining Schrödinger's in silico platform-driven drug
discovery capabilities with our deep therapeutic area knowledge and expertise in structural
biology.
Research alliance, Seattle Partnership for Research on Innovative Therapies (“SPRInT”),
aiming to accelerate the translation of Fred Hutchinson Cancer Research Center’s andUniversity of Washington’s cutting-edge discoveries into treatments for human disease, with afocus on GI, oncology and neuroscience.
Collaboration with Stanford University to form the Stanford Alliance for Innovative Medicines(“Stanford AIM”) to develop innovative treatments and therapies in a more effective manner.

Tri-Institutional Therapeutics
Discovery Institute ("Tri-I TDI")U.S.

Agreement with Isogenica for access to a sdAb (single-domain antibody) platform to generatea toolbox of VHH (Variable domain of Heavy chain of Heavy chain antibody) for various
immune cells, and we are targeting pathway validation and pipeline development across our GI
and Oncology portfolio.
Agreement for joint-discovery programs aimed at identifying clinical candidates for use in ourcore therapeutic areas, namely GI, oncology and neuroscience.

Partnered with the Tri-I TDI, a collaboration of academia institution and industry to more
effectively develop innovative treatments and therapies.

63Intellectual Property
An important part of our business strategy is to protect our products and technologies using patents and trademarks, to theextent available. We rely on trade secrets, proprietary know-how, technological innovations and contractual arrangementswith third parties to maintain and enhance our competitive position. Our commercial success depends, in part, upon ourability to obtain and enforce strong patents, to maintain trade secret protection, to operate without infringing the proprietary
rights of others and to comply with the terms of licenses granted to it. Due to the lengthy development periods for new
drugs, the high costs of research and development and the small percentage of researched compounds that reach the market,
the protection of intellectual property plays an important role in the return of investments for research and development of a
new drug.
Our low molecule products (small molecules) are mainly protected by substance patents. While the expiration of a
substance patent usually results in a loss of market exclusivity for the protected pharmaceutical products, commercial
benefits may continue to be protected by non-substance patents such as patents relating to the use of such substance, patents
relating to the method of use of such substance, patents relating the manufacturing method of such substance, and patents
relating to the new composition or formulation of such substance. The products can be also protected by regulatory dataprotection under relevant law in each country even if the substance patent expired. While our biologics products can andmay be protected by one or more substance patents, certain products may be protected by non-substance patents and/or
regulatory data protection. However, for biologics, patent protection may be less important than for traditional
pharmaceutical products, as similar products for the same indication and/or biosimilars may be developed and marketed bycompetitors without infringing on our patents.
In the United States, patents generally expire twenty years after the filing date of the application, subject to potential patentterm adjustments for delays in patent issuance based upon certain delays in prosecution by the United States Patent andTrademark Office. A U.S. pharmaceutical patent that claims a product, method of treatment using a product or method of
manufacturing a product may also be eligible for a patent term extension based on the time the FDA took to approve theproduct. This type of extension may only extend the patent term for a maximum of five years and may not extend the patentterm beyond fourteen years from regulatory approval. Only one patent may be extended for any product based on FDA
delay. In addition to patent exclusivities, the FDA may provide data or market exclusivity for a new chemical entity or an“orphan drug,” each of which run in parallel to any patent protection. Regulatory data protection or exclusivity prevents a
potential generic competitor from relying on clinical trial data that were generated by the sponsor when establishing thesafety and efficacy of its competing product for a period of seven years. Market exclusivity prohibits any marketing of thesame drug for the same indication.
In Japan, a patent can be issued for active pharmaceutical ingredients by the Japan Patent Office (“JPO”). Althoughmethods of treatment, such as dosage and administration, are not patentable in Japan, pharmaceutical compositions for a
specific dosage or administration method as well as processes to make a pharmaceutical composition are patentable. Patents
in Japan generally expire 20 years after the filing date of the patent application. Patents for pharmaceuticals may be
extended for up to five years, depending on the amount of time spent for the drug approval process. Japan also has aregulatory data protection system called a “re-examination period” of eight years for pharmaceuticals that contain newactive pharmaceutical ingredients and four years to six years for new indications and formulations and a ten-year orphan
drug exclusivity system.
In the EU, patent applications may be filed in the European Patent Office (“EPO”) or in a country in Europe. The EPO
system permits a single application to be granted for the EU, plus certain other non-EU countries, such as Switzerland andTurkey. When the EPO grants a patent, it is then validated in the countries that the patent owner designates. The term of apatent granted by the EPO or a European country office is generally 20 years from the filing date of the patent application.
Pharmaceutical patents covering an approved medicinal product can be granted a further period of exclusivity under the
Supplementary Protection Certificate (“SPC”) system. SPCs are designed to compensate the owner of the patent for thetime it took to receive marketing authorization by the European Medicines Agency or the National Health Authorities. An
SPC may be granted to provide, in combination with the patent, up to 15 years of exclusivity from the date of the first
European marketing authorization. However, an SPC cannot last longer than five years. The SPC duration can additionallybe extended by a further Pediatric Extension of six months if the SPC relates to a medicinal product for children for whichdata has been submitted according to a Pediatric Investigation Plan ("PIP"). The post-grant phase of patents, including the
SPC system, is currently administered on a country-by-country basis under national laws. Therefore, although regulations
concerning patents and SPCs have been created at EPO and EU level, respectively, due to different national implementation
they may not always lead to the same result. The EU also provides a system of regulatory data exclusivity for authorized
human medicines, which runs in parallel to any patent protection. The system for drugs being approved today is usuallyreferred to as “8+2+1” rule because it provides an initial period of eight years of data exclusivity, during which a competitor
cannot rely on the relevant data, a further period of two years of market exclusivity, during which the data can be used tosupport applications for marketing authorization but the competitive product cannot be launched and a possible one-year

64extension of the market exclusivity period if, during the initial eight-year data exclusivity period, the sponsor registered a
new therapeutic indication for the concerned drug. However, the additional one-year extension is only available if either notherapy exists for the new indication or if the concerned product provides for the new indication a "significant clinicalbenefit over existing therapies". This system applies both to national and centralized authorizations. The EU also has anorphan drug exclusivity system for medicines similar to the U.S system. If a medicine is designated as an orphan drug, it
benefits from ten years of market exclusivity, during which time a similar medicine for the same indication will not receive
marketing authorization. Under certain circumstances, this exclusivity can be extended with a two-year Pediatric Extension
for completion of a PIP.
Worldwide, we experience challenges in the area of intellectual property from factors such as the penetration of genericversions of our products following the expiry of the relevant patents and the launch by competitors of over-the-counterversions of our products. Our Global General Counsel is responsible for the oversight of our Intellectual Property operations,as well as our legal operations. Our Intellectual Property Department supports our overall corporate strategy by focusing
efforts on three main themes:•••

maximization of the value of our products and research pipeline and protection of related rights aligned to the strategies
of our therapeutic area units;facilitation of more dynamic harnessing of external innovation through partner alliance support; andsecuring and protection of intellectual property rights around the world, including in emerging markets.

As infringement of our intellectual property rights poses a risk of loss of expected earnings derived from those rights, wehave internal processes in place to manage patents and other intellectual property. This program includes both remaining
vigilant against patent infringement by others as well as exercising caution, starting at the research and development stage,
to ensure that our products and activities do not violate intellectual property rights held by others.
In the regular course of business, our patents may be challenged by third parties. We are party to litigation or otherproceedings relating to intellectual property rights. Details of material ongoing litigation are provided in Note 32 to our
audited consolidated financial statements included in this annual securities report.
The following table describes our outstanding substance patents and the regulatory data protection (“RDP”) (US and EU) or
re-examination period (“RP”) (Japan) for the indicated product by territory and expiry date. The table includes RDP or RP
information only if the protection provided by regulatory exclusivity exceeds the patent expiry. Patent term extensions(“PTE”), supplemental protection certificates (“SPC”), and pediatric exclusivity periods (“PEP”) are reflected in the expiry
dates to the extent they have been granted by the issuing authority. For PTE’s, SPC’s, and PEP’s in which the application isin process but not yet granted, the extended expiry is separately provided.

Our biologic products may face or already face competition from companies who produce similar products for the same
indications, and/or biosimilars, regardless of expiry dates below. Certain of the European patents are the subjectof supplemental protection certificates that provide additional protection for the product in certain countries beyond the dates
listed in the table.
Our ProductGI:
ENTYVIO

Japan Expiry Dates(1)(2)

U.S. Expiry Dates(1)EU Expiry Dates(1)Patent: —Patent: September 2021

Patent: August 2017 (Extended
expiry of August 2022 in certain
countries)

RP: July 2026(2)RDP: May 2026

RDP: May 2024

PANTOPRAZOLEPatent: —Patent: —Patent: —DEXILANTNot commercialized

Patent: —Patent: —TAKECAB(3)Patent: August 2031

Patent: —(3)AMITIZA(4)

Patent: —(4)

Patent: May 2021

Patent: —(3)(5)

GATTEX/REVESTIVE

Patent: —Patent: October 2020

LIALDA/MEZAVANT(3)Patent: — (3)Patent: —RP: September 2022(2)65

Not commercialized(6)

Patent: —RDP: September 2024
Patent: —Japan Expiry Dates(1)(2)

Our ProductRare Diseases
VPRIV

Patent: —U.S. Expiry Dates(1)EU Expiry Dates(1)Patent: —Patent: —RP: July 2024(2)RDP: August 2022

ELAPRASE

Patent: —Patent: September 2019

Patent: —REPLAGAL

Patent: —Not commercialized

Patent: —NATPARAPatent: —Patent: —Patent: —RDP: January 2027

RDP: April 2029

Patent: July 2019

Patent: —Patent: —FIRAZYR

RP: September 2028(2)RDP: July 2020

ADVATE

Patent: —Patent: —Patent: —ADYNOVATE

Patent: January 2026

Patent: February 2026

Patent: January 2028 if granted

RDP: November 2027

RDP: January 2028

FEIBA(7)Patent: —Patent: —Patent: —HEMOFIL(7)Not commercialized

Patent: —Not commercialized

IMMUNATE(7)Patent: —Not commercialized

Patent: —IMMUNINE(7)Not commercialized

Not commercialized

Patent: —TAKHZYRO

January 2031

December 2031, February 2032,
March 2032

January 2031

Extended expiry of November 2034 Extended expiry of August 2032 if
PTE granted
if PTE granted

Extended expiry of January 2036 if
SPC granted

KALBITOR

Not commercialized

December 2023

Not commercialized

CINRYZE(7)Patent: —Patent: —Patent: —RDP: October 2020
GAMMAGARD LIQUID(7)ALBUMIN IN GLASS(7)HYQVIA(7)CUVITRU(7)FLEXBUMIN(7)Oncology:
LEUPLIN/ENANTONEVELCADE(3)

NINLARONot commercialized

Patent: —Patent: —Not commercialized

Patent: —Patent: —Not commercialized

Patent: —Patent: —RDP: September 2026

RDP: May 2024

Patent: —Patent: —RDP: September 2028

RDP: July 2027

Not commercialized

Patent: —Patent: —Patent: —Patent: —Patent: —RP: September 2019(2)(8)Patent: —(3)Patent: —Patent: —(3)Patent: July 2031

Patent: August 2027

Patent: November 2031

Not commercialized

Extended expiry of November 2029
if PTE granted
ADCETRIS(4)Patent: April 2022, July 2026 (9)Patent: —(4)Patent: October 2027

ALUNBRIG

Patent: May 2029

Patent: July 2030

Patent: May 2029

Extended expiry of February 2033
if PTE granted

Extended expiry of April 2031 if
PTE granted

Extended expiry of November 2033
if SPC granted

ICLUSIG(3)Patent: —(3)Patent: January 2027

Patent: —(3)VECTIBIX(4)Patent: August 2022

Patent: —(4)Patent: —(4)66Our ProductJapan Expiry Dates(1)(2)

U.S. Expiry Dates(1)EU Expiry Dates(1)Neuroscience:
TRINTELLIX (4)Patent: October 2022

Patent: June 2026

Patent: —(4)Extended expiry of October 2027 if Extended expiry of December 2026
PTE granted
if PTE granted
VYVANSE

Patent: June 2024

Patent: February 2023

Patent: June 2024 (Extended expiryof February 2028 or March 2029 incertain countries)

Patent: —Not commercialized

Extended expiry of June 2029 if
PTE granted
RP: March 2027
ADDERALL XR

Not commercialized

ROZEREM

Patent: March 2022

Patent: July 2019

Not commercialized

REMINYL

Patent: —Patent: —Patent: —INTUNIV

Patent: —Patent: —Patent: —RP: March 2025(2)RDP: September 2025

Other:NESINA

Patent: April 2028

Patent: June 2028

Patent: September 2028

ULORIC(4)Patent: —(4)Patent: —Patent: —(4)COLCRYS

Not commercialized

Patent: —Not commercialized

Patent: —Patent: — (4)Patent: — (4)Not commercialized

Not commercialized

LOTRIGA(4)

RP: September 2020(2)AZILVA

Patent: —RP: October 2021(2)Notes:(1) A “-” within the table indicates the substance patent is expired or not applicable.
(2) In Japan, an application for a generic product is filed after the re-examination period ends, and the product is listed in the approval anddrug price listing after a regulatory review. Therefore, the generic product would enter the market after a certain period of time from theexpiry of the re-examination period.
(3) This product is not sold by Takeda in all regions because of out-licensing agreements to third parties.
(4) This product is not sold by Takeda in all regions because of in-licensing agreements from third parties exclusive to certain regions. See“-Business Overview” principal products descriptions and “-Licensing and Collaboration” for further information on the licensing
agreements.
(5) Generic may be introduced after January 2021 (or earlier under certain circumstances) based on a settlement with an ANDA filer.
(6) Generic may be introduced after March 2023 based on a settlement with an ANDA filer.
(7) Relates to plasma-derived therapies products(8) LEUPLIN/ENANTONE has a re-examination period in Japan for formulation (6M) through September 2019.
(9) Generic/biosimilar may be introduced after July 2026 dependent on when access to the U.S. or European market is available.

67III. Property, Plant, and Equipment
1. Overview of Capital Expenditures
The Company has continued to make capital expenditures to maintain and strengthen its competitive edge. Our capital expenditures
represent mainly enhancing and streamlining our production facilities, enhancing and strengthening research and development
structure for new products, strengthening sales capabilities, and promoting efficiency of our operations.
The total capital expenditures of Takeda for the year ended March 31, 2019 was 188.4 billion JPY.
2. Major Facilities
Takeda's major facilities are as follows:(1) The Company

As of March 31, 2019
Carrying Amount (JPY (millions))
Land

Office Name
[Location]

Type of
Facilities

GlobalHeadquarters Sales &Administration[Chuo-ku,

Buildings Machinery
andand
Structures Vehicles

Area
(m2)

LeasedAmount Assets

Other

Total
AmountNumber of
Employees

6,640

—

13,102

26,123499

832

34,094

900

3,940

167

468,967

1,350

15

1,841

7,313

503

1,005

10

1,584

15,511

465

—

110

10,648

36

685

3,628

57,163

668

3

1,999

5,560

27

431

3,458

68,249591

Tokyo]
Head Office[Chuo-ku,
Osaka andothers]Sales &
Administration(6,542)

Osaka Plant[Yodogawaku, Osaka]

Production

Osaka CMC
Center[Yodogawaku, Osaka]

Research

Hikari Plant[Hikari-shi,
Yamaguchi]

Production andresearch

27,116

Hikari CMC
Center[Hikari-shi,
Yamaguchi]

Production forresearch

3,033

525

62,422

557

6,311

6,601
163,568

ShonanResearchCenterResearch[Fujisawa-shi,
Kanagawa]

10,49939(included in Osaka
Plant)(4,573)
22,1163,618
1,011,061(included in Hikari
Plant)

243,10568

1,381

Carrying Amount (JPY (millions))
Land
Office Name
[Location]

Type of
Facilities

Center for
Learning andInnovation[Suita-shi,
Osaka]

Education andwelfare

4,028

—

—

—

SapporoBranchSales &
[Chuo-ku,
Administration
Sappporo-shi]

18

—

—

TohokuBranch[Aoba-ku,
Sendai-shi]

Sales &
Administration

11—

Tokyo Branch
and others
Sales &
[Chuo-ku,
Administration
Tokyo]

63

NagoyaBranch[Nishi-ku,
Nagoya-shi]

Sales &
Administration

Buildings Machinery
andand
Structures Vehicles

Total
Amount

—

26

4,054

—

—

—

1

19

129

—

—

—

2

13

193

—

—

—

—

14

77

664

21

—

—

—

—

4

25

251

Osaka Branch
and others
Sales &
[Chuo-ku,
Administration
Osaka]

31

—

—

—

—

7

38

600

Fukuoka
Branch[Hakata-ku,
Fukuoka]

10

—

—

—

—

1

11

264

Sales &
Administration

LeasedAmount Assets

Number of
Employees

Other

Area
(m2)

Notes:(1) The Company’s facilities belong to the Pharmaceuticals segment.
(2) "Other" in the carrying amount shows the total amount of tools, furniture and fixtures and construction in progress.
(3) The table above includes land of 5 million JPY (634m2) and buildings of 1,237 million JPY which are leased to parties
other than consolidated companies.
(4) The part of land and buildings are leased from parties other than consolidated companies. The annual lease payments
were 1,718 million JPY. Figures in parentheses of "Land" represent the square meters of the land.
(5) Head Office mainly consists of buildings, accompanying facilities and lands (includes dormitory and company housing).

69

(2) Domestic subsidiaries

As of March 31, 2019
Carrying Amount (JPY (millions))
Land
Number of
Buildings Machinery
Total Employees
and
and
Area
Other
AmountAmountStructures Vehicles(m2)

Subsidiaries’
Company Name
[Main Location]

OperatingSegment

Type of
Facilities

TakedaPharmaceutical
Real Estate Co.,Ltd.
[Chuo-ku,
Tokyo]

Pharmaceuticals

Head Office
and for rent
and others

25,567367(1,502)
78,125254

Nihon
PharmaceuticalCo., Ltd.
[Izumisanoshi,Osaka]

Pharmaceuticals

Production,
researchand others

2,726

1,402

71,556

1,181

521

5,830

392

TakedaHealthcare
Products Co.,
Pharmaceuticals
Ltd.
[Fukuchiyamashi,
Kyoto]

Production
and others

2,667

3,004

86,001

239

473

6,383

190

373 26,562

9

Notes:(1) "Other" in the carrying amount shows the total amount of tools, furniture and fixtures and construction in progress.
(2) The table above includes land of 6 million JPY (3,951 m2 ) and buildings of 241 million JPY which are leased toparties other than consolidated companies.
(3) The part of land and buildings are leased from parties other than consolidated companies. The annual lease payments were
102 million JPY. Figures in parentheses of “Land” represent the square meters of the land.
(3) Overseas subsidiaries
As of March 31, 2019
Carrying Amount (JPY (millions))
Subsidiaries’
Company Name
[Main Location]

OperatingSegment

Type of
Facilities

Buildings
Machineryandand Vehicles
Structures

Land
Area
(m2)

Other

Total
AmountNumber of
Employees

AmountMillennium
Pharmaceuticals,
Inc.
Pharmaceuticals[Cambridge, MA,
U.S.A.]

Researchand others

123,009

4,405(2,686)
144,675

410 15,333

143,157

2,236

Baxalta, US, Inc.
[Covington, GA,
U.S.A ]

Production
and others

160,704

117,967

653,811

7,538 22,596

308,804

3,707

Pharmaceuticals

70Carrying Amount (JPY (millions))
Subsidiaries’
Company Name
[Main Location]

OperatingSegment

Type of
Facilities

Buildings
Machineryandand Vehicles
Structures

Land

Number of
Employees

Other

Total
Amount390,927 26,715 11,545

109,917

2,275

3,254

55,1773,245

564 31,417

33,149246

726

32,228599

98 14,077

30,079

937

Area
(m2)

Shire Human
Genetic
Therapies, Inc.
[Lexington, MA,
U.S.A.]

Pharmaceuticals

Production
and others

47,491

24,166

Baxter AG[Vienna,
Austria]

Pharmaceuticals

Production
and others

34,898

10,829Shire
Pharmaceuticals
Ireland Limited[Dublin,Ireland]

Pharmaceuticals

Production
and others

1,159

8

485,622

Baxalta
Manufacturing,
S.a.r.l.
[ Neuchatel,
Switzerland]

Pharmaceuticals

Production
and others

10,537

18,965

109,924

Baxalta Belgium
Manufacturing
S.A.
[Lessines,
Belgium]

Pharmaceuticals

Production
and others

6,371

9,533

110,321368,551

Amount

6,197

2,000

Notes:(1) "Other" in the carrying amount shows the total amount of tools, furniture and fixtures and construction in progress.
(2) The table above includes buildings of 2,495 million JPY which are leased to parties other than consolidated
companies.
(3) The part of land and buildings are leased from parties other than consolidated companies. The annual lease payments
were 2,684 million JPY. Figures in parentheses of “Land” represent the square meters of the land.

71

3. Plans for new facility construction, old facility disposal, etc.
The following are the important new facility construction, facility removal projects and/or facilities sales projects
planned as at 31 March, 2019.
(1) The Company
BudgetClassification

Name[Location]

Details

Construction

Osaka Plant[Yodogawaku, Osaka]

Production
Support andquality assurance
facility

Schedule

Total
(JPY
(millions))

Paid
(JPY
(millions))

10,990872

FinancingFunds onhand

Commencement

Completion

July 2018

March 2021

Note: Facilities of the Company belong to the Pharmaceuticals segment(2) Domestic subsidiaries
Not Applicable.
(3) Overseas subsidiaries
BudgetSubsidiaries’
Classification Company Name
[Main Location]

Schedule

OperatingSegment

Details

Pharmaceuticals

Manufacturing
equipment

9,648

9,636

Funds onhand andsubsidies

August2014

June, 2019

Takeda GmbHand Takeda
Singen Real
Estate GmbH &Construction
Pharmaceuticals
Co. KG[Shingen, BadenWürttemberg,
Germany]

Manufacturing
equipment

16,761

12,268Funds onhand

November
2016

September
2019

Takeda Ireland
Construction Limited
Pharmaceuticals[Dublin, Ireland]

Manufacturing
equipment

6,453

6,011

Funds on
hand

June
2017

July, 2019

Millennium
Pharmaceuticals,
Construction Inc.
Pharmaceuticals[Cambridge,MA,
U.S.A.]

Manufacturing
equipment

11,684

11,811

Funds onhand

December
2015

June
2019

Shire
Pharmaceuticals,
Construction
Pharmaceuticals
Ireland Limited.
[Dublin, Ireland]

Manufacturing
equipment

73,76534,698Funds onhand

October
2017

April
2022

Manufacturing
equipment

5,932

4,143

Funds on
hand

April
2016

June
2019

Construction

Renovation

Takeda GmbH
[Oranienburg,
Brandenburg,
Germany]

Shire Human
Genetic
Therapies S.A.
[Lexington,
U.S.A.]

Pharmaceuticals

Total
(JPY
(millions))

72

Paid
Financing Commence(JPY
Completionment(millions))BudgetSchedule

Subsidiaries’
Classification Company Name
[Main Location]

OperatingSegment

Details

Baxalta US, Inc.
Construction [Social Circle,
U.S.A.]

Pharmaceuticals

Manufacturing
equipment

231,084

221,499

Funds on
hand

June
2012

December
2021

Renovation

Baxter AG
Pharmaceuticals[Vienna, Austria]

Manufacturing
equipment

6,372

208

Funds onhand

August
2018

June
2022

Renovation

Baxalta Belgium
Manufacturing
S.A.
Pharmaceuticals[Lessine,
Belgium]

Manufacturing
equipment

16,637

4,760

Funds onhand

February
2017

July
2021

Total
(JPY
(millions))

73

Paid
Financing Commence(JPY
Completionment(millions))

IV. Information on the Company
1. Information on the Company's Shares(1) Total Number of Shares and Other Related Information
1) Total number of shares
Class

Total Number of Shares Authorized to be Issued (shares)

Common stock

3,500,000,000

Total

3,500,000,0002) Number of shares issued

Class

Number of Shares
Outstanding(as of March 31, 2019)

Number of Shares
Outstanding as of theFiling Date
(June 27, 2019)

Names of Stock Exchanges on
Which the Company is Listedor Names of Authorized
Financial Instruments Firms
Association with Which theCompany Is Registered

The number ofshares per one
unit of shares is
100 shares.
̶

Common stock

1,565,005,908

1,565,006,908

Securities Exchanges inTokyo, Nagoya, (bothlisted on the first section),
Fukuoka, Sapporo, New
York

Total

1,565,005,908

1,565,006,908

̶Description

Notes:(1) The Company's American Depositary Shares (ADS) are listed on the New York Stock Exchange.
(2) Number of shares outstanding as of the filing date does not include newly issued shares exercised by stockacquisition rights from June 1, 2019 to the filing date.

74

(2) Stock Acquisition Rights
1) Description of stock option plans
Date of resolution

June 25, 2010

Position and the number of grantees

5 Directors

Number of stock acquisition rights (*)
Class and the number of shares to be issued
upon exercise of stock acquisition rights (*)
Amount to be paid in upon exercise of stockacquisition rights (Exercise price) (*)

70 (Note1)

Exercise period of stock acquisition rights (*)
Price of issuing shares and the amount of
capitalization upon exercise of stockacquisitionrights (*)
Conditions for exercise
acquisition rights (*)

ofCommon stock: 7,000 (Note2)
1 JPY
From July 11, 2013
to July 10, 2020 (Note3)
Price of issuing stocks: 3,029 JPY (Note4)
Amount of Capitalization: 1,515 JPY
1)

stock
2)

Matters regarding
acquisition rights (*)

transfer

of

stock

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring(*)

At the time of the exercise of the stock acquisition rights, the holder ofstock acquisition rights must be a director of the Company; however,this shall not apply in the case where the holder retires due to the
expiration of his/her term of board membership or other valid reason.
A single stock acquisition right may not be exercised in part.

Transfer of stock acquisition rights shall be subject to approval
by resolution of the Board of Directors.

̶Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the filing date), the status as of May 31, 2019 is statedin square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one share arising as a result of thisadjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for thatsplit. In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective dateof the distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares tobe issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in theevent of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number of shares,
the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger about therequisite matters no later than the previous day to the application of the post-adjustment number of shares. However,when notification cannot be made by this date, the Company shall promptly make the notification thereafter.
(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofoffice or other valid reason, such director may exercise stock acquisition rights immediately following the date of such
retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (1 JPY per share) and a fair value per stock acquisition right on the allotment date
(3,028 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the directors toward the Company and the right to demand payment of the amount to be paid in for stockacquisition rights.

75Date of resolution

June 24, 2011

Position and the number of grantees

4 Directors

Number of stock acquisition rights (*)
Class and the number of shares to beissued upon exercise of stock acquisitionrights (*)to be paid in upon exercise of stock
Amountacquisition rights (Exercise price) (*)

101 (Note1)
Common stock: 10,100 (Note2)
1 JPY

Exercise period of stock acquisition rights (*)

From July 16, 2014
to July 15, 2021 (Note3)

Price of issuing shares and the amount of
capitalization upon exercise of stockacquisition rights (*)

Price of issuing stocks: 2,727 JPY (Note4)
Amount of Capitalization: 1,364 JPY
1)Conditions for exercise of stock acquisitionrights (*)2)

At the time of the exercise of the stock acquisition rights, the holder ofstock acquisition rights must be a director of the Company; however,this shall not apply in the case where the holder retires due to the
expiration of his/her term of board membership or other valid reason.
A single stock acquisition right may not be exercised in part.

Matters regarding transfer of stock acquisitionrights (*)

Transfer of stock acquisition rights shall be subject to approval byresolution of the Board of Directors.

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring (*)̶

Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the submission date), the status as of May 31, 2019 isstated in square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one (1) share arising as a result of
this adjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for that split.
In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective date of the
distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares tobe issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in theevent of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number of shares,
the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger about therequisite matters no later than the previous day to the application of the post-adjustment number of shares. However,when notification cannot be made by this date, the Company shall promptly make the notification thereafter.
(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofoffice or other valid reason, such director may exercise stock acquisition rights immediately following the date of such
retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (1 JPY per share) and a fair value per stock acquisition right on the allotment date
(2,726 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the directors toward the Company and the right to demand payment of the amount to be paid in for stockacquisition rights.

76

Date of resolution

June 24, 2011

Position and the number of grantees

113 Corporate officers and other senior management

Number of stock acquisition rights (*)

8,887 (Note1)

Class and the number of shares to be issued
upon exercise of stock acquisition rights (*)up

Common stock: 888,700 (Note2)

Amount to be paid in upon exercise of stockacquisition rights (Exercise price) (*)

3,705 JPY

Exercise period of stock acquisition rights (*)

From July 16, 2014
to July 15, 2031 (Note3)

Price of issuing shares and the amount of
capitalization upon exercise of stockacquisition rights (*)

Price of issuing stocks: 4,132 JPY (Note4)
Amount of Capitalization: 2,066 JPY

Conditions for exercise of stock acquisitionrights (*)1) At the time of the exercise of the stock acquisition rights, theholder of stock acquisition rights must be a director, an employee
or other position similar thereto within the Company or theCompany’s subsidiaries; provided, however, that this shall not
apply in the case where the holder retires due to the expiration of
his/her term of board membership, mandatory retirement or othervalid reason.
2) Where the holder of stock acquisition rights is found to haveacted in breach of trust against the Company or the Company
group, the holder of stock acquisition rights may not exercise
his/her share options.
3) If the holder of stock acquisition rights is subject toimprisonment or severer penalty, such holder of stock acquisitionrights may not exercise his/her share options.
4) Pledges and any other disposal of the stock acquisition rights
may not be approved.
5) A single stock acquisition right may not be exercised in part.

Matters regarding transfer of stock acquisitionrights (*)

Transfer of stock acquisition rights shall be subject to approval byresolution of the Board of Directors.

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring (*)̶

Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the submission date), the status as of May 31, 2019 isstated in square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one (1) share arising as a result of
this adjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for thatsplit. In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective dateof the distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares tobe issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in theevent of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number of shares,
the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger about therequisite matters no later than the previous day to the application of the post-adjustment number of shares. However,when notification cannot be made by this date, the Company shall promptly make the notification thereafter.

77

(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofboard membership, mandatory retirement or other valid reason, such person may exercise stock acquisition rights
immediately following the date of such retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (3,705 JPY per share) and a fair value per stock acquisition right on the allotment
date (427 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the Corporate Officers and Senior Management toward the Company and the right to demand payment of
the amount to be paid in for stock acquisition rights.

78

Date of resolution

June 26, 2012

Position and the number of grantees

4 Directors

Number of stock acquisition rights (*)
Class and the number of shares to be issued
upon exercise of stock acquisition rights (*)
Amount to be paid in upon exercise ofstock acquisition rights (Exercise price)(*)
Exercise period of stock acquisition rights (*)

186 (Note1)

Price of issuing shares and the amount of
capitalization upon exercise of stockacquisition rights (*)

Price of issuing stocks: 2,679 JPY (Note4)
Amount of Capitalization: 1,340 JPY

Conditions for exercise of stock acquisitionrights (*)

Matters regarding
acquisition rights (*)

transfer

of

stock

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring (*)

Common stock: 18,600 (Note2)
1 JPY
From July 18, 2015
to July 17, 2022 (Note3)

1) At the time of the exercise of the stock acquisition rights, the holder ofstock acquisition rights must be a director of the Company; however,this shall not apply in the case where the holder retires due to the
expiration of his/her term of board membership or other valid reason.
2) A single stock acquisition right may not be exercised in part.
Transfer of stock acquisition rights shall be subject to approval
by resolution of the Board of Directors.
̶Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the submission date), the status as of May 31, 2019 isstated in square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one (1) share arising as a result of
this adjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for that split.
In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective date of the
distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares tobe issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in theevent of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number of shares,
the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger about therequisite matters no later than the previous day to the application of the post-adjustment number of shares. However,when notification cannot be made by this date, the Company shall promptly make the notification thereafter.
(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofoffice or other valid reason, such director may exercise stock acquisition rights immediately following the date of such
retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (1 JPY per share) and a fair value per stock acquisition right on the allotment date
(2,678 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the directors toward the Company and the right to demand payment of the amount to be paid in for stockacquisition rights.

79Date of resolution

July 30, 2012

Position and the number of grantees

118 Corporate officers and other senior management

Number of stock acquisition rights (*)
Class and the number of shares to beissued upon exercise of stock acquisitionrights (*)
Amount to be paid in upon exercise of stockacquisition rights (Exercise price) (*)

13,972 (Note1)

Exercise period of stock acquisition rights (*)

From July 18, 2015 to July 17, 2032 (Note3)

Price of issuing shares and the amount of
capitalization upon exercise of stockacquisition rights (*)

Price of issuing stocks: 4,094 JPY (Note4)
Amount of Capitalization: 2,047 JPY

Conditions for exercise of stock acquisitionrights (*)1) At the time of the exercise of the stock acquisition rights, theholder of stock acquisition rights must be a director, an employee
or other position similar thereto within the Company or theCompany’s subsidiaries; provided, however, that this shall not
apply in the case where the holder retires due to the expiration of
his/her term of board membership, mandatory retirement or othervalid reason.
2) Where the holder of stock acquisition rights is found to haveacted in breach of trust against the Company or the Company
group, the holder of stock acquisition rights may not exercise
his/her share options.
3) If the holder of stock acquisition rights is subject toimprisonment or severer penalty, such holder of stock acquisitionrights may not exercise his/her share options.
4) Pledges and any other disposal of the stock acquisition rights
may not be approved.
5) A single stock acquisition right may not be exercised in part.

Matters regarding transfer of stock acquisitionrights (*)

Transfer of stock acquisition rights shall be subject to approval byresolution of the Board of Directors.

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring (*)̶

Common stock: 1,397,200 (Note2)
3,725 JPY

Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the submission date), the status as of May 31, 2019 isstated in square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one (1) share arising as a result of
this adjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for that split.
In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective date of the
distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares tobe issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in theevent of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number of shares,
the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger about therequisite matters no later than the previous day to the application of the post-adjustment number of shares. However,when notification cannot be made by this date, the Company shall promptly make the notification thereafter.
(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofboard membership, mandatory retirement or other valid reason, such person may exercise stock acquisition rights

80

immediately following the date of such retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (3,725 JPY per share) and a fair value per stock acquisition right on the allotment
date (369 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the Corporate Offices and Senior Management toward the Company and the right to demand payment of
the amount to be paid in for stock acquisition rights.

81Date of resolution

June 26, 2013

Position and the number of grantees

4 Directors

Number of stock acquisition rights (*)
Class and the number of shares to be issued
upon exercise of stock acquisition rights (*)
Amount to be paid in upon exercise ofstock acquisition rights (Exercise price)(*)
Exercise period of stock acquisition rights (*)

143 (Note1)

Price of issuing shares and the amount of
capitalization upon exercise of stockacquisition rights (*)

Price of issuing stocks: 3,710 JPY (Note4)
Amount of Capitalization: 1,855 JPY

Common stock: 14,300 (Note2)
1 JPY
From July 20, 2016
to July 19, 2023 (Note3)

1)
Conditions for exercise of stock acquisitionrights (*)2)
Matters regarding
acquisition rights (*)

transfer

of

stock

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring (*)

At the time of the exercise of the stock acquisition rights, the holder ofstock acquisition rights must be a director of the Company; however,this shall not apply in the case where the holder retires due to the
expiration of his/her term of board membership or other valid reason.
A single stock acquisition right may not be exercised in part.

Transfer of stock acquisition rights shall be subject to approval
by resolution of the Board of Directors.
̶Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the submission date), the status as of May 31, 2019 isstated in square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one (1) share arising as a result of
this adjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for thatsplit. In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective dateof the distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares
to be issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in
the event of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number ofshares, the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger
about the requisite matters no later than the previous day to the application of the post-adjustment number of shares.
However, when notification cannot be made by this date, the Company shall promptly make the notification thereafter.
(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofoffice or other valid reason, such director may exercise stock acquisition rights immediately following the date of such
retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (1 JPY per share) and a fair value per stock acquisition right on the allotment date
(3,709 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the directors toward the Company and the right to demand payment of the amount to be paid in for stockacquisition rights.

82

Date of resolution

December 19, 2013

Position and the number of grantees

134 Corporate officers and other senior management

Number of stock acquisition rights (*)

10,533 (Note1)

Class and the number of shares to be issued
upon exercise of stock acquisition rights (*)

Common stock: 1,053,300 (Note2)

Amount to be paid in upon exercise of stockacquisition rights (Exercise price) (*)

4,981 JPY

Exercise period of stock acquisition rights (*)

From July 20, 2016
to July 19, 2033 (Note3)

Price of issuing shares and the amount of
capitalization upon exercise of stockacquisition rights (*)

Price of issuing stocks: 5,534 JPY (Note4)
Amount of Capitalization: 2,767 JPY

Conditions for exercise of stockacquisition rights (*)1) At the time of the exercise of the stock acquisition rights, theholder of stock acquisition rights must be a director, an
employee or other position similar thereto within the Company
or the Company’s subsidiaries; provided, however, that thisshall not apply in the case where the holder retires due to the
expiration of his/her term of board membership, mandatory
retirement or other valid reason.
2) Where the holder of stock acquisition rights is found to haveacted in breach of trust against the Company or the Company
group, the holder of stock acquisition rights may not exercise
his/her share options.
3) If the holder of stock acquisition rights is subject toimprisonment or severer penalty, such holder of stockacquisition rights may not exercise his/her share options.
4) Pledges and any other disposal of the stock acquisition rights
may not be approved.
5) A single stock acquisition right may not be exercised in part.

Matters regarding transfer of stock acquisitionrights (*)

Transfer of stock acquisition rights shall be subject to approval byresolution of the Board of Directors.

Matters regarding the grant of acquisitionrights to shares upon organizational
restructuring (*)̶

Asterisk (*) denotes items as of the end of the current fiscal year (March 31, 2019). For items changed between the end of thecurrent fiscal year and May 31, 2019 (the end of the month preceding the submission date), the status as of May 31, 2019 isstated in square brackets ([ ]). Other items have not been changed since the end of the current fiscal year.
Notes:(1) One hundred shares are allocated for one stock acquisition right.
(2) In the event that the Company conducts a stock split, a free distribution (“musho-wariate”) of shares or a stock
consolidation of its common stock, such number of shares shall be adjusted by application of the equation noted below.
Such adjustment shall be made for the number of shares to be issued or transferred upon exercise of stock acquisitionrights that have not been exercised as of that time. Any fractional figure of less than one (1) share arising as a result of
this adjustment shall be rounded down.
* Post-adjustment number of shares = pre-adjustment number of shares x split or consolidation rate
Note: In the event of free distribution of shares, the rate shown above shall be the quotient of division of the postdistribution outstanding stock volume (excluding treasury stock) by the pre-distribution outstanding stock volume(excluding treasury stock).
In the event of a stock split, the post-adjustment number of shares shall be applied beginning on the base day for that split.
In the event of free distribution of shares or stock consolidation, it shall be applied beginning on the effective date of the
distribution or consolidation.
In addition to the cases noted above, the Company shall reasonably adjust to the extent possible, the number of shares
to be issued or transferred upon exercise of stock acquisition rights, based on resolutions by the Board of Directors in
the event of occurrence of circumstances requiring such adjustment. In the event of such adjustment of the number ofshares, the Company shall notify each holder of stock acquisition rights noted in the stock acquisition rights ledger
about the requisite matters no later than the previous day to the application of the post-adjustment number of shares.
However, when notification cannot be made by this date, the Company shall promptly make the notification thereafter.

83

(3) In the event that a director to whom stock acquisition rights are allocated retires due to the expiration of his/her term ofboard membership, mandatory retirement or for other valid reason, such person may exercise stock acquisition rights
immediately following the date of such retirement even if the exercise period has not commenced.
(4) Issue price consists of exercise price (4,981 JPY per share) and a fair value per stock acquisition right on the allotment
date (553 JPY per share). On the allotment date, the Company shall make a consensual offset between the remunerationcredits held by the Corporate Offices and Senior Management toward the Company and the right to demand payment of
the amount to be paid in for stock acquisition rights.
2) Description of rights plan
Not applicable.
3) Other stock acquisition rights
Not applicable.
(3) Exercise Status of Bonds with Stock Acquisition Rights Containing a Clause for Exercise Price Adjustments
Not applicable.

(4) Changes in Total Number of Shares Issued, Share Capital, Etc.

Date

Increase/Decrease Balance ofIncrease/Decreas Balance ofin the Total
Total
Increase/Decrease Balance ofe in Legal
Legal Capital
Share
Number of Shares Number of in Share Capital
IssuedShares Issued (JPY (millions) Capital (JPY Capital Surplus Surplus (JPY
(millions)) (JPY (millions)) (millions))(Thousands of (Thousands
Shares)of Shares)

From April 1,2014 to March 31,
2015(Note1)

243

789,924483

64,044483

50,141

From April 1, 2015
to March 31,
2016 (Note1)

361

790,284722

64,766722

50,863

From April 1, 2016
to March 31,2017 (Note1)

238

790,521436

65,203436

51,3004,167

794,688

12,711

77,914

12,70864,008770,318

1,565,006

1,565,671

1,643,585

1,565,671

1,629,679

From April 1,2017 to March
31, 2018(Notes 1 and 2)
From April 1,2018 to March
31, 2019(Notes 1 and 3)

Notes:(1) The increase of number of shares in 2014 (243 thousand), 2015 (361 thousand), 2016 (238 thousand), 2017 (617thousand) and 2018 (15 thousand) are by exercise of stock acquisition rights.
(2) 3,550 thousand shares out of the increased number of shares in 2017 is by issuance of new stocks through third party
allotment.
Price of issuing stocks: 6,415 JPY
Amount of capitalization: 3,208 JPY
Allottee: The Master Trust Bank of Japan, Ltd (trust account for Stock grant ESOP 75,805 shares)(3) Due to the issuance of common stock as part of the consideration relating to the Company’s acquisition of Shire plc (Dateof contribution: January 8, 2019), the total number of shares issued increased by 770,303 thousand and the amount ofshare capital and legal capital surplus increased by 1,565,641 million yen, respectively,.
Price of issuing stocks: 4,065 JPY
Amount of capitalization: 2,032.50 JPY(4) The exercise of stock acquisition rights between April 1, 2019 and May 31 increased the total number of shares issuedby 1 thousand shares and the amount of share capital and legal capital surplus by 2 million JPY respectively.

84

(5) Status by Type of Holder
As of March 31, 2019
Status of Shares (1 unit = 100 shares)
Foreign Shareholders
National andForeign
Financial Securities
Other
Classification
Individuals
Local
Shareholders Individuals
Institutions
Companies
Corporations
Governments
and Others
Other Than

Total

SharesLess
Than One
Unit

Individuals

Number ofshareholders(persons)

1

258

59

Number ofshares held
(Trading
units)

338 4,343,461

571,127

Percentage ofshares held
(%)

0.00

27.77

3.65

1,892

1,194

383,825 7,934,687

2.45

50.72

240

323,933

327,577−

2,859 2,407,127 15,643,424 663,508

0.02

15.39

100.00−Note: The 165,150 shares of treasury stock include 1,651 units of shares held by “Individuals and others” and 50 shares heldby “Shares less than one unit.”85

(6) Major Shareholders
As of March 31, 2019
Number ofPercentage of Total
Number of Shares
Shares Held
Issued (Excluding(Thousands ofTreasury Stocks) (%)
Shares)Name

Address

The Bank of New York Mellon as
depositary bank for depositary receipt
holders(Standing proxy: Sumitomo Mitsui
Banking Corporation)

One Wall Street, New York, NY
10286, U.S.A.
(3-2, Marunouchi 1-chome, Chiyodaku, Tokyo)

118,250

7.56

The Master Trust Bank of Japan, Ltd.
(Trust account)11-3, Hamamatsucho 2-chome,
Minato-ku, Tokyo

109,549

7.00

Japan Trustee Services Bank, Ltd.
(Trust account)

8-11, Harumi 1-chome, Chuo-ku,
Tokyo85,405

5.46

6-6, Marunouchi 1-chome, ChiyodaNippon Life Insurance Company
ku, Tokyo(Standing proxy: The Master Trust Bank (11-3, Hamamatsucho 2-chome,of Japan, Ltd.)
Minato-ku, Tokyo)

35,360

2.26

Japan Trustee Services Bank, Ltd. (Trust 8-11, Harumi 1-chome, Chuo-ku,
Tokyoaccount 5)34,260

2.19

JP Morgan Chase Bank 380055(Standing proxy: Settlement & Clearing
Services Department, Mizuho Bank,Ltd.)

270 Park Avenue, New York,NY 10017, U.S.A(15-1, Konan 2-chome, Minato-ku,
Tokyo)

30,324

1.94

SSBTC CLIENT OMNI BUS
ACCOUNT(Standing proxy: Custody Business
Department, Tokyo branch, The
Hongkong and Shanghai Banking
Corporation, Limited.)

One Lincoln Street, Boston, MA,
U.S.A. 02111(11-1, Nihonbashi 3-Chome, Chuoku, Tokyo)

26,787

1.71

State Street Bank West Client-Treaty
505234(Standing proxy: Settlement & Clearing
Services Department, Mizuho Bank,
Ltd.)

1776 Heritage Drive, North Quincy,
MA 02171, U.S.A.
(15-1, Konan 2-chome, Minato-ku,
Tokyo)

24,673

1.58

State Street Bank and Trust Company
505001(Standing proxy: Settlement & Clearing
Services Department, Mizuho Bank,
Ltd.)

P.O. BOX 351 Boston MA 02101
U.S.A.
(15-1, Konan 2-chome, Minato-ku,
Tokyo)

23,775

1.52

Japan Trustee Services Bank, Ltd. (Trust 8-11, Harumi 1-chome, Chuo-ku,
account 1)
Tokyo

22,7981.46

511,183

32.66

Total

―

86

(Note) According to the Report for Large Volume possession and Changes disclosed on March 22, 2019, Sumitomo
Mitsui Trust Asset Management Co., Ltd and its co-holders, Nikko Asset management Co., Ltd. owned thefollowing number of shares as of March 15, 2019. Since the Company is unable to confirm the actual number of shares
held by those companies as of March 31, 2019, it is not included in the above major shareholders. The details of theReport for Large Volume possession and Changes are as follows:

Name

Address

Number of
Shares Held(Thousands ofShares)Percentage of Total
Number of Shares
Issued (%)

Sumitomo Mitsui Trust AssetManagement Co.,Ltd

1-1, Shibakoen 1-chome, Minato-ku,
Tokyo53,211

3.4

Nikko Asset Management Co.,Ltd.

7-1, Akasaka 9-chome, Minato-ku,
Tokyo25,190

1.61(7) Status of Voting Rights
1) Issued shares
As of March 31, 2019
Classification

Number of Voting
Rights(Units)Number of Shares(Shares)

Description

Shares without voting rights

―

―

―

Shares with restricted voting rights(Treasury stock, etc.)

―

―

―

Shares with restricted voting rights(Others)

―

―

―

―

―

15,638,903―(Treasury stock)
Shares with full voting rights(Treasury stock, etc.)

Common stock 165,100(Crossholding stock)
Common stock 287,000

Shares with full voting rights(Others)
Shares less than one unit
Number of shares issued

Common stock
1,563,890,300
Common stock
663,508――

1,565,006,908

Total number of voting rights

Shares less than one unit
(100 shares)

15,638,903―

Notes:(1) "Shares with full voting rights (Others)" includes 8,950,300 shares (voting rights: 89,503 units) held by the
ESOP trust account and 1,025,000 shares (voting rights: 10,250 units) held by the BIP trust accountrespectively(2) "Shares less than one unit" includes 50 shares of treasury stock, and 160 shares held by the ESOP trust
account and 109 shares held by the BIP trust account respectively.

872) Treasury Stock, Etc.
As of March 31, 2019

Name of Shareholders

Address

Number of
Shares Heldunder Own
Name
(Shares)(Treasury stock)
Takeda Pharmaceutical
Company Limited

1-1, Doshomachi
4-chome, Chuo-ku,
Osaka165,100(Crossholding stock)
Amato Pharmaceutical
Products, Ltd.

5-3, Shinsenri Higashimachi 1-chome,
Toyonaka-city, Osaka

275,000

Watanabe Chemical
Co.,Ltd.

6-1, Hiranomachi
3-chome, Chuo-ku,
Osaka

Number ofPercentage ofShares Held
Total Shares
Total Shares
under the Name
Held (Shares)
Issued (%)
of Others(Shares)−

165,100−

275,000

0.01

0.02

12,000−12,000

0.00

0.03
−
−
452,100
452,100
Note: In addition to the above treasury stock and 50 shares of less than one unit, 8,950,460 shares held by the ESOP
trust account and 1,025,109 shares held by the BIP trust account are recorded in treasury stock of the financial
statements.
Total

.

88

(8) Officer / Employee Stock Ownership Plan
1) Employee (officers of our group) Stock Ownership Plan
The Company introduced Employee Stock Ownership Plan (“the Plan”) in FY 2014 for Takeda’s Group Managementin Japan and overseas as a highly transparent and objective incentive plan that is closely linked to company
performance. The purpose of this Plan is to improve the Company’s mid- and long-term performance as well as raiseawareness of the need to enhance the Company’s value.
(i) Outline of the Plan
The Plan uses a structure referred to as an Employee Stock Ownership Plan Trust (“ESOP Trust”). The ESOP Trustis an employee incentive plan based on the ESOP system in the U.S. The Company delivers or pays the Company’s
shares acquired through the ESOP Trust and money equivalent to the liquidation value of the Company’s shares,
along with dividends arising from the Company’s shares to employees based on their job positions and theirachievement of performance indicators, etc., along with dividends from the Company’s shares.
The Company plans to continue this scheme by introducing a new ESOP Trust or changing and entrusting additional
funds to the existing expired ESOP Trust every year starting from FY 2014 to maintain the Plan. Consequently, on
May 16, 2017, the Company extended the trust period of the ESOP Trust which was established in FY 2014 andentrusted additional funds based on the resolution of continuation of the ESOP Plan at the meeting of the Board of
Directors held on May 10, 2017. On February 28, 2018, the Company extended the trust period of the ESOP Trustwhich was established in FY 2015 and entrusted additional funds based on the resolution of continuation of the Planand issuance of new shares through third-party allotment at the meeting of the Board of Directors held on February 1,
2018. On May 31, 2019, the Company extended the trust period of the ESOP Trust which was established in FY
2016 and entrusted additional funds based on the resolutions of continuation of the Plan and issuance of new sharesthrough third-party allotment at the meeting of the Board of Directors held on May 14, 2019.

(ii) Trust Agreement[FY 2017]
・Trust type:

Money trust other than a specified money trust for
specific investment (Third party benefit trust)・Trust purpose:

To grant incentives to Takeda’s Group Management inJapan and overseas

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among
Takeda’s Group Management in Japan and overseas

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

May 21, 2014
(an amendment agreement was executed regarding theextension of the Trust term as of May 16, 2017)

・Trust term:

From May 21, 2014 to August 31, 2020
(the Trust term was extended by the amendment agreement
executed as of May 16, 2017)(Base points were granted on July 1, 2018)

・Exercise of voting rights:

No voting rights will be exercised

・Type of acquired shares:

Common shares of the Company

・Total amount of shares to be acquired:16.9 billion JPY (including trust fees and trust expenses)

・Timing of share acquisition:

From May 17 to May 24, 2017

・Manner of share acquisition:

To be acquired from the stock exchange market

・Vested rights holder:

The Company

89

[FY 2018]
・Trust type:

Money trust other than a specified money trust for
specific investment (Third party benefit trust)・Trust purpose:

To grant incentives to Takeda’s Group Management inJapan and overseas

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among
Takeda’s Group Management in Japan and overseas

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

May 22, 2015(an amendment agreement was executed regarding theextension of the Trust term as of February 28, 2018)

・Trust term:

From May 22, 2015 to August 31, 2021
(the Trust term was extended by the amendment agreement
executed as of February 28, 2018)(Base points were granted on July 1, 2018)

・Exercise of voting rights:

No voting rights will be exercised

・Type of acquired shares:

Common shares of the Company

・Total amount of shares to be acquired:22.8 billion JPY (including trust fees and trust expenses)

・Timing of share acquisition:

March 9, 2018

・Manner of share acquisition:

To be allocated by the Company

・Vested rights holder:

The Company[FY 2019]
・Trust type:

Money trust other than a specified money trust for
specific investment (Third party benefit trust)・Trust purpose:

To grant incentives to Takeda’s Group Management inJapan and overseas

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among
Takeda’s Group Management in Japan and overseas

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

May 20, 2016(an amendment agreement was executed regarding theextension of the Trust term as of May 31, 2019)

・Trust term:

From May 20, 2016 to August 31, 2022
(the Trust term was extended by the amendment agreement
executed as of May 31, 2019)(Base points were granted on July 1 (scheduled), 2019)

・Exercise of voting rights:

No voting rights will be exercised90

・Type of acquired shares:

Common shares of the Company

・Total amount of shares to be acquired:49.0 billion JPY (including trust fees and trust expenses)

・Timing of share acquisition:

June 10, 2019・Manner of share acquisition:

To be allocated by the Company

・Vested rights holder:

The Company(iii) Affairs related to Trust and Shares・Affairs related to trust:

Mitsubishi UFJ Trust and Banking Corporation will be theTrustee of the ESOP Trust and will engage in affairs related
to the Trust・Affairs related to shares:

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. will
engage in affairs related to vesting Company shares to
Beneficiaries based on the agreement of entrustment ofaffairs(iv) Maximum number of shares to be acquired by employees
Grant trust for FY 2019: Approximately 12,000,000 shares(v) Beneficiaries
Person(s) who meet beneficiary requirements among Takeda’s Group Management in Japan and overseas

2) Board Incentive Plan
The Company introduced the Board Incentive Plan (the “Plan”) for members of the Board of Directors in accordancewith the resolution of the 140th General Shareholders’ Meeting held on June 29, 2016. This plan substitutes theformer Board Incentive Plan (the “former Plan”) which was adopted in FY 2014, with the transition of the company
to a company with Audit and Supervisory Committee. The Company plans to partially revise the Plan upon theapproval in the 143rd General Shareholders’ Meeting to be held on June 27, 2019(i) Outline of the Plan
The Plan uses a structure referred to as a Board Incentive Plan trust (the “BIP Trust”). The BIP Trust is an incentive
plan for Directors based on the Performance Share system and Restricted Stock system. The Company delivers or
pays the Company’s shares acquired through the BIP Trust and money equivalent to the liquidation value of theCompany’s shares, along with dividends arising from the Company’s shares to (1) Directors who are not members of
the Audit and Supervisory Committee (excluding External Directors and Directors residing overseas) based on theachievement of performance goals, etc. at a set time and to (2) Directors who are members of the Audit andSupervisory Committee and External Directors three years after the date when base points will be granted in a set
amount regardless of the achievement of performance goals, etc., in terms of securing the proper and objective
supervisory function on the validity of the execution.
The Company plans to continue this scheme by introducing a new BIP Trust or changing and entrusting additional
funds to the existing expired BIP Trust every year starting from FY 2014 and maintain the similar incentive plan as
the former plan. In FY 2016, in adoption of the Plan instead of the former Plan, Directors who are members of the
Audit and Supervisory Committee and External Directors appointed in FY 2016 were added in the scope of the Plan,
and new BIP Trusts was established each for Directors who are not members of the Audit and Supervisory
Committee (excluding Directors residing overseas who are not External Directors. The same shall apply hereinafter.)as well as Directors who are members of the Audit and Supervisory Committee. (The BIP Trust associated with
Directors who are not members of the Audit and Supervisory Committee shall be referred to as the “NSV (Non-91Supervisory) Trust” and those who are as the “SV (Supervisory) Trust” hereinafter). On May 16, 2017, the Company
partially revised the BIP Trust which was established in FY 2014 in order to allow it to be continued as the NSV
Trust for the Plan and then extended the trust period and entrusted the additional funds based on the resolution ofcontinuation of the Plan at the meeting of the Board of Directors held on May 10, 2017. No SV Trust was newly
established in FY 2017 as there was no newly appointed Director who is a member of the Audit andSupervisory Committee and is thus eligible for the Trust.
On May 21, 2018, the Company partially revised the BIP Trust which was established in FY 2015 in order to allow
it to be continued as the NSV Trust for the Plan and then extended the trust period and entrusted additional funds
based on the resolution of continuation of the Plan at the meeting of the Board of Directors held on May 14, 2018.
Also, based on the same resolution, the Company extended the trust period for the SV Trust which was establishedin FY 2015 and entrusted additional funds.
In FY 2019, the Company plans to extend the term and change a part of the BIP Trust already established in FY 2016
to the NSV Trust with entrustment of additional money to the Trust in order to allow the Plan to be continued asplans for Internal Directors (excluding Directors who are members of the Audit and Supervisory Committee andDirectors residing overseas) ("Plan I"), External Directors (excluding Directors who are members of the Audit andSupervisory Committee ) ("Plan II"), and members of the Audit and Supervisory Committee ("Plan III") under thecondition that the partial revisions to the LTI shall be approved by Shareholders.

(ii) Trust Agreement[FY 2017]
NSV Trust・Trust type:

Money trust other than a specified money trust for specificinvestment (Third party benefit trust)・Trust purpose:

To grant incentives to Directors who are not members of
the Audit and Supervisory Committee.

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among Directors
who are not members of the Audit and Supervisory Committee.

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

August 4, 2014
(an amendment agreement was executed regarding theextension of the Trust term as of May 16, 2017)

・Trust term:

August 4, 2014 to August 31, 2020
(the Trust term was extended by the amendment agreement
executed as of May 16, 2017)(Base points were granted on July 1, 2017)

・Exercise of voting rights:

No voting rights will be exercised

・Type of acquired shares:

Common shares of the Company

・Total amount of shares to be acquired:

0.8 billion yen (including trust fees and trust expenses)

・Timing of share acquisition:

May 17, 2017

・Manner of share acquisition:

To be acquired from the stock exchange market

・Vested rights holder:

The Company

92

[FY 2018](a) NSV Trust・Trust type:

Money trust other than a specified money trust for specificinvestment (Third party benefit trust)・Trust purpose:

To grant incentives to Directors who are not members of
the Audit and Supervisory Committee.

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among Directors
who are not members of the Audit and Supervisory Committee.

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

May 22, 2015

・Trust term:(an amendment agreement was executed regarding theextension of the Trust term as of May 21, 2018)
May 22, 2015 to August 31, 2021
(the Trust term was extended by the amendment agreement
executed as of May 21, 2018)(Base points were granted on July 1, 2018)

・Exercise of voting rights:

No voting rights will be exercised

・Type of acquired shares:

Common shares of the Company

・Total amount of shares to be acquired:1.03 billion yen (including trust fees and trust expenses)

・Timing of share acquisition:

May 22, 2018

・Manner of share acquisition:

To be acquired from the stock exchange market

・Vested rights holder:

The Company(b) SV Trust・Trust type:

Money trust other than a specified money trust for specificinvestment (Third party benefit trust)・Trust purpose:

To grant incentives to Directors who are members of the
Audit and Supervisory Committee.

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among Directors
who are members of the Audit and Supervisory Committee.

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

August 3, 2016(an amendment agreement was executed regarding theextension of the Trust term as of May 21, 2018)

・Trust term:

August 3, 2016 to August 31, 2020
(the Trust term was extended by the amendment agreement
executed as of May 21, 2018)(Base points were granted on July 1, 2018)

・Exercise of voting rights:

No voting rights will be exercised

・Type of acquired shares:

Common shares of the Company

93

・Total amount of shares to be acquired:

0.06 billion yen (including trust fees and trust expenses)

・Timing of share acquisition:

May 22, 2018

・Manner of share acquisition:

To be acquired from the stock exchange market

・Vested rights holder:

The Company[FY 2019 (Plans I, II, and III)]・Trust type:

Money trust other than a specified money trust for specificinvestment (Third party benefit trust)・Trust purpose:

To grant incentives to Directors

・Settlor:

The Company

・Trustee:

Mitsubishi UFJ Trust and Banking Corporation (Co-trustee:
The Master Trust Bank of Japan, Ltd.)・Beneficiaries:

Person(s) who meet beneficiary requirements among Directors

・Trust administrator:

A third person who has no conflict of interest with theCompany (Certified public accountant)・Date of trust agreement:

August 3, 2016

・Trust term:(an amendment agreement will be executed regarding theextension of the Trust term as of August 1, 2019)
August 3, 2016 to August 31, 2022
(the Trust term will be extended by the amendment agreement
executed as of August 1, 2019)(Base points were granted on July 1, 2019 (scheduled))

・Exercise of voting rights:

No voting rights will be exercised

・Type of acquired shares:

Common shares of the Company

・Total amount of shares to be acquired:・Timing of share acquisition:

3.66 billion yen (scheduled) (including trust fees and trust
expenses)
August 2, 2019 (scheduled)・Manner of share acquisition:

To be acquired from the stock exchange market

・Vested rights holder:

The Company(iii) Affairs related to Trust and Shares・Affairs related to trust:

Mitsubishi UFJ Trust and Banking Corporation will be theTrustee of the BIP Trust and will engage in affairs related to
the Trust.

・Affairs related to shares:

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. will
engage in affairs related to vesting Company shares to
Beneficiaries based on the agreement of entrustment ofaffairs.

(iv) Maximum number of shares to be acquired by Directors
Grant trust for FY 2019: Approximately 950,000 shares (scheduled)(v) Beneficiaries
Person(s) who meet beneficiary requirements among Directors

94

2. Acquisition of Treasury Stock and Other Related Status[Class of shares] Acquisition of common stock under Article 155, Item 7 of the Companies Act(1) Acquisition of Treasury Stock Based on a Resolution Approved at the Ordinary General Meeting of Shareholders
Not applicable.
(2) Acquisition of Treasury Stock Based on a Resolution Approved by the Board of Directors
Not applicable.
(3) Acquisition of Treasury Stock not Based on a Resolution Approved at the Ordinary General Meeting of
Shareholders or a Resolution Approved by the Board of Directors
Number of Shares(Shares)Classification

Total Amount (JPY)

Treasury stock acquired during the current fiscal year

4,705

21,170,003

Treasury stock acquired during the current period

498

2,086,431

Notes:(1) The Treasury stock acquired during the current period does not include the purchase of shares constituting
less than one full unit during the period from June 1, 2019 to the filing date of this report.
(2) The above table does not include the shares of the Company acquired by the trust account relating to the
ESOP Trust or BIP Trust.

(4) Current Status of the Disposition and Holding of Acquired Treasury Stock
Current F iscal YearClassification

Numberof Shares(Shares)Acquired treasury stock for which subscribers
were solicited―

Acquired treasury stock that was cancelled―

Acquired treasury stock for which transfer ofshares was conducted in association
with merger/ stock exchange/ corporate
separation
Other (Sold due to request for sale of sharesconstituting less than one full unit)
Number of shares of treasury stock held

Total
Disposition
Amount (JPY)(((J( (JPY)―

Current Period for Acquisition
Numberof Shares(Shares)

Total
Disposition
Amount (JPY)

―

―

―

―

―

―

―

―

―

586

2,834,866

39

188,280

165,150―

165,609―

Notes:(1) The Treasury stock acquired during the current period does not include t h e purchase of shares constituting
less than one full unit during the period from June 1, 2019 to the filing date of this report.
(2) The above table does not include the shares of the Company held by the trust account relating to the ESOP
Trust or BIP Trust.

95

3. Dividend Policy
Takeda's priorities for capital allocation are as follows:
De-leverage rapidly⁃ Target 2x net debt/adjusted EBITDA ratio in 3 to 5 years⁃ Committed to invest grade credit ratings
Invest in growth drivers⁃ Strategic internal investment in R&D and product launches⁃ Disciplined and focused R&D partnerships
Shareholder returns⁃ Maintain well established dividend policy of 180 yen per share/year
Takeda is strongly committed to shareholder returns with the dividend as a key component.
The Company’s Articles of Incorporation stipulates that an interim dividend may be paid. Our policy is to distributesurplus twice a year, an interim and a year-end dividend. The Company may decide the matters listed in each item of
Paragraph 1, Article 459 of the Companies Act including dividends from surplus by resolution of the Board of
Directors, unless otherwise provided in laws and regulations.
(For dividends for which the basis date falls in the year ended March 31, 2019, refer to the "Notes to Consolidated Financial
Statement, "Note 26. Equity and Other Equity Items," Consolidated IFRS Financial Statements for the year ended
March 31, 2019.)
4. Corporate Governance(1) Corporate Governance1) Corporate Governance Structure
Takeda’s mission is to “strive towards Better Health and Brighter Future for people worldwide through leading
innovation in medicine.” In line with this mission, Takeda is establishing a management framework appropriate for a
R&D-driven biopharmaceutical company that operates on a global scale. We are strengthening internal controls,
including rigorous compliance and risk management, and establishing a structure that will allow rapid decision-making
that is also sound and transparent. Through these efforts, we will further improve our corporate governance, thereby
maximizing corporate value.
2) Organizational Composition and Operation[Organization Form]
Company with Audit and Supervisory Committee(Reasons for Adoption of Current Corporate Governance System)
The Company became a Company with Audit and Supervisory Committee based on the resolution at the Ordinary
General Meeting of Shareholders held on 29th June, 2016. We aim for increased transparency and independency of theBoard, and further enhancement of the corporate governance, through establishing the systems of audit and supervision
conducted by the Audit and Supervisory Committee and increasing the proportion of the number of External Directors
and the diversity of the Board. The governance structure also enables us to enhance the separation of businessexecution and supervision by delegating decision-making authority to Directors, which realizes further agility indecision-making and helps the Board of Directors focus more on discussions of business strategies and particularly
important business matters.
[Directors]
・Chair of the Board Meeting:・Number of Directors:
・Election of External Directors:

Independent External Director
16 persons (Male 15 persons, Female 1 person including 4 Directors who are
Audit and Supervisory Committee Members)
Elected96

[Audit and Supervisory Committee]
・Number of Audit and Supervisory Committee members:

4 persons（Including 3 External Directors）

・Audit and Supervisory Committee's Audit
The Audit and Supervisory Committee ensures its independency and effectiveness, in line with "Rules of Audit andSupervisory Committee's Audit, etc." The Committee conducts audits of directors’ performance of duties andperforms any other duties stipulated in laws and regulations and in the articles of incorporation.
・Matters Related to the Independence of Such Directors and/or Staff from Executive Directors
To support the operations and serve as the secretariat for the Audit and Supervisory Committee, the Audit andSupervisory Committee Office was established. The Audit and Supervisory Committee secures number of staffs
devoted to the committee as required. Personnel matters with respect to the members of the Audit and Supervisory
Committee Office are handled by agreement between Directors and the Audit and Supervisory Committee.
・Cooperation among Audit and Supervisory Committee, Accounting Auditors and Internal Audit Departments(Cooperation between Supervisory Committee and Accounting Auditors)
The Audit and Supervisory Committee receives directly from Accounting Auditors the reports on audit plans, the audit
structure/system and audit results for each business year, and the Audit and Supervisory Committee and Accounting
Auditors closely cooperate with each other by exchanging information and opinion as necessary.
(Cooperation between Audit and Supervisory Committee and Internal Audit Division)
Based on the status of development and operation of the internal control system, the Audit and Supervisory Committee
works in close cooperation with Internal Audit Division to which the Audit and Supervisory Committee has theauthority to give instructions, and conduct a systematic audit utilizing the information derived therefrom.
(Relationship between Audit and Supervisory Committee and Internal Control Promoting Department)
The Audit and Supervisory Committee closely cooperates with divisions responsible for the internal control function
such as compliance, risk management and accounting/finance, etc. and utilize information from these divisions toenable effective audits and supervision by the Audit and Supervisory Committee.

[Internal Criteria for Independence of External Directors of the Company]
The Company will judge whether an External Director has sufficient independence against the Company with theemphasis on his/her meeting the following quality requirement, on the premise that he/she meets the criteria for
independence established by the financial instruments exchanges.
The Company believes that such persons will truly meet the shareholders' expectations as the External Directors of theCompany, i.e., the persons who can exert strong presence among the diversified members of the Directors and of theCompany by proactively continuing to inquire the nature of, to encourage improvement in and to make suggestions
regarding the important matters of the Company doing pharmaceutical business globally, for the purpose of facilitating
impartial and fair judgment on the Company's business and securing sound management of the Company. The
Company requires such persons to meet two or more of the following four quality requirements to be an External
Director:••••

He/She has advanced insights based on the experience of corporate management;
He/She has a high level of knowledge in the area requiring high expertise such as accounting and law;
He/She is well versed in the pharmaceutical and/or global business; andHe/She has advanced linguistic skill and/or broad experience which enable him/her to understand diverse values
and to actively participate in discussion with others.

973) Business Execution[Management Setup]
At Takeda, the Board of Directors determines the fundamental policies for the Group, and TET executes management andbusiness operations in accordance with their decisions. Transparency of the Board of Directors is achieved through audits
conducted by the Audit and Supervisory Committee. The External Directors ensure optimal business execution free of thepharmaceutical industry mindset. Moreover, in order to respond to management tasks that continue to diversify, theCompany shall establish the TET consisting of President & CEO and members who manage and supervise each functionof the Takeda Group, and also establish the Business Review Committee (which is responsible for general management
matters), the Portfolio Review Committee (which is responsible for R&D and products related matters), and the Risk,
Ethics & Compliance Committee (which is responsible for risk management, business ethics and compliance matters) that
review important matters to ensure agility and flexibility of business execution and deeper cooperation among the various
functions.

[Board of Directors]
Takeda has given its Board of Directors the primary functions of observing and overseeing business execution as well as
decision-making for strategic or particularly important matters regarding company management. The Board of Directors
consists of 16 Directors (including one female), including 11 External Directors, eight Japanese and eight non-Japanese,and meets in principle eight times per year to make resolutions and receive reports on important matters regarding
management. Twelve Board of Directors meeting were held in fiscal year 2018 and all Internal Directors who took officeat the end of fiscal year 2018 attended all meetings. The Board is chaired by an Independent External Director to increase
independency of the Board. To ensure the validity and transparency of the decision-making process for the election of
Director’s candidates and compensation of Directors, Takeda established a Nomination Committee and a Compensation
Committee, in which the majority of the members are External Directors and one of the External Directors is the chairmanof each committee, as advisory committees to the Board.
[Internal Audit]
The Group Internal Audit and the Corporate EHS (environment, health and safety) department in the Global
Manufacturing & Supply division conduct a regular internal audit of each function of the Company and each groupcompany based on the “Group Internal Audit Charter” and "Global Policy and Guideline on EHS", respectively.
[Takeda Executive Team (TET)]The TET consists of the President & CEO and 19 function heads who report directly to the President & CEO.
[Business Review Committee]
The Business Review Committee consists of TET members. In principle, it holds a meeting twice a month to discuss andmake decisions on important matters concerning corporate management and business execution.
[Portfolio Review Committee]
The Portfolio Review Committee consists of TET members and the heads of R&D core functions. In principle, it holds a
meeting two to three times a month. The Portfolio Review Committee is responsible for ensuring that Takeda’s portfolio
is optimized to achieve the organization’s strategic objectives, and determines the composition of the portfolio byreviewing and approving R&D investments in portfolio assets. In addition to determining which assets and projects will
be funded, the Portfolio Review Committee defines how investments will be resourced.
[Risk, Ethics & Compliance Committee]
The company renamed Audit, Risk and Compliance Committee to Risk, Ethics & Compliance Committee to improve risk
management in more effective manner and modified the committee structure, roles and responsibility, etc., in May 2019.
The Risk, Ethics & Compliance Committee consists of TET members and Head of Internal Audit and inviting relevant
senior managements and subject matter experts including Chief Accounting Officer and Corporate Controller, Heads of
Risk Management and Business Continuity, Chief Information Security Officer and Representative of relevant
compliance matters, etc. In principle, it holds a meeting once a quarter to discuss and make decisions on important mattersconcerning risk management, business ethics and compliance matters.

98

[Basic Views on Internal Control System and the Progress of System Development]
The Company shares its “Corporate Philosophy,” which comprises its “Mission,” “Vision,” “Values” and “Strategic
Roadmap” within the entire Takeda Group and puts an effort to promote the creation of a disciplined and sound corporate
culture. Based on the abovementioned principle, the Company undertakes to establish the following measures for its
internal control system, treating it as an important component of corporate governance that functions alongside risk
management. Also, in order to further enhance corporate governance, necessary changes are conducted, including changes
to the decision-making system.
The below shows a schematic diagram of Takeda’s internal control system.

(a) Systems that ensure the appropriateness of operations in Takeda GroupAs a “Company with Audit and Supervisory Committee (“ASC”),” a system that enables ASC to effectively perform
its duties relating to audit and supervision shall be established and the composition and diversity of the External
Directors in the Board of Directors shall be enhanced. Under the appropriate audit and supervision thereof, theBoard of Directors shall make highly transparent and objective decisions and, by resolution, delegate authority to the
Directors and expedite the management of business.
The objectivity and fairness of the appointment of Directors and the compensation paid to them shall be ensured byvoluntarily establishing a Nomination Committee and Compensation Committee, as advisory bodies for the Board of
Directors, wherein an External Director will serve as the chairperson and external committee members will
constitute a majority, respectively. By appointing one or more Directors who are ASC Members as members of suchcommittees, the effectiveness of the ASC’s function of supervising the appointment, etc. of Directors who are not
ASC Members and the compensation, etc. paid to them shall be enhanced. By resolution of the Board of Directors,
the authority to decide the amount of individual remuneration of Internal Directors who are not ASC Members shallbe delegated to the Compensation Committee, through which we have realized a more transparent process indetermining individual remuneration.

Under the system above, the Board of Directors will (i) decide on the most important matters for the business
operation of the Takeda Group, including matters relating to Basic Management Policy and matters relating tointernal control, including compliance and risk management, and (ii) discuss business strategy, and monitor andsupervise the execution of operations.
To strengthen its global business management system, the Company shall establish the TET, which will consist of
the President & CEO and the members who manage and supervise each function of the Takeda Group, and alsoestablish a Business Review Committee (which will be responsible for general management matters), a Portfolio
Review Committee (which will be responsible for R&D and product related matters), and a Risk, Ethics &Compliance Committee (which will be responsible for risk management, business ethics and compliance matters).
These committees will review important matters that will ensure systems through which faster and more flexible

99



















work execution and deeper cooperation among the various functions can take place.
By resolution of the Board of Directors, decision making authority on matters of important business execution shallbe partially delegated to the Directors through decision-making bodies such as the Business Review Committee,
Portfolio Review Committee, and Risk, Ethics & Compliance Committee; the Company shall make flexible andefficient decisions.
The Company shall clarify the roles and responsibilities of each function based on the T-MAP, which summarizes
the business management systems, decision-making systems and operational rules and other important management
rules of the Takeda Group. With regard to certain material items, the Company shall oblige each function to proposeor report them to the decision making bodies, including the Board of Directors, depending on the materiality of those
items. Concurrently, the Company shall delegate a certain level of decision making authority to the President &CEO or to other TET members, and such decision making authority shall be exercised under proper governance.
TET members develop and implement policy manuals (divisional T-MAP) consistent with the T-MAP and establish
an adequate internal control structure in the divisions which they oversee.
In order to manage and supervise the entire Takeda Group in a cross-sectoral and unified manner, the Company shallmaintain Global Policies, etc. (Global Policies mean the rules applied to employees of three or more TET
organizations) for the respective operations of specialized functions.
With regard to risk management and management of a crisis that has occurred in the Takeda Group, the “Global
Risk Management Policy,” and the “Global Crisis Management Policy” respectively lay out the structure of the risk
management system including BCP (Business Continuity Plan) and the crisis management systems of the Takeda
Group.
The Global Ethics & Compliance division and other divisions in charge of compliance shall disseminate the “Takeda
Global Code of Conduct” to all group companies and develop and disseminate compliance programs for all groupcompanies based on that code under the system to promote compliance globally. The Global Ethics & Compliancedivision shall establish a mechanism with monitoring capabilities to ensure that the Takeda Group's businessactivities are in compliance with laws and internal rules. In addition, the Global Ethics & Compliance division andother divisions in charge of compliance shall periodically report to the Risk, Ethics & Compliance Committee andASC, and report to the Board of Directors as necessary, on the compliance related affairs of the Takeda Group,
including those reported through the internal reporting system for whistleblowers.
The Group Internal Audit (“GIA”) shall conduct a regular internal audit of each function of the Company and eachgroup company based on the “Group Internal Audit Charter” and report the results thereof to the President & CEO,
Board of Directors, and ASC.
The Global Finance division shall conduct an evaluation of the status of the development and implementation of theinternal control systems for securing the reliability of financial reporting based on the Japanese Financial
Instruments and Exchange Act and Cabinet Office Ordinance and the U.S. Sarbanes-Oxley Act. The Global Financedivision shall also manage the processes of (i) testing of internal controls over the financial reporting and (ii)
implementation of any improvement plans in response to warnings or recommendations.
The Global Quality division shall formulate global quality assurance policies, etc., relating to research, development,
manufacturing, and post-marketing safety measures and then audit, monitor, and supervise compliance therewith
regularly or as necessary.
The Corporate EHS establishes the "Global Policy and Guideline on EHS", etc. and conducts audits regularly or asnecessary. Also, it provides support and advice to reduce risks regarding the environment, occupational health andsafety.

(b) System for retention and management of information in connection with the execution of the duties of Directors

The minutes of the meetings of the Board of Directors, requests for and approvals of managerial decisions, andother information concerning the execution of the duties of Directors shall be appropriately retained and controlledin keeping with the term, method and place of retention designated for each category of information, as determinedin accordance with the “Policy on Document Control,” in either hard copy or electromagnetic record, and to
facilitate ease of inspection.
(c) Risk management rules and other systems·
Based on the “Global Risk Management Policy”, Enterprise Risk Management (ERM) shall be conducted through afive-step approach, which is the identification, assessment, mitigation, reporting, and monitoring and control of therisk, and the systems through which the major potential risks and the mitigation plans thereof, etc. will be reported
to the Risk, Ethics & Compliance Committee and the Board of Directors shall be established. Based on the policy
with respect to all risk factors, including major potential risks for the Company (Risks relating to research anddevelopment, intellectual property rights, sales decrease following patent expirations, adverse effects, price-

100

·

reduction due to the movements to curtail drug costs, corporate acquisitions, stable supply, and litigation and otherlegal matters, environment and IT-security and information management, etc., Influence of fluctuations in foreignexchange rates and country risks of the countries and regions in which the Company operates), the person(s) incharge of each function shall control and manage such risk factors in each area under his/her charge using
qualitative and quantitative criteria in designing and implementing mid-range and annual plans, and shall take allnecessary measures or remedies available to avoid and minimize such risk factors, depending on the degree andcontent of the risk the Company is exposed to, in compliance with the countermeasures to cope therewith and any
contingency plans. In addition, the Company shall design a BCP in response to the business impact level in order tominimize the negative impact on business when risks are realized.
In order to prevent and respond to emergency situations, the Company shall establish crisis management systems
through the appointment of persons who will be in charge of crisis management, site heads who will lead theincident site and those who will be in charge of site incident management, and shall establish a crisis management
committee under the “Policy on Crisis Management.”(d) Systems that ensure the duties of Directors are executed efficiently
A system that ensures the duties of Directors are executed appropriately and efficiently shall be safeguarded throughthe “Bylaws of Board of Directors” and other internal company regulations relating to authorities and rules for
decision-making.
(e) Systems that ensure Directors and employees comply with laws and regulations and the Company’s Articles ofIncorporation in executing their duties
In accordance with the “Compliance Promotion Rule” that provides for the basic policies and procedures in relation
to the implementation of the compliance program for the ethical and legal requirements of the Company, an Ethics& Compliance Officer position, Compliance Promotion Committee and Compliance Secretariat shall be establishedto promote the compliance policy of the Company.

The Company has established procedures for the receipt, retention, investigation and treatment of concerns andcomplaints notified through the internal reporting system related to any violations of laws and regulations, Takeda’s
Global Code of Conduct, policies or SOPs, including concerns and complaints related to the Company’s accounting,internal accounting controls, or auditing matters. The Company has also established procedures for the confidential,
anonymous submission by Takeda employees of all concerns and complaints.
(f) System that ensures the audits by the Audit and Supervisory Committee are conducted effectively
Each of the items stated below shall be set forth in accordance with the “Rules of Audit and Supervisory
Committee’s Audit, etc.”Full-time ASC Members shall be appointed, and an ASC Office, which will be composed of full-time staff, shall beestablished to provide secretariat assistance to the ASC Members in the performance of their duties and functions.

The ASC shall make efforts to secure the independence of the ASC Office from the person in charge of executing
the business, and the effectiveness of instructions from the ASC and personnel matters with respect to the membersof the ASC Office shall be handled by agreement between the Directors and ASC.
A Director shall inform the ASC of those matters concerning the Company’s basic management policy and plans,
and of material matters including the ones involving subsidiaries and affiliated companies (provided, however, that
this shall not apply if the ASC Members attend the meeting of the Board of Directors or any other meeting at whichsuch matter is discussed).

If a Director becomes aware of a fact that might cause material damage to the Takeda Group, such Director shall,
without delay, give notice of such fact to the ASC.
The ASC shall appoint ASC Members who will have the authority to request Directors and employees to report on
matters relating to the performance of their duties and investigate the status of the operations and assets of theCompany.
Based on the status of development and operation of the internal control system, the ASC shall have close
communications with the internal audit division, internal control promotion division and Accounting Auditor, towhich the ASC shall have the authority to give instructions, and it shall enhance the effectiveness and efficiency of
the audit by conducting a systematic audit utilizing the information derived therefrom.

The ASC Members shall request the Company to reimburse their costs for performing their duties, and submit abudget to the Company every year.

The ASC shall make proposals or state its opinions to the Board of Directors, as necessary, with respect to systems
that ensure that any person who makes a report to the ASC and the internal audit divisions, etc., including a report101made through the internal reporting system for whistleblowers, would not be subject to any discriminatory treatment
on the grounds of such reporting and that the anonymity and confidentiality of such reporting is maintained.
(g) Basic Views on Eliminating Anti-Social Forces
The Company’s basic policy is to eliminate any relationship, including normal transactions, with antisocial forces thatpose a threat to the order or safety of civil society. The Takeda Global Code of Conduct (Japan edition) is clear in thisregard and stipulates behavior that all Directors and employees should adhere to, in addition to the following actions.
 The Company has built and maintains close cooperative relationships with the supervising police station andspecialist external bodies, to proactively collect information on antisocial forces.
 The Company disseminates information on antisocial forces to relevant divisions in the Company and also to
employees as necessary during internal training, etc., in order to implement activities to prevent any damage fromantisocial forces.

4) Adoption of Anti-Takeover Measures
The Company has not adopted any defense measures against hostile takeovers5) Other[Liability Limitation Agreement]
・The Company has executed agreements with Non-Executive Directors stating that the maximum amount of their liabilities
for damages as set forth in Article 423, Paragraph 1 of the Companies Act shall be the amount provided by law.

[Other stipulation in the Company’s articles of incorporation regarding Number and Appointment of Directors]
・The Company shall have 12 or fewer Directors (excluding Directors who are Audit and Supervisory Committee Members).
The Company shall have four or fewer Directors who are Audit and Supervisory Committee Members.
・The Directors shall be appointed at a general meeting of shareholders that distinguishes between Directors who are Audit
and Supervisory Committee Members and other Directors. Voting on resolutions for appointments shall take place in thepresence of shareholders who have one-third or more of the voting rights of shareholders entitled to exercise their voting
rights, and a majority of the votes of the shareholders present shall be requisite for adoption of the resolution. The
appointment of Directors shall not be made by cumulative voting.

[Other stipulation in the Company’s articles of incorporation regarding matters to be resolved at the general meeting ofshareholders or the board of directors]
・For the purpose of agile implementation of capital policy and dividend policy, the company may decide the matters listed ineach item of Paragraph 1, Article 459 of the Companies Act including dividends from surplus by resolution of the Board of
Directors, unless otherwise provided for in laws and regulations.
・In order to fully demonstrate the expected role of directors in executing their duties, the company may, by a resolution of theBoard of Directors, exempt Directors (and former Audit and Supervisory Board members) from their liability for damages set
forth in Paragraph 1, Article 423 of the Companies Act to the extent permitted by laws.
・For the purpose of smooth operation of general meeting of shareholders, the extraordinary resolution of general meeting ofshareholders provided for in Paragraph 2, Article 309 of the Companies Act shall be adopted by two- thirds or more of thevotes of the shareholders present at the meeting and entitled to exercise their voting rights at which a quorum shall be onethird or more of the voting rights of the shareholders entitled to exercise their voting rights.

102

(2) Members of the Board of Directors
1) List of the Board of Directors
15 male Directors and 1 female Director (percentage of female: 6%)
Name

Christophe Weber

Title

President and Representative Director, Chief Executive Officer

Date of Birth

November 14, 1966

Number of Company Shares Owned as of March 31, 2019294 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(145 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
May

2008

Senior Vice President & Regional Director, Asia Pacific, GlaxoSmithKline

April

2012

President & General Manager, GlaxoSmithKline Vaccines

April

2012

CEO, GlaxoSmithKline Biologicals

April

2012

Member of GlaxoSmithKline Corporate Executive Team

April

2014

Chief Operating Officer of the Company

April

2014

Corporate Officer of the Company

June

2014

President and Representative Director of the Company (to present)

April

2015

Chief Executive Officer of the Company (to present)

Name

Masato Iwasaki

Title

Director, President, Japan Pharma Business Unit

Date of Birth

November 6, 1958

Number of Company Shares Owned as of March 31, 2019

22 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(9 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
April

1985

Joined the Company

April

2008

Senior Vice President, Strategic Product Planning Department of the Company

June

2010

Corporate Officer of the Company

January2012

Head of CMSO Office, Takeda Pharmaceuticals International, Inc.

April

2012

Senior Vice President, Pharmaceutical Marketing Division of the Company

June

2012

Director of the Company (to present)

April

2015

President, Japan Pharma Business Unit of the Company (to present)

April

2019

Representative Director, President & CEO, Shire Japan, plc (to present)

103

Name

Andrew Plump

Title

Director, President, Research and Development

Date of Birth

October 13, 1965

Number of Company Shares Owned as of March 31, 201953 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(53 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
January

2007

Executive Director, Cardiovascular Disease Franchise Integrator and Head, CardiovascularTranslational Medicine, Merck & Co.

January

2008

Vice President, Cardiovascular Disease Franchise Integrator and Head, Cardiovascular Early
Development & Cardiovascular Translational Medicine, Merch & Co.

January

2008

Vice President, Cardiovascular Disease Franchise Integrator and Head, Cardiovascular Disease
Franchise, Worldwide Discovery Head, Merch & Co.

July

2012

Vice President & Deputy to the President, Research & Translational Medicine, Sanofi

March

2014

Senior Vice President & Deputy to the President for Research & Translational Medicine,
SanofiFebruary2015

Chief Medical & Scientific Officer Designate of the Company

February

2015

Corporate Officer of the Company

June

2015

Director of the Company (to present)

June

2015

Chief Medical & Scientific Officer of the Company

June

2015

Executive Vice President, Takeda Pharmaceutical International, Inc. (to present)

January

2019

President, Research and Development of the Company (to present)

NameConstantine Saroukos

Title

Director, Chief Financial Officer

Date of Birth

April 15, 1971

Number of Company Shares Owned as of March 31, 2019

13 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(13 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
April

2011

Regional Finance Director – Africa of MERCK SHARP & DHOME

July

2012

Executive Finance Director – Eastern Europe, Middle East & Africa of MERCK SHARP &DHOME

October

2013

Executive Finance Director – Greater China & Japan of Allergan

September

2014

Head of Finance and Business Development for the Asia-Pacific region of Allergan

May

2015

Chief Financial Officer of the Europe and Canada Business Unit of the Company

April

2018

Chief Financial Officer of the Company (to present)

April

2018

Corporate Officer of the Company

June

2019

Director of the Company (to present)

104

Name

Masahiro Sakane

Title

Director, Chair of the Board of Directors meeting

Date of Birth

January 7, 1941

Number of Company Shares Owned as of March 31, 2019

5 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(5 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
April

1963

Joined Komatsu Ltd.

June

2001

President and Representative Director, Komatsu Ltd.

June

2007

Chairperson of the Board and Representative Director, Komatsu Ltd.

June

2008

External Director, Nomura Holdings, Inc.

June

2008

External Director, Nomura Securities Co., Ltd.

June

2008

External Director, Tokyo Electron Limited

June

2010

Chairperson of the Board, Komatsu Ltd.

March

2011

External Director, Asahi Grass Co., Ltd.

April

2013

Director and Councilor, Komatsu Ltd.

June

2013

Councilor, Komatsu Ltd. (to present)

June

2014

Director of the Company (to present)

June

2015

External Director, Kajima Corporation (to present)

June

2017

Chairman of the Board of Directors meeting of the Company (to present)

Name

Olivier Bohuon

Title

Director

Date of Birth

January 3, 1959

Number of Company Shares Owned as of March 31, 2019

0 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(0 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
January

1998

Chief Executive Officer and President, SmithKline Beecham Pharmaceuticals France

January

2001

Senior Vice President & Director European Commercial Operations, GlaxoSmithKline
Pharmaceuticals Europe

April

2003

President Europe & Corporate Officer, Abbott Laboratories

February

2006

Corporate Senior Vice President, Abbott Laboratories

July

2009

Executive Vice President, Abbott Laboratories

September

2010

Chief Executive Officer, Pierre Fabre SA

April

2011

Chief Executive Officer, Smith & Nephew plc

June

2011

External Director, Virbac SA

July

2015

External Director, Shire plc

July

2018

External Director, Smiths Group plc (to present)

August2018

External Director and Vice Chairman, LEO Pharma A/SJanuary

2019

Director of the Company (to present)

February

2019

External Director and Chairman of the Board, LEO Pharma A/S (to present)

105

Name

Ian Clark

Title

Director

Date of BirthAugust 27, 1960

Number of Company Shares Owned as of March 31, 2019

0 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(0 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
December

2005

Executive Vice President of Commercial Operations, Genentech, Inc.

April

2009

Executive Vice President of Global Marketing, Head of Global Product Strategy and Chief
Marketing Officer, Genentech, Inc.

January2010

Director, Chief Executive Officer and Head of North American Commercial Operations,
Genentech, Inc.

December

2016

External Director, Agios Pharmaceuticals, Inc. (to present)

January

2017

External Director, Shire plc

January

2017

External Director, Corvus Pharmaceuticals, Inc. (to present)

January

2017

External Director, Guardant Health, Inc. (to present)

November

2017

External Director, AVROBIO Inc. (to present)

April

2018

External Director, Forty Seven Inc. (to present)

January

2019

Director of the Company (to present)

Name

Yoshiaki Fujimori

Title

Director

Date of Birth

July 3, 1951

Number of Company Shares Owned as of March 31, 2019

7 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(5 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
May

2001

Senior Vice President, General Electric Company

October

2008

Representative Director, Chairperson, President and CEO, General Electric Japan Ltd.

March

2011

Representative Director and Chairperson, GE Japan Corporation (currently GE Japan GK)

June

2011

Director, LIXIL Corporation

June

2011

Director, LIXIL Group Corporation

August2011

Representative Director, President and CEO, LIXIL Corporation

August2011

Director, Representative Executive Officer, President and CEO, LIXIL Group Corporation

June

2012

External Director, Tokyo Electric Power Company, Incorporated (currently Tokyo
Electric Power Company Holdings, Incorporated)

January

2016

Representative Director, Chairperson and CEO, LIXIL Corporation Co

June

2016

Senior Advisor, LIXIL Group Corporation (to present)

June

2016

Director of the Company (to present)

June

2019

External Director, TOSHIBA CORPORATION

106

Name

Steven Gillis

Title

Director

Date of Birth

April 25, 1953

Number of Company Shares Owned as of March 31, 2019

0 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(0 thousands shares)

Term

See (Note5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
August1981

Founder, Director and Executive Vice President, Research and Development, Immunex
Corporation (currently, Amgen, Inc.)

June

1988

President and Chief Operating Officer, Immunex Research and Development Corporation

July

1990

President and Chief Executive Officer, Immunex Research and Development Corporation

May

1993

Chief Executive Officer, Immunex Corporation

October

1994

Founder, Director and Chief Executive Officer, Corixa Corporation (currently,
GlaxoSmithKline)

January

1999

Director and Chairman, Corixa Corporation

August2005

Managing Director, ARCH Venture Partners (to present)

October

2009

External Director, Pulmatrix, Inc. (to present)

October

2012

External Director, Shire plc

May

2016

External Director and Chairman, VBI Vaccines, Inc. (to present)

January

2019

Director of the Company (to present)NameToshiyuki Shiga

Title

Director

Date of Birth

September 16, 1953

Number of Company Shares Owned as of March 31, 2019

6 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(5 thousands shares)

Term

See (Note5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
April

1976

Joined Nissan Motor Co., Ltd.

April

2000

Senior Vice President (Officer), Nissan Motor Co., Ltd.

April

2005

Chief Operating Officer, Nissan Motor Co., Ltd. Director,

June

2005

Nissan Motor Co., Ltd.

May

2010

Chairman, Japanese Automobile Manufacturers Association, Inc. Vice

November

2013

Chairman, Nissan Motor Co., Ltd.

April

2014

Vice Chairman, KEIZAI DOYUKAI (Japan Association of Corporate Executives

June

2015

Chairman and CEO, Innovation Network Corporation of Japan

June

2016

Director of the Company (to present)

June

2017

Director, Nissan Motor Co., Ltd.

September

2018

Chairman and CEO, INCJ, Ltd. (to present)

107

Name

Jean-Luc Butel

Title

Director

Date of Birth

November 8, 1956

Number of Company Shares Owned as of March 31, 2019

7 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(7 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
January

1994

President, Nippon Becton Dickinson Company, Ltd.

January

1998

Corporate Officer, President, Worldwide Consumer Healthcare, Becton, Dickinson andNovember

1999

President, Independence Technology, Johnson & Johnson

August2003

Corporate Officer, Executive Committee Member, Senior Vice President andCompany

President, Asia Pacific, Medtronic. Inc.
May

2008

Corporate Officer, Executive Committee Member, Executive Vice President and Group
President, International, Medtronic, Inc.

February

2012

Corporate Officer, Operating Committee Member and Corporate Vice President, Baxter
International Inc.

January

2015

President, International, Baxter International Inc.

July

2015

Global Healthcare Advisor, President, K8 Global Pte. Ltd. (to present)

June

2016

Director, Audit and Supervisory Committee member of the Company

September

2017

External Director, Novo Holdings A/S (to present)

June

2019

Director of the Company (to present)

Name

Shiro Kuniya

Title

Director

Date of BirthFebruary 22, 1957

Number of Company Shares Owned as of March 31, 2019

6 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(5 thousands shares)

Term

See (Note 5)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
April

1982

Registered as an attorney-at-law (Osaka Bar Association)

April

1982

Joined Oh-Ebashi Law Offices

May

1987

Registered as an attorney-at-law at New York Bar Association

June

1997

External Corporate Auditor, Sunstar Inc.

April

2002

Managing Partner, Oh-Ebashi LPC & Partners (to present)

June

2006

External Corporate Auditor, NIDEC CORPORATION

April

2011

Chairperson, Inter-Pacific Bar Association

March

2012

External Director, NEXON Co., Ltd. (to present)

June

2012

External Director, EBARA CORPORATION (to present)

June

2013

External Corporate Auditor of the Company

June

2013

External Director, Sony Financial Holdings Inc. (to present)

June

2016

Director, Audit and Supervisory Committee Chairman of the Company

June

2019

Director of the Company (to present)

108

Name

Yasuhiko Yamanaka

Title

Director, Full-time Audit & Supervisory Committee member

Date of Birth

January 18, 1956

Number of Company Shares Owned as of March 31, 2019

26 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(8 thousands shares)

Term

See (Note 6)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
April

1979

Joined the Company

June

2003

Senior Vice President, Corporate Strategy & Planning Department of the Company

June

2004

Corporate Officer of the Company

April

2007

Senior Vice President, Pharmaceutical Marketing Division of the Company

June

2007

Director of the Company

June

2011

Managing Director of the Company

April

2012

Assistant to CEO, Globalization of the Company

June

2013

Special Missions assigned by President of the Company

June

2014

Special Missions of the Company

June

2015

Full-time Corporate Auditor of the Company

June

2016

Director, Full-time Audit and Supervisory Committee member of the Company (to present)

Name

Koji Hatsukawa

Title

Director, Chair of Audit and Supervisory Committee

Date of Birth

September 25, 1951

Number of Company Shares Owned as of March 31, 2019

6 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(5 thousands shares)

Term

See (Note 6)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
March

1974

Joined Price Waterhouse Accounting Office

July

1991

Representative Partner, Aoyama Audit Corporation

April

2000

Representative Partner, ChuoAoyama PricewaterhouseCoopers

October2005

Director and Manager of International Operations, ChuoAoyama PricewaterhouseCoopers

May

2009

CEO, PricewaterhouseCoopers Arata

June

2012

Audit & Supervisory Board Member, The Norinchukin Bank (to present)

June

2012

External Audit & Supervisory Board Member, Accordia Golf co., Ltd.

June

2013

External Audit & Supervisory Board Member, Fujitsu Limited (to present)

June

2016

Director, Audit and Supervisory Committee member of the Company

June

2019

Director, Audit and Supervisory Committee Chair of the Company (to present)

109

Name

Emiko Higashi

Title

Director, Audit and Supervisory Committee member

Date of Birth

November 6, 1958

Number of Company Shares Owned as of March 31, 2019

7 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(7 thousands shares)

Term

See (Note 7)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
February

1988

Director, Wasserstein Perella & Co., Inc.

May

1994

Managing Director, Investment Banking, Merrill Lynch & Co.

April

2000

CEO, Gilo Ventures, LLC

January

2003

Managing Director, Tomon Partners, LLC (to present)

November

2010

External Director, KLA-Tencor Corporation (to present)

October

2014

External Director, InvenSense Inc.

June

2016

External Director, MetLife Insurance K.K. (to present)

June

2016

Director of the Company

May

2017

External Director, Rambus Inc. (to present)

June

2019

External Director, Sanken Electric Co., Ltd. (to present)

June

2019

Director, Audit and Supervisory Committee member of the Company (to present)

NameMichel Orsinger

Title

Director

Date of Birth

September 15, 1957

Number of Company Shares Owned as of March 31, 2019

7 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(7 thousands shares)

Term

See (Note7)

Profile, Position and Responsibilities at the Company, and Important Duties Concurrently Held
January

1996

Head of Eastern Europe, Sandoz Nutrition, Consumer Health, Novartis AG

July

1997

President, Global Medical Nutrition, Consumer Health, Novartis AG

September

1999

Regional President, Europe, Middle East and Africa, Consumer Health, Novartis AG

March

2001

Chief Executive Officer and President, OTC Division Worldwide, Consumer Health,

October

2004

Chief Operating Officer, Synthes, Inc. (currently Johnson & Johnson)

April

2007

President and Chief Executive Officer, Synthes, Inc.

June

2012

Worldwide Chairperson, Global Orthopedics Group, Deputy Synthes Companies, Johnson &

June

2012

Member of Global Management Team, Johnson & Johnson

June

2016

Director of the Company

June

2019

Director, Audit and Supervisory Committee member of the Company (to present)

Novartis AG

JohnsonTotal Number of Company Shares Owned as of March 31, 2019457 thousands shares(Of which, Number of Company Shares to be provided under the Stock Compensation Plan)(269 thousands shares)

Notes:(1) Mr. Masahiro Sakane, Mr. Olivier Bohuon, Mr. Ian Clark, Mr. Yoshiaki Fujimori, Mr. Steven Gillis, Mr. Toshiyuki
Shiga, Mr. Jean-Luc Butel, and Mr. Shiro Kuniya are External Directors.
(2) Mr. Koji Hatsukawa, Ms. Emiko Higashi, and Mr. Michel Orsinger are External Directors who are also Audit andSupervisory Committee members.
(3) For the above candidates, the “Number of Company Shares Owned” includes the number of Company shares (as ofMarch 31, 2019) to be provided under the stock compensation plan (for Mr. Andrew Plump and Mr. Constantine
Saroukos, under the stock grant plan). Such Company shares are to be provided to each of the Directors during his/herterm of office or at the time of his/her retirement.

110

[Description of the number of Company Shares to be provided under the Stock Compensation Plan, etc.]
The Company introduced a stock compensation plan for Directors (excluding Directors residing overseas who are notExternal Directors) and a stock grant plan for executives of the Takeda Group in Japan and overseas (collectively, the“Plan”).
The Company shares to be provided under the stock compensation plan for Directors who are not External Directors(excluding Directors who are Audit and Supervisory Committee Members and Directors residing overseas) (“Directors
who are eligible for performance-linked compensation”) and the stock grant plan for executives of the Takeda Groupin Japan and overseas include the following:(i)a fixed portion which is not linked to the Company’s performance (“Fixed Portion”); and(ii)a variable portion which is linked to the Company’s performance (“Performance-based Portion”).

The number of Company shares to be provided to the above candidates in accordance with the Plan includes only the
Fixed Portion under (i) above, since such number of Company shares to be provided is already fixed. The number ofCompany shares relating to the Performance-based Portion under (ii) above is not yet included, since it will vary in therange of 0-200% and is therefore not fixed at this moment. The provision of Company shares under (i) Fixed Portionand (ii) Performance-based Portion to the Directors who are eligible for performance-linked compensation will bemade at a certain period during their term of office.
The Company shares to be provided under the stock compensation plan for Directors who are Audit and Supervisory
Committee Members and External Directors (“Directors who are not eligible for performance-linked compensation”)
are included in the “Number of Company Shares to be provided under the Stock Compensation Plan,” since it is to beprovided under (i) Fixed Portion, the number of Company shares to be provided to the above candidates is fixed. The
provision of Company shares to the Directors who are not eligible for performance-linked compensation will be madeat the end of their term of office.
In addition, with regard to Company shares to be provided under the Plan, (a) the voting rights thereof may not be
exercised before such shares are provided to each candidate; and (b) 50% of such shares will be sold in the stock
market to secure the necessary funds for tax payments and, thereafter, the proceeds thereof will be provided to eachcandidate.
(4) The number of Company Shares Owned less than unit shown is rounded to the nearest JPY.
(5) The term of office of Directors (excluding Directors who are Audit and Supervisory Committee Members) shall be up
to the time of closing of the ordinary general meeting of shareholders concerning the fiscal year ended March 31, 2019within one year after their election.
(6) The term of office of Directors who are Audit and Supervisory Committee Members, Mr. Yasuhiko Yamanaka and Mr.
Koji Hatsukawa shall be up to the time of closing of the ordinary general meeting of shareholders concerning the
fiscal year ended March 31, 2018 within two years after their election.
(7) The term of office of Directors who are Audit and Supervisory Committee Members, Ms. Emiko Higashi and Mr.
Michel Orsinger shall be up to the time of closing of the ordinary general meeting of shareholders concerning the
fiscal year ended March 31, 2019 within one year after their election.

2) External Directors
Number of External Directors:

11 persons (including 3 independent External Directors
who are Audit and Supervisory Committee Members)

Number of independent officers under the ruleof financial instruments exchange such as Tokyo
Stock Exchange on which the company is listed:

11 persons

Mr. Masahiro Sakane has been appointed as an External Director as of June 2014. He proactively expresses his opinions at theBoard of Directors meetings by leveraging his ample experience as company top management. He facilitates Board of
Directors meetings as the chairperson since June 2017 as well as leads meetings by External Directors, which contributes to themaking of fair and appropriate decisions and securing sound management in the Company. He attended 12 of the 12 meetingsof the Board of Directors in FY2018. He has also contributed as chairperson of the Nomination Committee of the Company toprovide objectivity and transparency in the Director candidate selection process. His ownership of the Company’s share isimmaterial (as of June 2019), and there are no personnel, capital, business or other special relationship between him and theCompany. The Company deemed that he is highly independent and designated him as an Independent Director of the Company
because there is no risk of conflict with the interests of the Company’s general shareholders as he executes his duties as an111

External Director.
Mr. Olivier Bohuon served as an External Director of Shire and has sufficient expertise in Shire's portfolio and its related
therapeutic areas. Previously, he has held key positions in healthcare companies in Europe and the U.S. and has a deep insight
into the management of global healthcare businesses based on his ample experience. He has remarkable expertise in the area ofmarketing in the overall healthcare business. He has been appointed as an External Director as of January 2019. He contributes
to the making of fair and appropriate decisions and securing sound management in the Company. After his appointment, heattended 1 of the 2 meetings of the Board of Directors in FY2018. There are no personnel, capital, business or other special
relationship between him and the Company. The Company deemed that he is highly independent and designated him as an
Independent Director of the Company because there is no risk of conflict with the interests of the Company’s generalshareholders as he executes his duties as an External Director.
Mr. Ian Clark served as an External Director of Shire and has sufficient expertise in Shire's portfolio and its related therapeuticareas. Previously, he has held key positions in healthcare companies in Europe and the U.S. and has a deep insight into the
management of global healthcare businesses based on his ample experience. He has remarkable expertise in marketing in thearea of oncology and the operation of the science and technology division of a healthcare company.
He has been appointed as an External Director as of January 2019. He contributes to the making of fair and appropriate
decisions and securing sound management in the Company. After his appointment, he attended 1 of the 2 meetings of theBoard of Directors in FY2018.
There are no personnel, capital, business or other special relationship between him and the Company. The Company deemedthat he is highly independent and designated him as an Independent Director of the Company because there is no risk of
conflict with the interests of the Company’s general shareholders as he executes his duties as an External Director.
Mr. Yoshiaki Fujimori has been appointed as an External Director as of June 2016. He proactively expresses his opinions at theBoard of Directors meetings by leveraging his ample experience as company top management, which contributes to the making
of fair and appropriate decisions and securing sound management in the Company. He attended 12 of the 12 meetings of theBoard of Directors in FY2018. He actively participates in the discussions at the Compensation Committee based on his
experience as top management of a global operating company, providing objectivity and transparency in the Company's
compensation plan for Directors. His ownership of the Company’s share is immaterial (as of June 2019), and there are no
personnel, capital, business or other special relationship between him and the Company. The Company deemed that he ishighly independent and designated him as an Independent Director of the Company because there is no risk of conflict with theinterests of the Company’s general shareholders as he executes his duties as an External Director.
Mr. Steven Gillis served as an External Director of Shire and has sufficient expertise in Shire's portfolio and its related
therapeutic areas. Previously, he has held key positions in healthcare companies in Europe and the U.S. and has a deep insight
into the management of global healthcare businesses based on his ample experience. He has remarkable expertise, with a Ph.D.
in Biological Sciences, in the area of immune-related healthcare businesses.
He has been appointed as an External Director as of January 2019. He contributes to the making of fair and appropriate
decisions and securing sound management in the Company. After his appointment, he attended 2 of the 2 meetings of theBoard of Directors in FY2018.
There are no personnel, capital, business or other special relationship between him and the Company. The Company deemedthat he is highly independent and designated him as an Independent Director of the Company because there is no risk of
conflict with the interests of the Company’s general shareholders as he executes his duties as an External Director.
Mr. Toshiyuki Shiga has been appointed as an External Director as of June 2016. He proactively expresses his opinions at theBoard of Directors meetings by leveraging his ample experience as company top management as well as his expertise ingeneral industries in Japan, which contributes to the making of fair and appropriate decisions and securing sound managementin the Company. He attended 12 of the 12 meetings of the Board of Directors in FY2018. As chairperson, he actively led
discussions at the Compensation Committee by expressing opinions based on his experience as a top executive of a global
operating company, providing objectivity and transparency in the Company's compensation plan for Directors. His ownershipof the Company’s share is immaterial (as of June 2019), and there are no personnel, capital, business or other special
relationship between him and the Company. The Company deemed that he is highly independent and designated him as an
Independent Director of the Company because there is no risk of conflict with the interests of the Company’s generalshareholders as he executes his duties as an External Director.

Mr. Jean-Luc Butel has served as an External Director who is an Audit and Supervisory Committee Member since June 2016
and been appointed as an External Director who is not an Audit and Supervisory Committee Member since June 2019. He

112

proactively expresses his opinions at the Board of Directors meetings by leveraging his ample experience as top managementof major western healthcare companies, which contributes to the making of fair and appropriate decisions and securing soundmanagement in the Company. He attended 9 of the 10 meetings of the Board of Directors in FY2018. He did not join 2
extraordinary meetings of Board of Directors, they were held only for discussing the acquisition of Shire, in order to avoid aconflict of interest as he was a shareholder of Shire. There are no personnel, capital, business or other special relationshipbetween him and the Company. The Company deemed that he is highly independent and designated him as an Independent
Director of the Company because there is no risk of conflict with the interests of the Company’s general shareholders as heexecutes his duties as an External Director.
Mr. Shiro Kuniya has served as External Corporate Auditor since June 2013 and an External Director who is the Head of Audit
and Supervisory Committee since June 2016, and been appointed as an External Director who is not an Audit and Supervisory
Committee Member since June 2019. He proactively expresses his opinions at the Board of Directors meetings by leveraging
wide-ranging experience and expertise in the area of corporate and international legal affairs as a lawyer, which contributes tothe making of fair and appropriate decisions and securing sound management in the Company. He attended 12 of the 12
meetings of the Board of Directors in FY2018. He has also contributed as a member of the Nomination Committee of theCompany to provide objectivity and transparency in the Director candidate selection process. His ownership of the Company’s
share is immaterial (as of June 2019), and there are no personnel, capital, business or other special relationship between him
and the Company. The Company deemed that he is highly independent and designated him as an Independent Director of theCompany because there is no risk of conflict with the interests of the Company’s general shareholders as he executes his duties
as an External Director.
Mr. Koji Hatsukawa has wide-ranging experience and expertise in the area of corporate finance and accounting as a certified
public accountant. He has served as an External Director who is an Audit and Supervisory Committee Member since June 2016,
and an External Director who is the Head of Audit and Supervisory Committee since June 2019. He has contributed in therealization of the mission of Audit and Supervisory Committee: to ensure the sound and continuous growth of the Company,
realize the creation of mid-and long-term corporate value, and establish a good corporate governance system that
accommodates society’s trust. He attended 12 of the 12 meetings of the Board of Directors in FY2018. His ownership of theCompany’s share is immaterial (as of June 2019), and there are no personnel, capital, business or other special relationshipbetween him and the Company. The Company deemed that he is highly independent and designated him as an Independent
Director of the Company because there is no risk of conflict with the interests of the Company’s general shareholders as heexecutes his duties as an External Director.
Ms. Emiko Higashi has been appointed as an External Director who is not an Audit and Supervisory Committee Member as ofJune 2016. She proactively expresses her opinions at the Board of Directors meetings by leveraging her ample experience andwide expertise on healthcare, technology and financial industries, which contributes to the making of fair and appropriate
decisions and securing sound management in the Company. She attended 12 of the 12 meetings of the Board of Directors in
FY2018. She has served as an External Director who is an Audit and Supervisory Committee Member since June 2019. The
Company believes her contribution in the realization of the mission of Audit and Supervisory Committee: to ensure the soundand continuous growth of the Company, realize the creation of mid- and long-term corporate value, and establish a good
corporate governance system that accommodates society’s trust. She has also contributed as a member of the Nomination
Committee of the Company to provide objectivity and transparency in the Director candidate selection process. There are no
personnel, capital, business or other special relationship between her and the Company. The Company deemed that she ishighly independent and designated her as an Independent Director of the Company because there is no risk of conflict with theinterests of the Company’s general shareholders as she executes her duties as an External Director.
Mr. Michel Orsinger has been appointed as an External Director who is not an Audit and Supervisory Committee Member asof June 2016. He proactively expresses his opinions at the Board of Directors meetings by leveraging his ample experience as
top management of major western healthcare companies, which contributes to the making of fair and appropriate decisions andsecuring sound management in the Company. He attended 12 of the 12 meetings of the Board of Directors in FY2018. He hasserved as an External Director who is an Audit and Supervisory Committee Member since June 2019. The Company believes
his contribution in the realization of the mission of Audit and Supervisory Committee: to ensure the sound and continuous
growth of the Company, realize the creation of mid-and long-term corporate value, and establish a good corporate governancesystem that accommodates society’s trust. There are no personnel, capital, business or other special relationship between him
and the Company. The Company deemed that he is highly independent and designated him as an Independent Director of theCompany because there is no risk of conflict with the interests of the Company’s general shareholders as he executes his duties
as an External Director.
・Supporting System for External Directors

113

Takeda provides, in a timely manner, relevant information about important management-related matters to External
Directors to help them make informed decisions. Explanations of the summary of topics to be discussed at board
meetings are also provided in advance. The CEO Office is responsible for coordination with External Directors who
are not Audit and Supervisory Committee Members. Information needed for activities such as auditing in the Audit
and Supervisory Committee are shared with External Directors who are Audit and Supervisory Committee Members.
To support the operation and serve as secretariat for the Audit and Supervisory Committee, the Audit and Supervisory
Committee Office with dedicated staff was established.

(3) Status of Auditing[Accounting Audit]
Accounting audit of the Company is performed by KPMG AZSA LLC, which was appointed at a general meeting ofshareholders. The Company’s financial statements were audited by certified public accountants, Mr. Koichi Kohori(consecutive auditing period: 5 years,) and Mr. Naohiro Nishida (consecutive auditing period: 4 years) from KPMG AZSA
LLC, supported by 21 other certified public accountants and 55 other individuals.

1) Policy and reasons on the appointment of Accounting Auditor
The Audit and Supervisory Committee appoints KPMG AZSA LLC as its Accounting Auditor based on the criteria weestablished for the appointment that enable us to comprehensively consider the Accounting Auditor’s expertise, audit
quality, independence, audit capabilities for the Company’s worldwide business operations, quality control systems andother factors.
In addition, if the Accounting Auditor is determined to fall under any of the events prescribed in each item of Article 340,
Paragraph 1 of the Companies Act, or if an event which has a material adverse effect on the audit procedures of theCompany occurs, including, but not limited to, the case in which such Accounting Auditor’s auditing license is suspended,
the Accounting Auditor shall be dismissed by the Audit and Supervisory Committee based on the approval of all members
thereof. The Audit and Supervisory Committee also determines whether to reappoint the Accounting Auditor considering
audit quality, quality control systems, independence and other factors.

2) Assessment of the Accounting Auditor by the Audit and Supervisory Committee
The Audit and Supervisory Committee has determined the assessment criteria based on the practical guidance for Audit &Supervisory Committee members in assessing its Accounting Auditor and developing its assessment criteria issued by
Japan Audit & Supervisory Board Members Association and assessed the expertise, audit quality, independence, and otherfactors of KPMG AZSA LLC annually based on the criteria.

114

(Details of audit fees and other matters)(Details of fees paid to the certified public accountant auditor)(JPY millions)
For the Year ended March 31, 2018

For the Year ended March 31, 2019

Classification
Fees for Audit
and Attestation
Services

Fees for Non-Audit
Services

Fees for Audit
and Attestation
Services

Fees for Non-Audit
Services

The Company

518

32

2,826

40

Consolidated
subsidiaries

17

4

17

3

Total

535

36

2,843

43

Note: Fees for audit and attestation services for the year ended March 31, 2019 include the fees for audit under PCAOB
audit standards for the past three fiscal years of 2015 to 2017 resulting from the listing of American Depository
Shares and the audit fees of Shire, which the Company acquired during the current fiscal year.
(Details of other significant fees)
Fiscal year ended March 31, 2018
The Company and its 81 overseas consolidated subsidiaries such as Takeda Pharmaceuticals International AG
and Takeda Pharmaceuticals U.S.A., Inc. paid 898 million JPY as fees for audit and attestation services and 36
million JPY as fees for non-audit services such as tax advisory to member firms of the KPMG network, to which
the Company’s certified public accountant auditor, KPMG AZSA LLC, belongs.
Fiscal year ended March 31, 2019
The Company and its 75 overseas consolidated subsidiaries such as Takeda Pharmaceuticals International AG
and Takeda Pharmaceuticals U.S.A., Inc., excluding Shire and its subsidiaries, paid 912 million JPY as fees foraudit and attestation services and 13 million JPY as fees for non-audit services such as tax advisory to member
firms of the KPMG network, to which the Company’s certified public accountant auditor, KPMG AZSA LLC,
belongs(Details of non-audit services provided by the certified public accountant auditor)
Fiscal year ended March 31, 2018
Non-audit services provided by the certified public accountant auditor were preparation of comfort lettersregarding the issuance of bonds.
Fiscal year ended March 31, 2019Non-audit services provided by the certified public accountant auditor were preparation of comfort lettersregarding the issuance of bonds.
(Policy for determining audit fees)
Audit fees are determined upon approval of the Audit and Supervisory Committee, taking into account theestimated number of hours required for auditing based on the execution of duties by the auditors required forauditing and other factors. In addition, the Audit and Supervisory Committee gives an approval upon
confirmation of the independence of the certified public accountant auditor prior to the certified public
accountant auditor providing services to the Company and its overseas consolidated subsidiaries.

115

(4) Remunerations for Directors
1) Policies concerning the calculation method of or the amount of compensation for Directors of the Company

The company has formulated the “Compensation Policy for Directors” and based on the policies and decision-making
processes described therein, the composition and level of compensation for directors is determined.
The resolutions of the general shareholders meetings regarding director compensation and the dates of the resolutions are as
follows:(a) Remunerations for Directors who are not Audit & Supervisory Committee Members (excluding External
Directors)(ⅰ) Regarding basic compensation, the total per month is no more than 150 million JPY (no more than 30
million JPY per month of the total is to be paid to External Directors) (based on a resolution from the140th Ordinary General Meeting of Shareholders held on June 29, 2016. Eleven (11) directors were
eligible (including six (6) external directors)).

(ⅱ) Regarding directors bonuses for FY2018 performance results, the proposal "Payment of Bonuses to
Directors who are not Audit and Supervisory Committee Members" was approved as proposed at the143rd General Meeting of Shareholders held on June 27, 2019. Accordingly, bonuses for 2 internal
Directors who are not ASC Members for this fiscal year will be paid within the upper limit of 730 million
JPY as set forth in the said proposal.
(ⅲ) The resolutions of the general meeting of shareholders on director equity compensation are as follows:
The stock compensation granted in fiscal years 2016, 2017 and 2018 is based on the resolution of the140th Ordinary General Meeting of Shareholders held on June 29, 2016. The upper limit on themonetary value of stock compensation and the number of the stocks to be granted are as follows:a.

Stock compensation granted to Directors who are neither External Directors nor ASC
Members (excluding Directors residing overseas) (Four (4) directors were eligible at thetime)Upper limit of 2.7 billion JPY per year for three consecutive fiscal years (the upper limit on thenumber of stocks to be granted is calculated by dividing the above-mentioned upper limit by theclosing price of stocks of the Company at the Tokyo Stock Exchange on a predetermined day eachfiscal year)b.

Stock compensation granted to External Directors who are not ASC Members
Upper limit of 0.3 billion JPY (the upper limit on the number of stocks to be granted is calculated by
dividing the above-mentioned upper limit by the closing price of stocks of the Company at theTokyo Stock Exchange on a predetermined day each fiscal year) (Six (6) directors were eligible atthe time)(b) The remunerations for Directors who are ASC Members(ⅰ) The basic compensation is a fixed amount depending on the position, and the total per month is no more than
15 million JPY (based on a resolution of the 140th Ordinary General Meeting of Shareholders held on
June 29, 2016). (Four (4) directors were eligible at the time)(ⅱ) The stock compensation granted in fiscal years 2017 and 2018 is based on a resolution from the 140th
Ordinary General Meeting of Shareholders held on June 29, 2016, for which no more than 200 million
JPY will be allocated over a period of two consecutive fiscal years. The upper limit on the number of thestocks to be granted is calculated by dividing the above-mentioned upper limit by the closing price ofstocks of the Company at the Tokyo Stock Exchange on a predetermined day each fiscal year. (Theeligible directors were four (4) at the time)
The board meeting has the authority to decide the amount of or any specific policy or calculation method todetermine the compensation of Directors who are not Audit & Supervisory Committee Members. The Audit &Supervisory Committee has the authority to decide the amount of or any specific policy or calculation method todetermine the compensation, of Directors who are Audit & Supervisory Committee Members.

116

The Compensation Committee has been established with an External Director as the Chairperson and with the
majority of members being External Directors, to serve as an advisory organization for the Board of Directors
to ensure the appropriateness of Director Compensation and the transparency in the decision-making
process.
The level of composition of compensation and performance-based compensation (Mid- and Long-term
Incentives and Bonus programs) for Directors are reviewed by the Compensation Committee before
resolution by the Board of Directors. With the advice of the Compensation Committee, the Board of Directors
determines the compensation of directors who are not Audit and Supervisory Committee members. The
determination of the amount of individual compensations for internal directors who are not audit and supervisorycommittee members has been delegated to the Compensation Committee by resolution of the Board of Directors
in order to increase the transparency of the process of determining individual compensations.
Regarding activities in fiscal year 2018, the Compensation Committee held six meetings with full participation.
During fiscal year 2018, the committee was focused on evolving the executive compensation framework to reflect thatof a Top 10 global biopharmaceutical company. Within this context, the committee established a global
biopharmaceutical peer group, revised programs to enhance our commitment to pay for performance including
increasing the mix of performance shares for our internal directors and Takeda executive teams, considered appropriate
KPIs for the company’s incentive programs that would drive an agile and successful integration as well as reviewing,
the amount of compensation for directors, etc., and providing guidance to the Board of Directors. The Board of
Directors determined the compensation of directors who are not Audit and Supervisory Committee members.
<Compensation Committee members>
Chair: Shiga Toshiyuki (external director) Members: Fujimori Yoshiaki (external director), Yamanaka Yasuhiko(Audit & Supervisory Committee member)
The compensation of Directors consists of both "Performance-based Compensation" and "non-Performancebased Compensation". The composition and level of compensation for directors is determined based on the policies anddecision-making processes described in the company’s “Compensation Policy for Directors” which is outlined later inthese materials. As part of the enhancements to our compensation framework, we have increased the proportion ofLong-term Incentives to 60% of our long-term incentive mix for internal directors (i.e., directors who are not Audit& Supervisory Committee Members or other External Directors.).
Bonuses shall be paid with the aim of driving the achievement of annual goals. The amount of individual bonus
shall be determined by multiplying the target bonus amount (amount when 100% of target is reached) which isset for each role of director by achievement level (0〜200%) of the set goal (Corporate KPI and/or Division
KPI). As the FY2018 KPIs for director bonuses, the company set consolidated revenue, core earnings and core
EPS as the annual indicators, and the board meeting set target values in order to facilitate the achievement of the
management guidance with review and advice from the Compensation Committee. Additionally, Division KPIs
have been set for individual departments depending on the roles and responsibilities of directors in charge. For
example, KPIs of sales departments include revenues and KPIs of the research department include R&D targets.
The goals for each KPI have been set based on the divisional annual plans with the aim of accomplishing groupwide annual targets.
For the FY2018 bonus for the President and CEO, the annual goal was set to be 100% of the Corporate KPI. For
other Directors that have divisional responsibilities, 75% of the annual bonus is linked to the Corporate KPI todrive commitment to group-wide goals, and 25% of the annual bonus is linked to the Division KPI.
Regarding the results for FY2018 bonus KPIs, the KPIs surpassed theirtargets, reflecting continued delivery of our
key strategic priorities and strict OPEX discipline. FY2018 Division
KPIs performance was varied but, generally, surpassed targets also
demonstrating strong performance against key divisional performanceindicators.

117

Management Guidance-Underlying growthFiscal 2018 guidance
Underlying Revenue

Low single digit

Underlying Core Earnings

High single digit

Underling Core EPS

Low-teens

During FY2018, a Long-term Incentive Plan that allocated 50% Performance Shares and 50% Restricted Stock was put
in place for Internal Directors (i.e., those who are not Audit & Supervisory Committee Members and not External
Directors) strengthen the pay for performance link between compensation, company performance and share price, and to
reinforce the commitment to increasing corporate value in the mid- and long-term. Key Performance Indicators (KPIs)
used for the FY 2016-2018 Performance Shares were linked to mid- to long-term performance objectives over a threeyear period including consolidated revenue, free cash flow, earnings per share and indicators on R&D targets.
The sum of the Performance Share payout shall be determined by multiplying the LTI target by the result of KPIs based on
performance achievement with the variable range 0% to 200% (100% at target).
Regarding results of the FY2016-2018 KPIs for performance share, the board set goals that facilitate contribution to theachievement of the FY2016-2018 Company strategy based on review and advice of the Compensation Committee.
Regarding the results of the FY2016-2018 KPIs for performance share, the overall KPI targets have been achieved.

2) Total remuneration paid to officers of the filing company (The Company) and numbers of subject officers (for eachjob title and remuneration type)

Officer title

Total remuneration(JPY (millions))

Total remuneration amount by remuneration
type (JPY (millions))
Long-Term
Base salary
Annual Bonus
Incentive

Number of
subject
officers

Directors (excluding
members of Audit andSupervisory
Committee )(excluding outside
directors) (Note1,2)

1,938

331

705

902

Directors (members of
Audit and Supervisory
Committee )(excluding outside
directors)

50

38

-

13

1

Outside Officers

265

176

-

89

11

Notes:(1) The aforementioned includes 1 Director who is not an Audit and Supervisory Committee (“ASC”) Member andretired from the office as of May 31, 2018.
(2) These amounts do not include salaries and bonuses that Directors, who also work as employees, receive for theemployee portions of their compensation.

118

43) Total remuneration (on consolidated basis) paid to Internal Directors of the filing company (for each director)

Name

Christophe Weber(Director)
Masato Iwasaki(Director)

Andy Plump(Director)

Total amount of
remuneration on
consolidated
basis(JPY (millions))

1,758

Remuneration amount by remuneration type (JPY (millions))
Company
payingremuneration

BasesalaryFiling company(TPC)

Filing company
(TPC)
193
- Director
Filing company(TPC)- Employee(Note4)Filing company(TPC)
795 TPI(Note6)

LongTerm
Incentive(Note1)

Annualbonus

Provision ofretirement
benefit

269(Note2)638

851(Note3)

―

16

67

51
(Note5)

―

27

32

―

―

12

―

―

―

115

378

255
(Note7)35(Note8)Notes:(1) Compensation expense related to the long-term incentive plan is recognized over multiple fiscal years, depending on
the length of the period eligible for earning compensation. This column shows amounts recognized as expenses
during the fiscal year ended March 31, 2019.
(2) Basic Compensation includes the grossed up amount paid for residence and pension allowances for the relevant
officer. (112million JPY)
(3) The amount recognized as an expense during the fiscal year, representing stock incentive plan (Board IncentivePlan) grants awarded in fiscal years 2015- 2018.
(4) Shows the salary and other amounts earned as the President, Japan Pharma Business Unit etc. This employee
portion of the bonus amount is not included in the limit outlined in the proposal "Payment of Bonuses to Directors
who are not Audit and Supervisory Committee Members" as proposed at the 143th General Meeting of
Shareholders held on June 27.
(5) The amount recognized as an expense during the fiscal year, representing stock incentive plan (Board IncentivePlan) grants awarded in fiscal years 2015- 2018(6) Shows the salary and other amounts earned as the President, Research and Development of Takeda Pharmaceuticals
International, Inc.
(7) The amount recognized as an expense during the fiscal year, representing stock incentive plan (Employee Stock
Ownership Plan) grants awarded in fiscal years 2015- 2018.
(8) Amounts of local retirement plan contributions and other additional benefits paid by Takeda Pharmaceuticals
International, Inc. during the fiscal year, as well as the amount equal to taxes on such amounts.

119

4)

Employee Portion of Internal Director Remuneration and Number of Directors
Total e m p l o y e e remuneration amount by remuneration
Officer title

Internal Directors(excluding membersof Audit andSupervisory
Committee )(excluding outside
directors)

Total employee
remuneration(JPY (millions))

842

Number of
subject
officers

type (JPY (millions))
Base salary142

Annual Bonus

410

Long-Term
Incentive

Others255

35

Note: The amounts include the salary and other amounts paid for the role for President, Japan Pharma Business Unit of
Masato Iwasaki and forth role for the President, Research and Development of Takeda Pharmaceuticals International, Inc. ofAndy Plump.

120

25) Directors' Compensation Policy

1. Guiding Principles

The Company's compensation system for Directors has the following guiding principles under the
corporate governance code to achieve management objectives:
 To attract, retain and motivate managerial talent to realize "Vision 2025"
 To increase corporate value through optimizing the Company’s mid- and long-term performance,
while reinforcing our patient-focused values
 To be closely linked with company performance, highly transparent and objective
 To support a shared sense of profit with shareholders and improve the managerial mindset
focusing on shareholders
 To encourage Directors to challenge and persevere, and to be aligned with the values of Takeda-ism
 To establish transparent and appropriate governance of directors' compensation to establish thecredibility and support of our stakeholders
2.

Level of Compensation

We aim to be competitive in the global marketplace to attract and retain talent who will continue totransform Takeda into a Global, Values-based, R&D-driven Biopharmaceutical Leader.
Directors' compensation should be competitive in the global market consisting of major global companies.
Specifically, the global market refers to a "global executive compensation database" developed on the basisof professional survey data with the addition of compensation data from the US, UK and Switzerland,
where we need to be competitive with other major pharmaceutical companies.
3.

Compensation Mix

3-1. Directors who are not Audit & Supervisory Committee Members (excluding External Directors)
The compensation of Directors who are not Audit & Supervisory Committee Members (excluding External
Directors) consists of "Basic Compensation", which is paid at a fixed amount and "Performance-based
Compensation", which is paid as a variable amount based on company performance, etc.
"Performance-based Compensation" further consists of a "Bonus" to be paid based on the consolidated
financial results, etc. for each fiscal year, and a "Long-term Incentive Plan (stock compensation)"
linked with long-term financial results over a 3-year period and with Takeda's share price.
The ratio of Long-term Incentives has been increased from prior years (as of fiscal 2018) to better alignwith the incentives of Takeda’s Directors with Takeda’s shareholders. Moreover, it matches with thepeer group and primary industry level. Both Bonus and Long-term incentives as a ratio of Total Direct
Compensation is higher putting the directors pay at risk in alignment with the company’s performance.
The targets range from 100%-250% of Basic Compensation for "Bonus" and range from 200% to 600%
of Basic Compensation for "Long-term Incentive", reflecting the common practice of global
companies.
■ Standard Directors who are not Audit & Supervisory Committee Members (excluding External Directors)
Compensation Mix Model
Basic Compensation

Fixed

Bonus
100%-250% of Basic Compensation*

Long-term Incentive Plan
(stock compensation)
200% to 600% or more of Basic Compensation*

Performance-based Compensation*Ratio of Bonus and Long-term Incentives to Basic Compensation is determined according to Director’s role.
3-2. External Directors who are not Audit & Supervisory Committee Members
The compensation of External Directors who are not Audit & Supervisory Committee Members consists of
Basic Compensation, which is paid as a fixed amount, and Long-term Incentive (stock compensation). The
stock compensation is linked only to share price and not to financial performance results. Newly awarded
stock compensation in 2019 and going forward will vest three years after the award date and Directors will be121required to hold 75% of their vested share portion until they leave the Company.
Bonus is not available for this category of Director. Committee retainers are paid with Basic Compensation
for the chair of board meeting, chair of the compensation committee, and chair of Nomination Committee.
The current compensation mix is "Basic Compensation" and "Long-term Incentive", which is a maximum of
100% of the Basic Compensation.
■ Standard External Directors who are not Audit & Supervisory Committee Members Compensation Mix Model
Basic Compensation

Long-term Incentive Plan

additionally committee fee paid for chairs(stock compensation)
Maximum of 100% of the Basic Compensation

Fixed

3-3. Directors who are Audit & Supervisory Committee Members
The compensation of Directors who are Audit & Supervisory Committee Members consists of Basic
Compensation, which is paid as a fixed amount, and Long-term Incentive (stock compensation). The stockcompensation is linked only to share price and not to financial performance results. Newly awarded stockcompensation in 2019 and going forward will vest three years after the award date and Directors will be
required to hold 75% of their vested share portion until they leave the Company.
Bonus is not available for this category of Director. Committee retainer is paid with Basic Compensation for
external directors who are Audit & Supervisory Committee Members.
The current compensation mix is "Basic Compensation" and "Long-term Incentive", which is a maximum of
100% of the Basic Compensation.
■ Standard Directors who are Audit & Supervisory Committee Members Compensation Mix Model
Long-term Incentive Plan
(stock compensation)
Maximum of 100% of the Basic Compensation

Basic Compensation
additionally committee fee paid for chairs

Fixed

4.

Performance-based Compensation

4-1. Directors who are not Audit & Supervisory Committee Members (excluding External Directors)
For Directors who are not Audit & Supervisory Committee Members (excluding External Directors) a Long
- term Incentive Plan that is allocated as 60% Performance Shares and 40% Restricted Stock is in place tostrengthen the link between compensation and company performance and share price, and to reinforce thecommitment to increasing corporate value in the mid and long term.
Key Performance Indicators (KPI) used for the Long-term Incentive will be linked with the latest mid- to longterm performance objectives over a three-year period such as but not limited to consolidated revenue, free cash
flow, indicators on earnings, R&D targets, integration success factors, etc., as transparent and objective indicators.
The variable range is from 0% to 200% (100% at target), based on performance achievement. For newly
awarded Long-term Incentive awards, a two-year holding period will be mandated; this includes Performance
Share if and when shares become vested.
■ Annual Performance-based Long-term Incentive Plan (stock compensation) Image

The company may, from time to time, award special Performance Share awards to Directors who are not Audit& Supervisory Committee Members (excluding External Directors) which are directly linked to point-in-time122corporate initiatives and which are aligned with shareholder expectations. Performance against established
KPIs for special Performance Share awards are determined independently each year over a three-year period,
with shares becoming vested after performance has been determined for the applicable period. There is nopost -vesting holding period established for special Performance Share awards.

■ Special Performance-based Share Awards (stock compensation) Image■ Annual Bonus
Bonuses will be paid based on performance achievement of annual goals. Bonuses will be paid in the range of
0% to 200% (100% at target) in accordance with the achievement of performance indicators such as
consolidated revenue, core earnings and core EPS, etc., established for a single fiscal year. For President andCEO, the annual bonus is weighted as 100% to the Corporate KPI.
For other Directors that have divisional responsibilities, 75% of their annual bonus opportunity is linked to the
Corporate KPI to drive their commitment to group-wide goals.

4-2. Directors who are Audit & Supervisory Committee Members and External Directors
The Long-term Incentive (stock compensation) for Directors who are Audit & Supervisory Committee
Members and External Directors is linked only to share price and not linked to financial performance results.
Newly awarded stock compensation will vest three years after the award date and Directors will be required tohold 75% of their vested share portion until they leave the Company.

■ Whole Picture of Directors' Compensation
Directors who are not Audit
and Supervisory Committee
Members

Directors who are
Audit and Supervisory
Committee Members

Internal
Directors

External
Directors

Internal
Directors

External
Directors

Basic Compensation

●

●

●

●

Bonus

●2

●5

●5

Long-termIncentivePlan(stock compensation)

Performancebased1

Not linked to

●3, 4

●4

performance results

1●5Includes Special Performance-based Share Awards

2 Varies from 0% to 200%, depending upon the degree of achievement, etc. of the performance indicators such as
consolidated revenue, core earnings, core EPS, etc., established for a single fiscal year.
3 Varies from 0% to 200%, depending upon the degree of achievement, etc. in relation to consolidated revenue,
free cash flow, indicators on earnings, R&D targets, integration success factors, etc. over 3 years
4 During term of office

5 Vest three years after the base points used for the calculation is granted.

123

5.

Governance

The Compensation Committee has been established with an External Director as its Chairperson and with the
majority of members being External Directors, to serve as an advisory organization for the Board of Directors toensure the appropriateness of Directors' compensation, etc. and the transparency in its decision-making process.
The level of compensation, compensation mix and performance-based compensation (Long-term Incentives andBonus programs) for Directors are reviewed by the Compensation Committee before resolution by the Board of
Directors. The company expanded the authority of the Committee by the board resolution to directly makedecisions on Directors who are not Audit & Supervisory Committee Members (excluding External Directors)
individual compensations in order to realize the transparency in the process.
The guiding principles for Director Compensation will continue to evolve to develop compensation programs
based on Directors' accountabilities and responsibilities, as well as to develop compensation programs that createshareholder value in alignment with Takeda-ism.

124

(5) Shareholdings
1) Standard and concept of classification of shareholdings
Those stocks held for the purpose of capital gain and dividend income are classified as "pure investment purpose stocks."
Those stocks held for the purpose of improvement of mid-to-long term corporate value are classified as "Non-pure investment
purpose stocks."
2) Shareholdings for reasons other than pure investment purposes(a) Shareholding policy and method for assessing its rationality and details of assessment by the Board of Directors
regarding possession of individual shares
The Company only holds a minimum number of shares of other companies with which it has business relationships. Aboutsuch shareholdings, the Company assesses whether or not each shareholding contributes to the corporate value of theCompany group by considering the Company’s mid-to-long term business strategy, and comparing benefits of suchownership (dividends and expected returns from strategic alliance, business transactions and others) with the Company's
cost of capital. As a result of the review, the Company divests shares from applicable shareholdings that are deemed to beof little significance after taking the financial strategy and market environment into consideration. For this fiscal year, theCompany decided to keep holding 12 names as a result of aforementioned reviewing process.
(b) Number of issues and amount posted on the balance sheet
Balance Sheet Amounts
Number of Shares

JPY(millions)

Unlisted Shares

50

6,388

Shares other than unlisted shares

12

60,915(Shares increased in the current fiscal year)
Numberof
SharesTotal Amountsof Acquisition
Costs for the
Increase in
Number of
SharesReasons for the Increase in Number of Shares

JPY(millions)
Unlisted Shares
Shares other than unlisted shares

6983 Increased from acquisitions of stocks inexisting or new strategic partnership deals.

24,777 Increased from acquisitions of stocks inexisting or new strategic partnership deals.

(Shares decreased in the current fiscal year)
Total Sales Amount for the
Decrease in Number of Shares

Number of Shares

JPY(millions)
Unlisted Shares

10

13

Shares other than unlisted shares

535,260125(c) Shareholdings (other than unlisted shares) for reasons other than pure investment purposes are as follows:

Specified investment shares
Current Fiscal Year
Number of Shares(Shares)
Issue
Balance Sheet Amounts
JPY(millions)

Prior Fiscal Year
Number of Shares(Shares)
Balance Sheet Amounts
JPY(millions)

11,517,333

23,013,868

30,29150,1704,214,559

4,214,559

10,827

8,832

727,120

727,120

5,580

3,946

1,096,892

̶

4,715

̶

804,800

804,800

MEDIPALHOLDINGSCORPORATION

Denali
Therapeutics, Inc.

Ultragenyx
Pharmaceutics,
Inc.

Wave Life
Sciences Ltd.

Alfresa Holdings
Corporation

ASKA
Pharmaceutical
Co.,Ltd.

2,535

1,906

2,204,840

2,204,840

2,527

3,686

253,467

253,467SUZUKEN CO.,LTD.

VITAL KSKHOLDINGS,
INC.

1,625

1,114

1,163,215

1,163,215

1,270

1,218

126

Purpose of Holding,
Quantitative/Economic Rationale for
Shareholding and the Reason for the
Increase in the Number of Shares(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2Holding oftheCompany’s
Share

✔

✔
Note:3✔

✔

✔
Note:4IssueRhythmPharmaceuticals,
Inc.

Ovid
Therapeutics, Inc.
(Note(2))

HOKUYAKU
TAKEYAMA
Holdings, Inc.

Current Fiscal Year
Number of Shares(Shares)
Balance Sheet Amounts
JPY(millions)

Prior Fiscal Year
Number of Shares(Shares)
Balance Sheet Amounts
JPY(millions)

223,544

223,544678

473

1,781,996

1,781,996

349

1,341

370,599

370,599284

313

157,057

66,128235

56

Sumitomo Mitsui
Financial
Group,Inc.

-

1,078,968

-

4,810

Mitsubishi UFJ
Financial Group,Inc.

-

5,863,874

-

4,087

-

570,055-351-

55,000Dermira, Inc.

NomuraHoldings, Inc.

Daito
PharmaceuticalCo., Ltd.

-214

Purpose of Holding,
Quantitative/Economic Rationale for
Shareholding and the Reason for the
Increase in the Number of Shares(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.
(Quantitative / economic rationale forshareholding) Note:2(Reason for the increase in the numberof shares) Shareholding increased by
90,929 shares due to contractual
reasons.
(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining business
relationship for financial activities that
support our business.
(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining business
relationship for financial activities that
support our business.
(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining business
relationship for financial activities that
support our business.
(Purpose of holding) The Company
holds stocks in this company for the
purpose of maintaining and improving
business relationship.

Holding oftheCompany’s
Share✔
Note:5✔
Note:6✔
Note:7✔

Notes:(1) "-" means that the Company does not hold applicable stocks(2) The company discloses the assessment method for rationale for shareholdings since we are not able to disclose qualitative /127economic rationale for the specified investment shares. The Company holds stocks as a result of comprehensive assessment
considering capital costs, dividends and transaction amounts as well as importance on our business strategy and relationshipwith an issuer.
(3) Shareholding company is Alfresa Corporation, the subsidiary of Alfresa Holdings Corporation。
(4) Shareholding company is Vital-Net, Inc., the subsidiary of Vital KSK Holdings, Inc.
(5) Shareholding company is Hokuyaku, Inc., the subsidiary of Hokuyaku Takeyama Holdings, Inc.
(6) Shareholding company is Sumitomo Mitsui Banking Corporation., the subsidiary of Sumitomo Mitsui Financial Group, Inc.
(7) Shareholding company is Nomura Securities Co. Ltd., the subsidiary of Nomura Holdings Inc.
Deemed Stockholdings
Not applicable3) Shareholdings for pure investment purposes
Current Fiscal Year
JPY(millions)
Number ofCategory
Total Amounts on
IssuesBalance Sheet(Name of
JPY(millions)Issues)Unlisted Shares̶̶
Shares except unlisted
shares3

Prior Fiscal Year
JPY(millions)
Number of
Total Amounts on
IssuesBalance Sheet(Name of
JPY(millions)Issues)

237

̶

̶

42

7,144

Current Fiscal Year
Category

Unlisted Shares
Shares except unlisted
sharesTotal Amounts of
Dividends
Received
JPY(Million)

Total Amounts ofProfit/Loss from
Sales of Shares
JPY(Million)

Total Amounts ofProfit/Loss from
Revaluation of
SharesJPY(Million)

̶

̶

̶

113

5,698

203

128

V. Financial Information
1. Basis of preparation of the consolidated financial statements and the non-consolidated financial statements(1) The consolidated financial statements of the Company have been prepared in accordance with IFRS pursuant to Article 93 of“Ordinance on the Terminology, Forms, and Preparation Methods of Consolidated Financial Statements” (Ordinance of the
Ministry of Finance No. 28 of 1976) (hereinafter “Ordinance on Consolidated Financial Statements”).
(2) The non-consolidated financial statements of the Company are prepared in accordance with the Ordinance of the Ministry of
Finance No. 59 of 1963 “Ordinance on Terminology, Forms, and Preparation Methods of Financial Statements” (hereinafter“Ordinance on Financial Statements”).
Also, the Company is qualified as a company submitting financial statements prepared in accordance with special provision andprepares financial statements in accordance with the provision of Article 127 of the Ordinance on Financial Statements.
2. Audit certification
Pursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act of Japan, the consolidated financial
statements for the fiscal year from April 1, 2018 to March 31, 2019 and the non-consolidated financial statements for the fiscal
year (from April 1, 2018 to March 31, 2019) were audited by KPMG AZSA LLC.
3. Particular efforts to secure the appropriateness of the consolidated financial statements and a framework to ensure that theconsolidated financial statements are appropriately prepared in accordance with IFRSThe Company has made particular efforts to ensure the appropriateness of the consolidated financial statements and has establisheda framework to ensure that the consolidated financial statements are appropriately prepared in accordance with IFRS. The details ofthese are the follows:(1) To establish a framework capable of appropriately adopting changes in accounting standards, the Company has made efforts tobuild expert knowledge by appointing employees who have sufficient knowledge about IFRS, joining the AccountingStandards Board of Japan and similar organizations, and participating in their training programs.
(2) To ensure that the Company appropriately prepares the consolidated financial statements in accordance with IFRS, theCompany has created the Group guidelines for accounting practices based on IFRS, and has been conducting accounting
procedures based on these guidelines. The Company regularly obtains press releases and accounting standards published by theInternational Accounting Standards Board, understands the latest accounting standards and assesses their potential impact on
the Company, and then updates the Group guidelines in a timely manner.

129

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES

1. Consolidated Financial Statements and Others(1) Consolidated financial statements
1) Consolidated Statements of Income for the Year Ended March 31,
JPY (millions, except per share)
Note

2018

2019

1,770,531 ¥(495,921)

2,097,224(659,690)

Selling, general and administrative expenses(628,106)(717,599)

Research and development expenses(325,441)(368,298)

Revenue
Cost of sales

4¥

Amortization and impairment losses on intangible assets associated with products

12(122,131)(203,372)

Other operating income

5169,412

159,863

Other operating expenses

5(126,555)(103,159)

6

241,789
39,543204,969
16,843Finance expenses

6(31,928)(83,289)

Share of loss of investments accounted for using the equity method

14(32,199)(43,627)

Profit before tax
Income tax (expense) benefit

7

217,205(30,497)

94,896
14,118¥

186,708 ¥109,014¥

186,886 ¥109,126¥

186,708 ¥109,014¥239.35 ¥113.50237.56112.86

Operating profit
Finance income

Net profit for the year
Attributable to:
Owners of the Company

8

Non-controlling interests(178)

Net profit for the year
Earnings per share (JPY)
Basic earnings per share

8

Diluted earnings per share8

See accompanying notes to consolidated financial statements.

130

(112)

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES2)Consolidated Statements of Other Comprehensive Income for the Year Ended March 31,

JPY (millions)Note
Net profit for the year
Other comprehensive income (loss)

¥

2018

2019

186,708 ¥109,014

Items that will not be reclassified to profit or loss:
Changes in fair value of financial assets measured at fair value through othercomprehensive income

9

—

6,000

Remeasurement gain (loss) of defined benefit plans

9724(11,665)724(5,665)34,639Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations

946,611

Net changes on revaluation of available-for-sale financial assets

9

4,714

—

Cash flow hedges

9

1,919

(33,793)

Hedging cost

9

1,606

(4,909)382(94)55,232(4,157)55,956(9,822)

Share of other comprehensive income (loss) of investments accounted for using theequity method
Other comprehensive income (loss) for the year, net of tax

9, 14
9

Total comprehensive income for the year¥

242,664 ¥99,192Attributable to:
Owners of the Company¥

242,444 ¥

99,456

220

(264)

¥

242,664 ¥99,192

Non-controlling interests
Total comprehensive income for the year

See accompanying notes to consolidated financial statements.

131

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES3)Consolidated Statements of Financial Position as of March 31,

JPY (millions)
Note

2018

2019

536,801 ¥1,316,531

AssetsNon-current assets:
Property, plant and equipment

10¥

Goodwill

11

1,029,248

4,161,403

Intangible assets

12

1,014,264

4,860,368

Investments accounted for using the equity method

14

107,949

114,658

Other financial assets

15

196,436

192,241

77,97787,472Other non-current assets
Deferred tax assets

7

Total non-current assets

64,98088,991

3,027,655

10,821,664

Current assets:
Inventories

16

212,944986,744

Trade and other receivables

17

420,247

741,907

Other financial assets

15

80,64623,276

Income tax receivables

8,545

7,212

Other current assets

57,912

109,666

Cash and cash equivalents

18

294,522702,093

Assets held for sale

19

3,992

479,760

Total current assets
Total assets¥

1,078,808

3,050,658

4,106,463 ¥

13,872,322

See accompanying notes to consolidated financial statements.

132

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIESJPY (millions)
Note

2018

2019

Liabilities and Equity
Liabilities:
Non-current liabilities:
Bonds and loans

20

985,644 ¥4,766,005

Other financial liabilities

21¥

91,223

235,786

Net defined benefit liabilities

22

87,611

156,513—61,900

Provisions

23

28,04235,364

Other non-current liabilities

24

68,30075,174

Deferred tax liabilities

7

90,725867,061

1,351,545

6,197,803

20

18984,946

Trade and other payables

25

240,259

327,394

Other financial liabilities

21

29,61347,34067,694

119,485

Accrued income taxes

Total non-current liabilities
Current liabilities:
Bonds and loans

Accrued income taxes
Provisions

23

132,781392,733

Other current liabilities

24

263,930

437,888

Liabilities held for sale

19

3,214

201,145

737,5092,510,931

2,089,054

8,708,734

77,914

1,643,585

Share premium

90,7401,650,232

Treasury shares(74,373)(57,142)

Retained earnings

Total current liabilities
Total liabilities
Equity:Share capital

1,557,307

1,569,365

Other components of equity

350,631353,542

Other comprehensive income related to assets held for sale

(4,795)—

1,997,424

5,159,582

19,9854,006

Equity attributable to owners of the company
Non-controlling interests
Total equity
Total liabilities and equity¥

2,017,409

5,163,588

4,106,463 ¥

13,872,322

See accompanying notes to consolidated financial statements.

133

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES4)Consolidated Statements of Changes in Equity

JPY (millions)
Equity attributable to owners of the Company
Other components of equity

Share
Capital.............¥Net profit for the year ..........
As of April 1, 2017

65,203

Share
Premium¥

74,973

Treasury
Shares¥221,550

Exchange
Differences on
Translation of
Foreign
Operations

Retained
Earnings(48,734) ¥ 1,511,817

Changes in fairvalue of financial
assets measured
at fair value
through othercomprehensive
income¥—¥Net Changes on
Revaluation of
Available-forSale Financial
Assets¥67,980Cash Flow
Hedges¥

1,472

Re-measurement
Gain or Loss on
DefinedBenefit Plans

Hedging
Cost
¥

—

¥

Other
comprehensive
income related
to assets held for
sale

Total

—

¥ 291,002¥

NonControlling
Interests

Total

—

¥ 1,894,261¥

54,704

Total Equity¥

1,948,965———

186,886

—

—

—

—

—

—

—

—

186,886(178)

186,708

Other comprehensive income

—

—

—

—

46,252

—

5,057

1,919

1,606

724

55,558—55,558398

55,956Comprehensive income for the
year

—

—

—

186,886

46,252

—

5,057

1,919

1,606

724

55,558—242,444220

242,664Issuance of new shares......... 12,711

12,609

—

—

—

—

—

—

—

—

—

—

25,320—25,320Acquisition of treasury
shares——(41,545)

—

—

—

—

—

—

—

—

—

(41,545)—(41,545)

Disposal of treasury shares

—

0

1

—

—

—

—

—

—

—

—

—

1

—

1

—

—

—

(142,120)

—

—

—

—

—

—

—

—

(142,120)(2,189)(144,309)

—

—

—

—

—

—

—

—

—

—

—

—

—

(32,750)(32,750)........................

Transactions with owners:.....................
.....
Dividends (Note 26) ...........
Changes in ownership ..........
Transfers from othercomponents of equity

—

—

—

724

—

—

—

—

—

(724)

(724)

—

—

—

—

Share-based compensation(Note 28)—

18,610

—

—

—

—

—

—

—

—

—

—

18,610—18,610Exercise of share-based
awards (Note 28)—(15,452)

15,905

—

—

—

—

—

—

—

—

—

453

—

453

.......

..................
...........

Transfers to othercomprehensive income
related to assets held forsale—........................
.. 12,711
As of March 31, 2018 ..........¥
77,914 ¥Total transactions with owners

—

—

—

4,795

—

—

—

—

—

4,795

(4,795)———

15,767(25,639)(141,396)

4,795

—

—

—

—

(724)

4,071

(4,795)(139,281)(34,939)(174,220)—¥ 350,631

90,740¥(74,373) ¥ 1,557,307¥

272,597¥—¥

73,037

¥

3,391

¥

1,606

¥

See accompanying notes to consolidated financial statements.

134¥(4,795) ¥ 1,997,424¥

19,985¥2,017,409

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIESJPY (millions)
Equity attributable to owners of the Company
Other components of equity

Share
Capital
As of April 1, 2018272,597

Changes in fairvalue of financial
assets measured
at fair value
through othercomprehensive
income¥—15,401—

84,672(73,037)(1,378)——

10,257—25,658(10)

25,648

1,572,708

272,597

84,672

—

2,013

1,606

—

360,888(4,795)2,023,082

19,9752,043,057

109,126

—

—

—

—

—

—

—

—

109,126(112)

109,014——

29,964

5,938—(33,793)(4,909)(11,665)(14,465)

4,795(9,670)(152)(9,822)——

109,126

29,964

5,938—(33,793)(4,909)(11,665)(14,465)

4,795

99,456(264)

99,192

1,565,671

—

—

—

—

—

—

—

—

—

—

3,131,342—

3,131,342(1,172)Share
Premium¥

77,914....................
.......
Net profit for the year ..........

—

—

—

77,91490,740(74,373)

—

—

—

—

—

—
.................
......
Issuance of new shares .........1,565,671

Cumulative effects of changes
in accounting policies(Note 2)Adjusted opening balance

Other comprehensive income(loss)......................

Comprehensive income (loss)
for the year¥

90,740Treasury
Shares¥Exchange
Differences on
Translation of
Foreign
Operations

Retained
Earnings(74,373) ¥ 1,557,307¥

Net Changes on
Revaluation of
Available-forSale Financial
Assets¥73,037

Cash Flow
Hedges¥3,391

Re-measurement
Gain or Loss on
DefinedBenefit Plans

Hedging
Cost
¥

1,606

¥

—

Other
comprehensive
income related
to assets held for
sale

Total
¥ 350,631¥(4,795)

NonControlling
Interests

Total¥1,997,424¥

19,985

Total
Equity¥2,017,409

Transactions with owners:

Acquisition of treasury
shares——(1,172)

—

—

—

—

—

—

—

—

—

(1,172)—

Disposal of treasury shares

—

(0)

3

—

—

—

—

—

—

—

—

—

3

—

3

—

—

—

(142,697)

—

—

—

—

—

—

—

—

(142,697)(169)(142,866)———(2,337)

230

—

—

—

—

—

230

—

(2,107)(15,536)(17,643).....................
.....
Dividends (Note 26) ...........
Changes in ownership ..........
Transfers from othercomponents of equity.......

———

32,565—(44,230)———

11,665(32,565)

—

—

—

—

Share-based compensation(Note 28)—

20,102

—

—

—

—

—

—

—

—

—

—

20,102—

20,102

Exercise of share-based
awards (Note 28)

18,400

—

—

—

—

—

—

—

—

—

(7,881)—(7,881)..................
...........

—(26,281)Basis adjustment related toacquisitions—................
.. 1,565,671

—

—

—

—

—

—

34,7394,715—

39,454—39,454—39,454

Total transactions with owners

1,559,492

17,231(112,469)

230(44,230)—

34,7394,715

11,665

7,119—

3,037,044(15,705)

3,021,339—¥ 353,542—¥ 5,159,582

As of March 31, 2019

¥1,643,585¥1,650,232¥(57,142) ¥ 1,569,365¥

302,791¥

46,380

¥

—

¥

2,959

¥

1,412

¥

See accompanying notes to consolidated financial statements.
135

¥

¥

4,006

¥

5,163,588

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES5)Consolidated Statements of Cash Flows for the Year Ended March 31,
JPY (millions)
Note
Cash flows from operating activities:
Net profit for the year
Depreciation and amortization
Impairment losses
Equity-settled share-based compensation
Gain on sales and disposal of property, plant and equipment
Gain on divestment of business and subsidiaries
Loss (gain) on liquidation of foreign operations
Change in fair value of contingent consideration liabilities
Finance (income) expenses, net
Share of loss of associates accounted for using the equity method
Income tax expenses (benefit)
Changes in assets and liabilities:
Increase in trade and other receivables
Decrease in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in provisions
Other, net¥

Cash generated from operations
Income taxes paid
Tax refunds and interest on tax refunds received
Net cash from operating activities
Cash flows from investing activities:
Interest received
Dividends received
Acquisition of property, plant and equipment
Proceeds from sales of property, plant and equipment
Acquisition of intangible assets
Acquisition of investments
Proceeds from sales and redemption of investments
Acquisition of business, net of cash and cash equivalents acquired
Proceeds from sales of business, net of cash and cash equivalents divested
Payments into restricted deposits
Proceeds from withdrawal of restricted deposits
Payments into time deposits
Proceeds from withdrawal of time deposits
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans
Proceeds from bonds and long-term loans
Repayments of bonds and long-term loans
Purchase of treasury sharesInterest paid
Dividends paid
Acquisition of non-controlling interests
Repayments of obligations under finance lease
Facility fees paid for loan agreements
Other, net

31

27
27
27

27

Net cash from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(Consolidated statements of financial position)
Cash and cash equivalents reclassified back from assets held for sale

2018

18
19

Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents

2019

186,708 ¥
182,127
13,544
18,610(434)(134,100 )
41,465
10,523(7,615 )32,19930,497

109,014
272,446
10,12020,084(45,220)(82,975)(2,669)(5,966)66,446
43,627(14,118)(647)
13,7196,862(6,530 )20,809(13,382)
58,678(16,413)47,063(73,347)

407,737(54,874 )
24,991

373,388(51,536)6,627

377,854

328,479

2,412
7,699
(67,005 )2,965(61,257 )(16,883 )
40,743(28,328 )
85,080(71,774 )———13,006

6,305
2,739(77,677)
50,717(56,437)(17,099)
65,035(2,958,686)
85,131—
71,844——(7,570)(93,342 )(2,835,698)(403,931 )
393,453(140,000 )(18,756 )(8,365 )(141,893 )—(2,658 )—(4,076 )367,319
2,795,926—(1,172)(34,914)(142,952)(2,392)(1,741)(19,507)(14,330)(326,226 )(41,714 )

2,946,237
439,018

319,455
21,797

294,522451

341,252(4,565 )294,973(31,269)

Cash and cash equivalents at the end of the year
Cash and cash equivalents reclassified to assets held for sale19

294,973(451)

702,722(629)

Cash and cash equivalents at the end of the year
(Consolidated statements of financial position)

18294,522702,093

See accompanying notes to consolidated financial statements.

136

TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Reporting Entity
Takeda Pharmaceutical Company Limited (the "Company") is a public company incorporated in Japan. The Company and its subsidiaries(collectively, "Takeda") is a global, values-based, research and development ("R&D") driven biopharmaceutical company with an innovative
portfolio, engaged primarily in the research, development, manufacturing and marketing of pharmaceutical products. Takeda's principal
pharmaceutical products include medicines in the following core business areas: gastroenterology ("GI"), rare diseases, plasma-derived therapies,
oncology, and neuroscience.
Takeda has grown both organically and through acquisitions, completing a series of major transactions that have brought therapeutic, geographic andpipeline growth, specifically the acquisition of Shire plc ("Shire") in January 2019 for 6,213,335 million JPY (Note 31). Shire was a leading global
biotechnology company focused on serving people with rare diseases and other highly specialized conditions.

2. Basis of Preparation

Compliance with International Financial Reporting Standards
Takeda’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by
the International Accounting Standards Board (“IASB”). The term IFRS also includes International Accounting Standards (“IASs”) and the related
interpretations of the interpretations committees ("SIC" and "IFRIC").

Approval of Financial Statements
The Company's consolidated financial statements as of and for the year ended March 31, 2019 were approved on June 27, 2019 by Representative
Director, President & Chief Executive Officer (“CEO”) Christophe Weber and Director & Chief Financial Officer ("CFO") Costa Saroukos.

Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for certain assets and liabilities recorded at fair value
including investments, derivatives, and contingent considerations.

Functional and Presentation Currency
The consolidated financial statements are presented in Japanese Yen ("JPY"), which is the functional currency of the Company. All financial
information presented in JPY has been rounded to the nearest million JPY, except when otherwise indicated.

New Accounting Standards and Interpretations Adopted
During the year ended March 31, 2019, Takeda has adopted the following new accounting standards:
IFRS 9 Financial instruments (“IFRS 9”)IFRS 9 was issued in its final form in July 2014 and has been implemented by Takeda as of April 1, 2018. IFRS 9 replaces the majority of therequirements of IAS 39 ‘Financial Instruments: Recognition and Measurement’ (“IAS 39”) and covers the recognition, classification, measurementand de-recognition of financial assets and financial liabilities; introduces a new impairment model for financial assets based on expected losses rather
than incurred losses and provides a new hedge accounting model. The principal impact for Takeda was the re-measurement of certain available-forsale financial instruments to fair value on initial application on April 1, 2018.
Takeda applied IFRS 9 with respect to classification and measurement (including impairment) without restating previous years, with the exception ofhedge accounting impacts which generally have been applied prospectively. The cumulative effects of initially applying IFRS 9 were recognized inequity as of the date of initial application of IFRS 9 (April 1, 2018). As a result of the adoption on the date of initial application, the opening balanceof retained earnings and other components of equity increased by 14,073 million JPY and 10,257 million JPY, respectively, while other financial

137

assets (non-current), other financial assets (current), and deferred tax liabilities increased by 32,809 million JPY, 856 million JPY and 9,345 million
JPY, respectively, and non-controlling interests decreasing by 10 million JPY. Comparative period presented for 2018 has not been updated as a resultof the adoption of IFRS 9, with the exception of hedge accounting impacts. See Note 3 for further details on the accounting policy under IAS 39 and
IFRS 9.
Takeda elected to designate irrevocably all of its equity instruments as financial assets measured at fair value through other comprehensive income(FVTOCI). This designation has been made based on the Company’s intent to hold these investments for the foreseeable future. Changes in the fairvalue of financial assets at FVTOCI are recognized in other comprehensive income, and the cumulative amount of the other comprehensive income istransferred to retained earnings when the instruments are derecognized due to liquidation or sale.
The classification of other financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its
contractual cash flow characteristics. The determination of the business model has been made based on the facts and circumstances that existed at thedate of initial application.
The impairment of financial assets measured at amortized cost is assessed using an expected credit loss (ECL) model where previously the incurred
loss model was used. There was no significant impact on the impairment of receivables upon the adoption of the new standard.
Takeda has not designated any financial liabilities as at fair value through profit or loss. There are no changes in classification and measurement for
Takeda’s financial liabilities following the adoption of IFRS 9.
The adoption of IFRS 9 has not had a material impact on Takeda’s financial liabilities and derivatives.
The new hedge accounting model introduced by the standard requires hedge accounting relationships to be based upon Takeda’s own risk
management objectives and strategy, and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness. The model is tobe discontinued only when the hedging relationships no longer qualify for hedge accounting. All hedging relationships designated under IAS 39 as ofMarch 31, 2018 met the criteria for hedge accounting under IFRS 9 as of April 1, 2018, and are therefore regarded as continuing hedging
relationships.
In addition, under IAS 39, the currency basis spread was included in cash flow hedges under other component of equity. Under IFRS 9, this basis
spread and time value of the currency options are separately accounted for and presented as hedging cost under other component of equity. The hedge
accounting impacts from IFRS 9 are generally applied prospectively, with the exception of certain aspects being treated retrospectively. Takeda
retrospectively applied the accounting treatment of hedging cost and adjusted the comparative information. The amounts retrospectively recorded as
hedging cost resulted in a 1,606 million JPY deduction from cash flow hedge reserves as of March 31, 2018.
Classification and carrying amounts of financial assets under IAS 39 and IFRS 9 as of the date of adoption were changed as presented in the tablebelow.
JPY (millions)
IAS 39Cash and cash equivalents

Loans and receivables

Derivative assets

Derivative assets to which hedge
accounting is applied

Carrying Amount¥

294,522

Financial assets measured atfair value through profit orloss
Derivative assets to which
hedge accounting is applied

2,527 Derivative assets to which
hedge accounting is applied

2,527

516,853 Financial assets measured atamortized cost
169,814 Financial assets measured atfair value through othercomprehensive income

516,853

5,303 Financial assets measured atfair value through profit or
2,070
loss

7,576

Loans and receivables
Financial assets measured atfair value through profit or
loss

Total

Carrying Amount

294,522 Financial assets measured at ¥amortized cost
762 Financial assets measured atfair value through profit orloss

Trade and other receivables, other financial Loans and receivables
assetsEquity instruments
Available-for-sale financial
assetsConvertible notes

JPY (millions)
IFRS 9¥138

991,851762

203,276¥

1,025,516

The following changes were made to the carrying amount of the financial assets as of the application date.

JPY (millions)
Carrying
AmountIAS 39Loans and receivables¥

Financial assets measured at fairvalue through profit or loss
Derivative assets to which hedge
accounting is applied
Available-for-sale financial assets

Total

¥

ReClassification

JPY (millions)
ReMeasurement

816,678 ¥(5,303) ¥

—

2,832

5,303

203

2,527

—

—

169,814—33,462

991,851 ¥— ¥33,665IFRS 9Financial assets measured at¥amortized cost
Financial assets measured at fairvalue through profit or loss
Derivative assets to which hedge
accounting is applied
Financial assets measured at fairvalue through other comprehensive
income¥Carrying
Amount811,375
8,338
2,527
203,276

1,025,516

IFRS 15 Revenue from Contracts with Customers (“IFRS 15”)
Takeda adopted IFRS 15 on April 1, 2018. The new standard provides a single, principles-based approach to the recognition of revenue from allcontracts with customers. The standard focuses on the identification of performance obligations in a contract and requires revenue to be recognizedwhen or as those performance obligations are satisfied. The standard also has more detailed disclosure requirements. IFRS 15 did not have a material
impact on the amount or timing of recognition of revenue.
The amount and timing of the recognition of sales and the basis for the estimates of sales deductions generally remained consistent as it relates torevenue derived from the sale of pharmaceutical products.
The previous revenue recognition for considerations received related to revenue received from out-licensing agreements required the transfer ofownership and related royalty income to be recognized on an accrual basis in accordance with the substance of the agreement as remaining
performance obligations. The basis of allocation to the transfer of ownership and an allocation of revenue over the remaining performanceobligations, and therefore timing of recognition for consideration received, has changed as a result of adoption. The impact of this change is notmaterial.
Takeda elected the modified retrospective method upon adoption of IFRS 15, which requires the recognition of the cumulative effect of initiallyapplying IFRS 15 in opening equity at the date of initial application. As a result of the adoption of IFRS 15, due to the difference in allocation ofrevenue to performance obligations for considerations received related to out-licensing agreements, other non-current liabilities, other current
liabilities, and deferred tax assets decreased by 1,247 million JPY, 495 million JPY and 414 million JPY respectively, and opening retained earnings
increased by 1,328 million JPY.
For the year ended March 31, 2019, the impact from adoption of IFRS 15 on the consolidated financial statements was immaterial compared to theconsolidated financial statements under IAS 18.

New Accounting Standards and Interpretations Issued and Not Yet Adopted
New or amended accounting standards and interpretations that have been issued as of the date of approval of the consolidated financial statements but
are not effective and have not yet been adopted by Takeda as of March 31, 2019 are discussed below:
IFRS 16 Leases (“IFRS 16”)
The standard will require lease liabilities and right of use (ROU) assets to be recognized on the balance sheet for almost all leases. Of the costs fromoperating leases currently included within cost of sales, selling, general and administrative expenses, research and development expenses, and otheroperating expenses, the portion related to the financing element will be reclassified and reported as finance expenses. In the statement of cash flow,
the lease payments currently included within cash outflows from operating activities will be reported within cash flows from financing activities.
IFRS 16 is effective for Takeda on April 1, 2019.
As a lessee, this standard can be applied retrospectively to each prior reporting period (retrospective approach) or retrospectively with the cumulative
effect of initially applying this standard recognized at the date of initial application (modified retrospective approach). Takeda has elected to apply thestandard applying the modified retrospective approach. Under the modified retrospective approach, the lease liabilities will be measured at the139

present value of the remaining lease payments, discounted at the incremental borrowing rate as of April 1, 2019. The ROU assets will be recognizedat an amount equal to the lease liability, adjusted for any prepaid or accrued lease payments, onerous lease provisions and business combination
related fair value adjustments.
On April 1, 2019, Takeda expects to recognize additional lease liabilities of approximately 220 billion JPY and corresponding ROU assets ofapproximately 200 billion JPY excluding existing finance leases. The additional liabilities and ROU assets include the impact of the operating leases
obtained as a result of the Shire Acquisition.

IFRIC 23 Uncertainty over Income Tax Treatments (“IFRIC 23”)
The interpretation clarifies that if it is considered probable that a tax authority will accept an uncertain tax treatment, the tax charge should be
calculated on that basis. If it is not considered probable, the effect of the uncertainty should be estimated and reflected in the tax charge. In assessing
the uncertainty, it is assumed that the tax authority will have full knowledge of all information related to the matter. IFRIC 23 is effective for Takeda
on April 1, 2019.
Other Standards
In addition, the following amendments and interpretations have been issued:
•
•
•
•
•

Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’. The IASB hasdeferred these amendments until a date to be determined by the IASB.
Amendments to IFRS 9: Prepayment Features with Negative Compensation
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
Amendments to IAS 28: Long-term interests in associates and joint ventures
Annual Improvements 2015-2017 Cycle (issued in December 2017) including improvements to IFRS 3 Business Combinations, IFRS 11
Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs

The adoption of the amendments to IFRIC 23 and these additional amendments and interpretations are not expected to have a significant impact on
Takeda’s consolidated financial statements. For those amendments and interpretations where early adoption is permitted, Takeda does not plan toearly adopt.

Use of Judgments, Estimates, and Assumptions
The preparation of consolidated financial statements in accordance with IFRS requires management to make certain judgments, estimates, andassumptions that affect the application of accounting policies and the reported amount of assets, liabilities, revenues and expenses, and the disclosureof contingent assets and liabilities. Actual results could differ from these estimates.
These estimates and underlying assumptions are reviewed on a continuous basis. Changes in these accounting estimates are recognized in the period
in which the estimates are revised and in any future periods affected.
Information about judgments and estimates that have been made in the process of applying accounting policies and that have significant effects on
the amounts reported in the consolidated financial statements, and information about accounting estimates and assumptions that have significant
effects on the amounts reported in the consolidated financial statements, are as follows:
•
•
•
•
•
•
•
•

Recognition and measurement of taxes based on uncertain tax positions (Note 7)
Recoverability of deferred tax assets (Note 7)
Impairment of property, plant and equipment; goodwill; and other intangible assets (Note 10, Note 11, and Note 12, respectively)
Measurement of fair value of assets acquired and liabilities assumed and contingent consideration in business combinations (Note 21 andNote 31)
Measurement of defined benefit obligations (Note 22)
Measurement of provisions, including estimation of rebates and return reserves associated with Takeda’s product sales (Note 23)
Valuation assumptions relating to share-based compensation (Note 28)
Probability of an outflow of resources embodying economic benefits on contingent liabilities (Note 32)

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3. Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries that are directly or indirectly controlled by theCompany. All significant intercompany balances and transactions have been eliminated in consolidation.
Takeda controls an entity when it is exposed or has rights to variable returns from involvement with the entity and has the ability to affect those
returns using its power, which is the current ability to direct the relevant activities, over the entity. To determine whether Takeda controls an entity,
status of voting rights or similar rights, contractual agreements and other specific factors are considered.
The financial statements of the subsidiaries are included in the consolidated financial statements from the date when control is obtained until the datewhen control is lost. The financial statements of subsidiaries have been adjusted in order to ensure consistency with the accounting policies adopted
by the Company as necessary.
Changes in ownership interest in subsidiaries that do not result in loss of control are accounted for as equity transactions. Any difference between theadjustment to non-controlling interests and the fair value of consideration transferred or received, is recognized directly in equity attributable toowners of the Company. When control over a subsidiary is lost, the investment retained after the loss of control is re-measured at fair value as of thedate when control is lost, and any gain or loss on such re-measurement and disposal of the interest sold is recognized in profit or loss.

Investments in Associates and Joint Arrangements
Associates are entities over which Takeda has significant influence over the decisions on financial and operating policies, but does not have control orjoint control. Investments in associates are accounted for using the equity method and recognized at cost on the acquisition date. The carrying amountis subsequently increased or decreased to recognize Takeda’s share of profit or loss and other comprehensive income of the affiliate. Intra-groupprofits on transactions with associates accounted for using the equity method are eliminated against the investment to the extent of Takeda’s equity
interest in the associates. Intra-group losses are eliminated in the same way as intra-group profits unless there is evidence of impairment.
Joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of anarrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Takeda
classifies joint arrangement into either joint operations or joint ventures. The classification of a joint arrangement as a joint operation or a joint
venture depends upon the rights and obligations of the parties to the arrangement. Joint operation is a joint arrangement whereby the parties that havejoint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint venture is a joint
arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The assets, liabilities,
revenues and expenses in joint operations are recognized in relation to Takeda’s interest. The investment in joint ventures is accounted for using theequity method. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate or joint
venture is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of
the associate or joint venture and its carrying value, and then recognizes the loss within profit or loss.

Business Combinations
Business combinations are accounted for using the acquisition method. The identifiable assets acquired and the liabilities assumed are measured at
the fair values at the acquisition date. Goodwill is measured as the excess of the sum of the fair value of consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the acquirer's previously held equity interest in the acquiree less the fair value ofidentifiable assets acquired, net of liabilities assumed at the acquisition date. As part of business combinations, when the acquired entity consists offoreign operations with multiple functional currencies, Takeda allocates goodwill recognized upon the acquisition to the foreign operations based on
the estimated cash flows of the acquired foreign operations.
The consideration transferred for the acquisition of a subsidiary is measured as the fair value of the assets transferred, the liabilities incurred toformer owners of the acquiree, and the equity interests issued by Takeda. Non-controlling interests is initially measured either at fair value or at the
non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets on a transaction-by-transaction basis.
The consideration for certain acquisitions includes amounts contingent upon future events, such as the achievement of development milestones andsales targets.
Any contingent consideration included in the consideration payable for a business combination is recorded at fair value at the date of acquisition.
These fair values are generally based on risk-adjusted future cash flows discounted using appropriate discount rates. The fair values are reviewed at141the end of each reporting period. The changes in the fair value based on the time value of money are recognized in finance expenses and the otherchanges are recognized in other operating income or other operating expenses in the consolidated statements of income.
Acquisition related costs are recognized as expenses in the period they are incurred. Changes in Takeda’s ownership interests in subsidiaries arisingfrom transactions between Takeda and non-controlling interests that do not result in Takeda losing control over a subsidiary are treated as equity
transactions and therefore, do not result in adjustments to goodwill.

Foreign Currency Translations
Foreign Currency Transactions
Foreign currency transactions are translated into the functional currency of each entity within Takeda using the exchange rates at the dates of thetransactions or rates that approximate the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency using the spot rates of exchange at the end of each reporting period. Non-monetary assets andliabilities that are measured at fair value in foreign currencies are translated using historical exchange rates at the date when the fair value wasdetermined. Non-monetary assets and liabilities measured based on historical cost that are denominated in foreign currencies are translated at theexchange rate at the date of the initial transaction. Exchange differences arising from the translation or settlement are recognized in profit or loss
except when related to financial assets measured at fair value through other comprehensive income, as well as financial instruments designated ashedges of net investments in foreign operations and cash flow hedges subsequently recognized as other comprehensive income. The gain or loss
arising from translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fairvalue of the item (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive income or profit or loss, arealso recognized in other comprehensive income or profit or loss, respectively).

Foreign Operations
The assets and liabilities of foreign operations are translated using the spot exchange rates at the end of the reporting period, while income andexpenses of foreign operations presented in profit or loss and other comprehensive income are translated using the exchange rates at the dates of thetransactions or rates that approximate the exchange rates at the dates of the transactions.
Exchange differences arising from translation are recognized as other comprehensive income. In cases in which foreign operations are disposed of,the cumulative amount of exchange differences related to the foreign operations is recognized as part of the gain or loss on disposal.

Revenue
Revenue on sales of Takeda products and services is recognized when control of the products is passed to the customer in an amount that reflects theconsideration to which we expect to be entitled in exchange for those products. Control is generally transferred at the point in time of shipment toor receipt of the products by customer, or when the services are performed. The amount of revenue to be recognized is based on the consideration
Takeda expects to receive in exchange for its goods and services. If a contract contains more than one contractual promise to a customer(performance obligation), the consideration is allocated based on the standalone selling price of each performance obligation.
The consideration Takeda receives in exchange for its goods or services may be fixed or variable. Variable consideration is only recognized when it ishighly probable that a significant reversal will not occur. The most common elements of variable consideration are listed below:•••

Rebates and discounts granted to government agencies, wholesalers, retail pharmacies, managed healthcare organizations and othercustomers are estimated and recorded as a deduction from revenue at the time the related revenues are recorded. They are calculated on thebasis of historical experience and the specific terms in the individual agreements.
Cash discounts are offered to customers and are provisioned and recorded as revenue deductions at the time the related sales are recorded.
Sales return provisions are recognized when Takeda sells a product which provides the customer a right of return. Sales return provisions
are recorded as revenue deductions when there is historical experience of Takeda agreeing to customer returns and Takeda can reasonably
estimate expected future returns. In doing so, the estimated rate of return is applied, determined based on historical experience of customer
returns and considering any other relevant factors. The rate is multiplied by the amounts invoiced in order to estimate expected future
returns.

Takeda generally receives payments from customers within 120 days after the point in time when goods are delivered to the customers. Takeda
usually performs those transactions as a principal, but Takeda also sells products on behalf of others, and revenue is recognized at an amount of salescommission that Takeda expects to be entitled as an agent.

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Takeda also generates revenue in the form of royalty payments, upfront payments, and milestone payments from the out-licensing of intellectual
property (IP). Royalty revenue earned through a license is recognized when the underlying sales have occurred. Revenue from upfront payment isgenerally recognized when Takeda provides a right to use IP. Revenue from milestone payments is recognized at the point in time when it is highly
probable that the respective milestone event criteria is met, and a significant reversal in the amount of revenue recognized will not occur. Revenue
from other services such as research and development of compounds that are out-licensed is recognized over the service period.
Takeda generally receives payments from customers within 60 days after entering into out-licensing contracts or confirmation by customers thatconditions for the milestone payments are met. Takeda licenses its own intellectual property rights to customers, and performed those transactions asa principal. Takeda also provides other services as a principal.

Government Grants
Government grants are recognized when there is reasonable assurance that Takeda will comply with the conditions attached to them and receive thegrants. Government grants for the purchasing of property, plant and equipment are recognized as deferred income and then recognized as profit orloss and offset the related expenses on a systematic basis over the useful lives of the related assets.
Government grants for expenses incurred are recognized as profit or loss and offset the related expenses over the periods in which Takeda recognizes
costs for which the grants are intended to compensate.

Advertising and Sales Promotion Expenses
Costs of advertising and sales promotion are expensed as incurred. Advertising and sales promotion expense was 115,708 million JPY, and 106,755
million JPY for the years ended March 31, 2018 and 2019, respectively.

Research and Development Expenses
Research costs are expensed in the period incurred. Internal development expenditures are capitalized when the criteria for recognizing an asset are
met in accordance with IAS 38 ‘Intangible Assets,’ usually when a regulatory filing has been made in a major market and approval is consideredhighly probable. Where regulatory and other uncertainties are such that the criteria are not met, the expenditures are recognized in the income
statement. Property, plant and equipment used for research and development is capitalized and depreciated over the estimated life of the asset.

Income Taxes
Income taxes consist of current taxes and deferred taxes. Current and deferred taxes are recognized in profit or loss, except for income taxes resulting
from business combinations, and income taxes recognized in either other comprehensive income or equity related to items that are recognized, in thesame or different period, outside of profit or loss.

Current Taxes
The current tax payable or receivable is based on taxable profit for the year. Taxable profit differs from reported profit because taxable profit excludes
items that are either never taxable or tax deductible or items that are taxable or tax deductible in a different period. Accrued income taxes and income
tax receivable, including those from prior fiscal years, are measured at the amount that is expected to be paid to or received from the taxation
authorities, reflecting uncertainty related to income taxes, if any. Takeda’s current taxes also include liabilities related to uncertain tax positions.
Takeda’s current tax assets and liabilities are calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred Taxes
Deferred taxes are calculated based on the temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes at the end of the reporting period. Deferred tax assets are recognized for deductible temporary
differences, unused tax credits and unused tax losses to the extent that it is probable that future taxable profit will be available against which theassets can be utilized. This requires us to evaluate and assess the probability of future taxable profit and our business plan, which are inherently
uncertain. Uncertainty of estimates of future taxable profit could increase due to changes in economies in which we operate, changes in market
conditions, effects of currency fluctuations, or other factors. Takeda’s deferred taxes also include liabilities related to uncertain tax positions.
Deferred tax liabilities are generally recognized for taxable temporary differences.

143

Deferred tax assets and liabilities are not recognized for the following temporary differences:
•
•
•

•

Taxable temporary differences arising on the initial recognition of goodwill
The initial recognition of assets and liabilities in transactions that are not business combinations and affect neither accounting profit nor
taxable profit (loss) at the time of the transaction
Deductible temporary differences arising from investments in subsidiaries and associates, when it is not probable that the temporary
differences will reverse in the foreseeable future and that taxable profit will be available against which the temporary differences can beutilized
Taxable temporary differences arising from investments in subsidiaries and associates when the timing of the reversal of the temporary
differences is controllable and it is not probable that they will reverse in the foreseeable future

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods in which the temporary differences are
expected to reverse based on the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred
tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and the deferred
tax assets and liabilities for those related to income taxes levied by the same taxation authority on the same taxable entity.

Earnings per Share
Basic earnings per share is calculated by dividing profit or loss for the year attributable to owners of ordinary shares of the Company, by theweighted-average number of ordinary shares outstanding during the reporting period, adjusted by the number of treasury shares. Diluted earnings per
share is calculated by adjusting all the effects of dilutive potential ordinary shares.

Property, Plant and Equipment
Property, plant and equipment are measured using the cost model and is stated at cost less accumulated depreciation and accumulated impairment
loss. Acquisition cost includes mainly the costs directly attributable to the acquisition and the initial estimated dismantlement, removal, andrestoration costs associated with the asset. Except for assets that are not subject to depreciation, such as land and construction in progress, assets are
depreciated mainly using the straight-line method over the estimated useful life of the asset. Leased assets are depreciated using the straight-line
method over the shorter of the lease term or the estimated useful life unless it is reasonably certain that Takeda will obtain ownership by the end of
the lease term. The depreciation of these assets begins when they are available for use.
The estimated useful life of major asset items is as follows:•••

Buildings and structures
Machinery and vehicles
Tools, furniture and fixtures

3 to 50 years
2 to 20 years
2 to 20 years

Goodwill
Goodwill arising from business combinations is stated at its cost less accumulated impairment losses. Goodwill is not amortized. Goodwill isallocated to cash-generating units or groups of cash-generating units based on expected synergies and tested for impairment annually or whenever
there is any indication of impairment. Impairment losses on goodwill are recognized in the consolidated statements of income and no subsequent
reversal will be made.

Intangible Assets Associated with Products
Marketed Products
An intangible asset associated with a marketed product is amortized on a straight-line basis over the estimated useful life, which is based on expected
exclusivity period, ranging from 3 to 20 years. Amortization of intangible assets is included in amortization and impairment losses on intangible
assets associated with products in the consolidated statements of income. Amortization and impairment losses on intangible assets associated withproducts is separately stated in the consolidated statement of income because intangible assets associated with products have various comprehensive
rights and contribute to our ability to sell, manufacture, research, market and distribute products, compounds and benefit multiple business functions.

144

In-Process R&D
Takeda regularly enters into collaboration and in-license agreements with third parties for products and compounds for research and development
projects. Payments for collaboration agreements generally take the form of subsequent development milestone payments. Payments for in-license
agreements generally take the form of up-front payments and subsequent development milestone payments.
Up-front payments for in-license agreements are capitalized upon commencement of the in-license agreements, and development milestone payments
are capitalized when the milestone is triggered.
These intangible assets relating to products in development that are not yet available for use are not amortized. These intangible assets are assessed
for impairment on an annual basis, or more frequently if indicators of a potential impairment exist. An impairment is recorded if the carrying value
exceeds the recoverable amount of the intangible assets. Intangible assets relating to products which fail during development, or for whichdevelopment ceases for any reason are written down to their recoverable amount which is typically nil.
If and when Takeda obtains approval for the commercial application of a product in development, the related in-process research and development
assets will be reclassified to intangible assets associated with marketed products and amortized over its estimated useful life from marketing
approval.

Intangible Assets – Software
Software is recognized at cost and amortized on a straight-line basis over the expected useful life. The useful life used for this purpose is 3 to 10
years. Amortization of intangible assets – software is included in cost of sales, selling, general and administrative expenses, and research anddevelopment expenses in the consolidated statements of income.

LeasesLeases are classified as finance leases if substantially all the risks and rewards incidental to ownership are transferred to the lessee. Leases other thanfinance leases are classified as operating leases.

As Lessee
At the commencement of the lease term, Takeda recognizes finance leases as assets and liabilities in the consolidated statements of financial positionat amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the
inception of the lease. Lease payments for operating leases are recognized as expenses on a straight-line basis over the lease term, unless anothersystematic basis is more representative of the time pattern of the user's benefit is available.

Impairment of Non-Financial Assets
Takeda assesses whether there is any indication of impairment for non-financial assets at the end of each reporting period, excluding inventories,
deferred tax assets, assets held for sale, and assets arising from employee benefits. If any such indication exists, or in cases in which an impairment
test is required to be performed each year, the recoverable amount of the asset is estimated. In cases in which the recoverable amount cannot be
estimated for each asset, they are estimated at the cash-generating unit level. The recoverable amount of an asset or a cash-generating unit isdetermined at the higher of its fair value less costs of disposal, or its value in use. In determining the value in use, the estimated future cash flows are
discounted to their present value using a discount rate that reflects the time value of money and the risks specific to the asset. If the carrying amountof the asset or cash-generating unit exceeds the recoverable amount, impairment loss is recognized in profit or loss and the carrying amount isreduced to the recoverable amount. An asset or a cash-generating unit other than goodwill, for which impairment losses were recognized in prioryears, is assessed at the end of the reporting period to determine whether there is any indication that the impairment loss recognized in prior periods
may no longer exist or may have decreased. If any such indication exists, the recoverable amount of the asset or cash-generating unit is estimated. In
cases in which the recoverable amount exceeds the carrying amount of the asset or cash-generating unit, the impairment loss is reversed up to thelower of the estimated recoverable amount or the carrying amount that would have been determined if no impairment loss had been recognized inprior years. The reversal of impairment loss is immediately recognized in profit or loss.

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Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is determined mainly using the weighted-average cost
formula. The cost of inventories includes purchase costs, costs of conversion, and other costs incurred in bringing the inventories to the present
location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion andthe estimated costs necessary to make the sale. Pre-launch inventory is held as an asset when there is a high probability of regulatory approval for the
product. Before that point, a provision is made against the carrying value to its recoverable amount; the provision is then reversed at the point when ahigh probability of regulatory approval is determined.

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known
amounts of cash and subject to insignificant risk of change in value and due within three months from the date of acquisition.

Assets Held for Sale
An asset or disposal group for which the cash flows are expected to arise principally from sale rather than continuing use is classified as an asset held
for sale when it is highly probable that the asset or disposal group will be sold within one year, the asset or disposal group is available for immediatesale in its present condition, and the management of Takeda is committed to the sale. In such cases, the asset held for sale is measured at the lower of
its carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets classified as held for sale are not depreciated or amortized. Assets and liabilities classified as held
for sale are presented separately as current items in the consolidated statements of financial position.

Post-employment Benefit
Takeda sponsors lump-sum payments on retirement, pensions and other plans such as post-retirement medical care as post-employment benefit plans.
They are classified into defined benefit plans and defined contribution plans.

Defined Benefit Plans
Takeda uses the projected unit credit method to determine the present value, the related current service cost, and the past service cost by each defined
benefit obligation. The discount rate is determined by reference to market yields on high quality corporate bonds at the end of the reporting period.
The net defined benefit liabilities (assets) in the consolidated statements of financial position are calculated by deducting the fair value of the plan
assets from the present value of the defined benefit obligations. Past service cost defined as the change in the present value of the defined benefit
obligation resulting from a plan amendment or curtailment is recognized in profit or loss upon occurrence of the plan amendment or curtailment.
Re-measurement of net defined benefit plans is recognized in full in other comprehensive income and transferred to retained earnings in the period inwhich they are recognized.

Defined Contribution Plans
The costs for defined contribution plans are recognized as expenses when the employees render the related service.

Provisions
Takeda recognizes rebates and return reserves if Takeda receives consideration from a customer and expects to refund some or all of thatconsideration to the customer. In addition, provisions are recognized when Takeda has present legal or constructive obligations as a result of past
events, it is probable that outflows of resources embodying economic benefits will be required to settle the obligations and reliable estimates can bemade of the amount of the obligations. Takeda’s provisions consist primarily of rebates and return reserves, as well as provisions for litigation andrestructuring.

Financial Instruments
Takeda’s financial instruments include financial instruments related to lease contracts, trade and other receivables and payables, liabilities forcontingent consideration under business combinations, derivative instruments, and rights and obligations under employee benefit plans, which aredealt with in specific accounting policies.

146

Financial Assets – Subsequent to April 1, 2018
Initial Recognition and Measurement

Financial assets are recognized in the consolidated statements of financial position when Takeda becomes a party to the contractual provisions of the
instruments. Financial assets, except for investments in debt instruments recorded at fair value through profit or loss (FVTPL), are initially measured
at fair value plus transaction costs that are directly attributable to the acquisition.
Investments in debt instruments recorded at amortized cost: Assets such as trade and other receivables that are held within a business model whose
objective is to hold financial assets in order to collect contractual cash flows and whose contractual terms give rise on specified dates to cash flowsthat are solely payments of principal and interest on the principal amount outstanding are measured at amortized cost. Trade receivables are initiallyrecognized at their invoiced amounts, including any related sales taxes less adjustments for revenue deductions such as impairment loss allowanceand cash discounts.
Investments in debt instruments recorded at fair value through other comprehensive income (FVTOCI): Assets that are held within a business model
objective whose objective is achieved by both collecting contractual cash flows and selling financial assets whose contractual terms give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are measured at FVTOCI.
Investments in debt instruments recorded at fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortized cost or
FVTOCI are measured at FVTPL.
Equity instruments recorded at FVTOCI: On initial recognition, Takeda made an irrevocable FVTOCI election (on an instrument-by-instrument
basis) to present the subsequent changes in the fair value of equity instruments in other comprehensive income for certain equity instruments held forthe long term for strategic purposes. At the reporting date, Takeda designates all of its equity instruments as financial assets at FVTOCI.

Subsequent Measurement and Derecognition
Takeda derecognizes a financial asset only when the contractual right to receive the cash flows from the asset expires or when Takeda transfers thefinancial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Investments in debt instruments recorded at amortized cost: These assets are subsequently measured at amortized cost using the effective interest
method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in
profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Investments in debt instruments recorded at FVTOCI: These assets are subsequently measured at fair value. Interest income calculated using theeffective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses arerecognized in OCI. Upon derecognition of the investments, the gains and losses accumulated in OCI related to the investment is reclassified to profit
or loss.
Investments in debt instruments recorded at FVTPL: These assets are subsequently measured at fair value, and a gain or loss on debt instruments thatis subsequently measured at FVTPL is recognized in profit or loss.
Equity instruments recorded at FVTOCI: These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss
unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are neverreclassified to profit or loss. Upon derecognition of the investments, the amounts in OCI related to the investment is reclassified within equity toretained earnings.
Impairment
Loss allowances for trade receivables are established using an ECL model. The provisions are based on a forward-looking ECL, which includes
possible default events on the trade receivables over the entire holding period of the trade receivables. Takeda has elected to measure provisions for
trade receivables, contract assets and lease receivables at an amount equal to lifetime ECL. Takeda uses a provisions matrix based on historical loss
rates adjusted for forward looking information to calculate ECL. These provisions represent the difference between the contractual amount of the
trade receivables and the lease receivables in the consolidated financial statements of financial position and the estimated collectible net amount.

147

Financial Assets – Prior to April 1, 2018
Initial Recognition and Measurement
Financial assets are recognized in the consolidated statements of financial position when Takeda becomes a party to the contractual provisions of the
instruments. Financial assets, except for financial assets at fair value through profit or loss, are initially measured at fair value plus transaction costs
that are directly attributable to the acquisition.
At the initial recognition, the financial assets are classified based on the nature and purpose in accordance with the following:•••

Financial assets at fair value through profit or loss: Either held-for-trading financial assets or financial assets designated as financial assets
at fair value through profit or loss.
Loans and receivables: Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Available-for-sale financial assets: Non-derivative financial assets that are either designated as available-for-sale financial assets or notclassified as (a) financial assets at fair value through profit or loss, or (b) loans and receivables.

Subsequent Measurement•••

Financial assets at fair value through profit or loss – Financial assets at fair value through profit or loss are measured at fair value, and any
gains or losses arising on re-measurement are recognized in profit or loss.
Loans and receivables – Loans and receivables are measured at amortized cost using the effective interest method less any impairment loss.
Interest income is recognized principally by applying the effective interest rate, unless the recognition of interest is immaterial as in thecase of short-term receivables.
Available-for-sale financial assets – Available-for-sale financial assets are measured at fair value as of the end of the reporting period, andthe gains and losses arising from changes in fair value are recognized in other comprehensive income. Exchange differences on monetary
assets are recognized in profit or loss. Dividends on available-for-sale financial assets (equity instruments) are recognized in profit or loss
in the reporting period when Takeda’s right to receive the dividends is established. Upon derecognition of the investments, the amounts in
OCI related to the investment is reclassified to profit or loss.

Impairment
Financial assets are considered impaired when there is objective evidence that one or more events occurred after the initial recognition of thefinancial asset and it is reasonably anticipated to have had a negative impact on the estimated future cash flows of the asset. For available-for-sale
equity instrument, a significant or prolonged decline in the fair value below its cost is considered objective evidence of impairment. Even when there
is no objective evidence of impairment individually, certain categories of financial assets, such as trade receivables, are collectively assessed for
impairment. For financial assets measured at amortized cost, the impairment loss is the difference between the carrying amount of the asset and thepresent value of the estimated future cash flows discounted at the original effective interest rate on the asset. In a subsequent period, if the amount of
the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized; the previously
recognized impairment loss is reversed through profit or loss. When an available-for-sale financial asset is determined to be impaired, the cumulative
gain or loss that was previously accumulated in accumulated other comprehensive income (loss) is reclassified to profit or loss in the same period. In
respect to available-for-sale equity investments, impairment loss previously recognized in profit or loss is not reversed through profit or loss. In
respect to available-for-sale debt instruments, if the amount of the fair value increases in a subsequent period and the increase can be related
objectively to an event occurring after the impairment was recognized; the previously recognized impairment loss is reversed through profit or loss.
Derecognition
Takeda derecognizes a financial asset only when the contractual right to receive the cash flows from the asset expires or when Takeda transfers thefinancial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, thedifference between the carrying amount and the consideration received or receivable is recognized in profit or loss, and the cumulative gain or loss
that was previously accumulated in accumulated other comprehensive income (loss) is reclassified to profit or loss.

148

Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are recognized in the consolidated statements of financial position when Takeda becomes party to contractual provisions offinancial instruments. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, bonds andloans, or payables.
Financial liabilities, except for financial liabilities at fair value through profit or loss, are initially measured at fair value less transaction costs that are
directly attributable to the issuance.
Subsequent Measurement
Financial liabilities recorded at FVTPL: Financial liabilities at fair value through profit or loss are measured at fair value, and any gains or losses
arising on re-measurement are recognized in profit or loss. Financial liabilities at fair value through the profit and loss includes derivatives andcontingent consideration related to business combinations.

Other financial liabilities, including bonds and loans: Other financial liabilities are measured at amortized cost mainly using the effective interest
method.

Derecognition
Takeda derecognizes a financial liability only when the obligation specified in the contract is discharged, cancelled, or expires. On derecognition of afinancial liability, the difference between the carrying amount and the consideration paid or payable is recognized in profit or loss.
Derivatives
Takeda hedges the risks arising mainly from their exposure to fluctuations in foreign currency exchange rates and interest rates using derivative
financial instruments such as foreign exchange forward contracts, interest rate swaps, currency options, and currency swaps. Takeda does not enter
into derivative transactions for trading or speculative purposes. Derivatives are measured at FVTPL unless the derivative contracts are designated as
hedging instruments. The gains and losses on derivatives that are not designed as hedging instruments are recognized in profit or loss. The treatmentof the change in fair value for derivatives designated as hedging instruments varies based on the type of hedge as described below.
Hedge Accounting- Subsequent to April 1, 2018
For foreign currency exposure as a result of translation risk, Takeda designates certain non-derivatives, such as foreign currency denominated debt, as
net investment hedges of foreign operations. For foreign currency exposure due to foreign currency denominated transactions, Takeda designates
certain derivatives, such as foreign currency forwards, as cash flow hedges of forecasted transactions. Within the designation documentation at
inception, Takeda documents the risk management objective, nature of the risk being hedged, and relationship between hedging instruments andhedged risk based on the strategy for undertaking the hedging relationships. At inception and on a quarterly basis, Takeda also assesses whether thehedging instruments are highly effective in offsetting changes in the fair value or the cash flows of the hedged item.
Cash flow hedges – the effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recognized inother comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss. The cumulative gain orloss that was previously recognized in other comprehensive income is reclassified to profit or loss in the same period when the cash flows of thehedged items are recognized in profit or loss and in the same line item in the consolidated statements of income. The currency basis spread and thetime value of the foreign currency options are accounted for and presented as hedging cost under other components of equity separately from cash
flow hedges.
Net investment hedges – the gain or loss on hedging instruments is recognized in other comprehensive income. At the time of disposal of the foreign
operations, the cumulative gain or loss recognized in other comprehensive income is reclassified to profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or when the hedge no longer qualifies forhedge accounting.

149

Hedge Accounting - Prior to April 1, 2018
The policy applied prior to April 1, 2018 is similar to that applied subsequent to April 1, 2018. However, for all cash flow hedges, the currency basis
spread was accounted for and presented under cash flow hedges.

Transaction costs of financial liabilities
Transaction costs relating to the financial liabilities of debt issued are recorded against the corresponding debt and amortized to the consolidated
statements of income over the period to the earliest redemption date of the debt, using the effective interest rate method. On extinguishment of therelated debt, any unamortized deferred transaction costs are written off and charged to interest expense in the consolidated statements of income.

Share-based Payments
Takeda has implemented share-based payment programs and provides equity and cash-settled share-based payments.
Equity-settled Share-based Payments
Equity-settled share-based payments are granted based on the service performed by the employees, directors, and senior management. The service
received and the corresponding increase in equity are measured at the fair value of the equity instruments at the grant date. The fair value of theequity instruments granted to employees, directors, and senior management are recognized as expense over the vesting period of the awards with acorresponding amount as an increase in equity.

Cash-settled Share-based Payments
Cash-settled share-based payments are granted based on the service performed by the employees, directors, and senior management. The service
received and the corresponding liability are measured at the fair value of the corresponding liability. The fair value of the liability-classified awards
granted to employees, directors, and senior management are recognized as expense over the vesting period of the awards with a corresponding
amount as an increase in liability. Takeda re-measures the fair value of the liability at the end of each reporting period and at the date of settlement,
and recognizes any changes in fair value in profit or loss.
CapitalOrdinary Shares
Proceeds from the issuance of ordinary shares by the Company are included in share capital and share premium.
Treasury Shares
When the Company acquires treasury shares, the consideration paid is recognized as a deduction from equity. When the Company sells the treasury
shares, the difference between the carrying amount and the consideration received is recognized in share premium.

4. Operating Segment and Revenue Information
Takeda comprises a single operating segment and is engaged in the research, development, manufacturing and marketing of pharmaceutical products,
over-the-counter ("OTC") medicines and quasi-drug consumer products, and other healthcare products. This is consistent with how the financial
information is viewed in allocating resources, measuring performance, and forecasting future periods by the CEO who is Takeda’s Chief Operating
Decision Maker.
Takeda’s revenue from contracts with customers is comprised of the following:
JPY (millions)
For the Year Ended March 31
2018

2019

Sales of pharmaceutical products
Royalty and service income¥

1,693,838 ¥
76,693

2,026,273
70,951Total¥

1,770,531 ¥

2,097,224

150

Geographic Information
Takeda’s revenue from contracts with customers is based in the following geographic locations:

JPY (millions)
For the Year Ended March 31
Japan
2018
2019

¥

580,349
571,016

United States

Europe andCanadaRussia/ CIS

Latin
America

¥

¥

¥

¥

598,341
828,985

313,723
405,641

68,24059,741

Asia

75,65888,115¥

Other

104,026
105,411¥30,194 ¥38,315

Total
1,770,531
2,097,224

Other includes the Middle East, Oceania and Africa.
Takeda’s non-current assets are held in the following geographic locations:
JPY (millions)
As of March 31
Japan
2018
2019

¥

413,457 ¥400,342

United States

Switzerland

1,231,051 ¥
6,649,357

70,175 ¥1,523,527

Other

Total

902,226 ¥
1,818,875

2,616,909
10,392,101

Non-current assets exclude financial instruments, deferred tax assets and net defined benefit assets. Goodwill recognized as a result of the Shireacquisition during the year ended March 31, 2019 was allocated to United States, Switzerland and Other.

Information Related to Major Customers
During the year ended March 31, 2018 and 2019, Medipal Holdings Corporation and its subsidiaries (collectively, “Medipal Group”) represented
more than 10% of Takeda’s sales. The sales to the Medipal Group were 220,249 million JPY and 225,962 million JPY for the years ended March 31,2018 and 2019, respectively.
These customers represented an aggregate 49,565 million JPY and 58,965 million JPY of trade receivables as of March 31, 2018 and 2019,respectively.

Other Revenue Information
Contract Balances

JPY (millions)
As ofApril 1, 2018
Receivables from contracts with customers
Receivables included in trade and other receivables (net of impairment loss allowance) (Note 17)
Receivables included in assets held for sale (net of impairment loss allowance)¥

360,833 ¥As ofMarch 31, 2019657,681

1,277

—

—

4,237

4,321

6,819

541

1,101

Contract assets
Unbilled receivables
Contract liabilities
Deferred income (Note 24)
Advance payments

The revenue recognized during the year ended March 31, 2019 that was included in the contract liability balance as of April 1, 2018 was 781 million
JPY. The revenue recognized during the year ended March 31, 2019 from performance obligations satisfied (or partially satisfied) in previous periods
was 53,931 million JPY and primarily relates to royalty income.

151

Takeda’s contract assets relate to the right to receive consideration where performance was completed based on the contract, and trade receivables arerecognized when the right to receive consideration becomes unconditional. The change during the year was mainly due to business combinations.
Takeda’s contract liabilities primarily relate to out-licensing arrangements where Takeda receives cash consideration prior to the completion of its
performance obligations under the agreements.
Receivables from contracts with customers primarily increased as a result of the acquisition of Shire, upon which 304,720 million JPY of suchreceivables were recorded.

Transaction price allocated to the remaining performance obligations

JPY (millions)

As ofApril 1,
2018
Contract liabilities

5.

¥

Changesduring theperiod

4,862 ¥

3,058 ¥

Duration of the remaining performanceobligations

As ofMarch 31,2019

Within ayear

7,920 ¥

After a year but
before 5 years

4,200 ¥

After 5years

1,015 ¥

2,705

Other Operating Income and Expenses
JPY (millions)
For the Year Ended March 31
2018

2019

Other operating income:¥Change in fair value of contingent consideration liabilities (Note 21)

— ¥

5,966

Gain on sales of property, plant and equipment and investment property

18,81450,330Gain on divestment of business to Teva Takeda Yakuhin (Note 14)

27,48130,366

Gain on sale of shares of subsidiaries

106,337

56,625

Other

16,78016,576

Total¥

Other operating expenses:
Donations and contributions¥¥

159,863

5,603 ¥

3,627

Restructuring expense (Note 23)

44,73682,962

Loss on liquidation of foreign operations

41,465

2,112

Change in fair value of contingent consideration liabilities (Note 21)

10,523

—

—

4,016

24,22810,442

Loss on sale of shares of subsidiaries
Other
Total

¥

169,412

126,555¥

103,159

For the year ended March 31, 2018, the loss on liquidation of foreign operations primarily consists of the realization of cumulative translation loss
recorded in the consolidated statement of income upon the liquidation of certain foreign operations. The gain on the sale of shares of subsidiaries
relates to the sale of shareholding in Wako Pure Chemical Industries, Ltd.
For the year ended March 31, 2019, the gain on sales of property, plant and equipment and investment property primarily relates to the sale of theformer headquarters in Tokyo. The gain on sale of shares of subsidiaries relates to the sale of shareholding in certain real estate properties, including
the former Osaka headquarters, and the gain on the sale of 100% of the shares held in Guangdong Techpool Bio-Pharma Co., Ltd.

152

6.

Finance Income and Expenses
JPY (millions)
For the Year Ended March 31
2018

2019

Finance Income:Interest income
Interest income from financial assets measured at amortized cost¥

Interest income from financial assets measured at fair value through P&L
Total interest income

6,171
448

¥

3,282

6,619

Dividend income
Dividend income from financial assets measured at fair value through OCI and disposed ofduring the period
Dividend income from financial assets measured at fair value through OCI and held at end of
the period
Dividend income from financial assets measured at fair value through P&L

1,353
1,116
145

Total dividend income

3,165

Gain on sales of available-for-sale financial assets
Gain on foreign currency exchange, net
Other

2,614

30,430

—

—

7,007

2,666

603

¥

39,543 ¥16,843¥

10,036 ¥48,158Change in fair value of contingent consideration liabilities (Note 21)

2,261

3,743

Impairment of available-for-sale financial assets

6,657

—

—

11,365

Total
Finance Expenses:
Interest expense

Loss on derivative financial assets
Loss on foreign currency exchange, net
Financing fees for bridge loan for acquisition of Shire
Other
Total

7.

¥

10,279——16,102

2,695

3,921

31,928 ¥83,289

Income Taxes

Income Tax Expenses (Benefit)
The composition of income tax expense (benefit) is as follows:
JPY (millions)
For the Year Ended March 31
2018

2019

Current tax expenses
Deferred tax expenses¥

37,758 ¥(7,261)

61,606(75,724)

Total¥

30,497 ¥(14,118)

Current tax expenses include the benefits arising from previously unrecognized tax losses, tax credits, and temporary differences of prior periods.
These effects decreased current tax expenses by 8,005 million JPY and 10,875 million JPY for the years ended March 31, 2018 and 2019,respectively.
Deferred tax expenses include the benefits arising from previously unrecognized tax losses, tax credits, and temporary differences of prior periods.
These effects decreased deferred tax expenses by 2,998 million JPY and 6,975 million JPY for the years ended March 31, 2018 and 2019,respectively.

153

The Company is mainly subject to income taxes, inhabitant tax, and deductible enterprise tax in Japan. The statutory tax rate calculated based onthese taxes for the years ended March 31, 2018 and 2019 were 30.8% and 30.6% respectively. The tax law changed during the periods presented,
which resulted in the reduction in the statutory tax rate for the Company.
The following is a reconciliation from the Company's domestic (Japanese) tax rate to the effective tax rate for the year ended March 31:
Unit: Percentage
2018

2019

Company’s domestic (Japanese) tax rate

30.8

30.6

Non-deductible expenses for tax purposes (1)

2.6

23.2

Changes in unrecognized deferred tax assets anddeferred tax liabilities (2)Tax credits(0.6)(61.5)(4.7)(13.4)

Differences in applicable tax rates of overseas subsidiaries (3)

(5.4)

8.2

Changes in tax effects of undistributed profit ofoverseas subsidiaries
Effect of changes in applicable tax rates

0.1

7.9

(12.6)

1.9

Tax contingencies (4)2.7(10.0)

Changes in fair value of contingent consideration

1.7

(1.8)

Others(0.6)

0.0

Effective tax rate

14.0

(14.9)(1) The 23.2% impact for the year ended March 31, 2019 includes the impact from intra territory eliminations, the pre-tax effect of which has been

eliminated in arriving at the Company’s consolidated income from continuing operations before income taxes as well as non-deductible transaction
costs related to the Shire acquisition.
(2) The (61.5%) impact for the year ended March 31, 2019 is primarily driven by a capital tax loss related to restructuring of subsidiaries.
(3)

The 8.2% impact for the year ended March 31, 2019 is primarily driven by a unitary tax on overseas subsidiaries.

(4) The (10.0%) impact for the year ended March 31, 2019 primarily relates to the tax benefit driven by favorable audit settlements.

In the United States, the Tax Cuts and Jobs Act (“U.S. Tax Reform”) was enacted on December 22, 2017. The federal corporate tax rate was reduced
from 35% to 21% beginning January 1, 2018 under the new tax law. As a consequence of U.S. Tax Reform enactment, Takeda recognized tax benefitsof 27,516 million JPY during the year ended March 31, 2018, primarily from the revaluation of net deferred tax liabilities at lower future tax rates
and the improved recoverability of deferred tax attributes resulting from U.S. Tax Reform enacted federal law changes.

The decrease in Takeda’s effective tax rate from 14.0% to (14.9)% between the years ended March 31, 2018 and 2019 was primarily due to a onetime tax benefit from restructuring of subsidiaries (in changes in unrecognized deferred tax assets and deferred tax liabilities) and favorable audit
settlements (in tax contingencies), partially offset by an increase in non-deductible expenses for tax purposes and differences in applicable tax rates ofoverseas subsidiaries and the impact of U.S. Tax Reform (in effect of changes in applicable tax rates) during the prior year that did not occur in thecurrent year.

Deferred Taxes
Deferred tax assets and liabilities reported in the consolidated statements of financial position are as follows:
JPY (millions)
As of March 31
2018

2019

Deferred tax assets
Deferred tax liabilities¥

64,980 ¥(90,725)

88,991(867,061)

Net deferred tax liabilities¥(25,745) ¥(778,070)

154

The major items and changes in deferred tax assets and liabilities are as follows:
JPY (millions)

As of April
1, 2017

Acquisitions
throughBusiness
Combinations

As ofMarch 31,2018

Others(1)52,595 ¥(34,007) ¥

— ¥

— ¥

Inventories

38,452(6,561)——18

31,909Property, plant and equipment(33,574)

656

—

—

(111)

(33,029)

Intangible assets(254,908)

84,254

—

—

1,696

(168,958)

Available-for-sale financial assets(28,241)

—

4,074

—

89

(24,078)

Accrued expenses and provisions

80,266(10,373)——(1,560)68,333

Defined benefit plans

4,815(3,032)

(432)

—

1,027

2,378

Deferred income

17,562

709

—

—

(503)

17,768

Unused tax losses

62,886(16,114)

—

—

915

47,687

Tax credits

29,563

9,314

—

—

(2,456)36,421

Investments in subsidiaries and associates(35,461)

6,762

—

—

89

(28,610)31,617(24,347)

Research and development expenses¥

Recognized in
Other
Comprehensive
IncomeRecognizedin Profit or(Loss)

Other
Total

¥

(225) ¥

18,363(1,570)

—

371

6,071

7,261 ¥

2,072 ¥— ¥(650) ¥

(25,745)

Recognized in
Profit or(Loss)

Recognized in
Other
Comprehensive
IncomeOthers(1)As ofMarch 31,2019

(34,428) ¥JPY (millions)
As ofApril 1,
2018
Research and development expenses¥

Acquisitions
throughBusiness
Combinations

18,363 ¥(5,512) ¥— ¥17,605 ¥Inventories

31,90919,628—(39,308)(5,965)

6,264

Property, plant and equipment(33,029)

4,514—(52,036)(3,289)(83,840)

Intangible assets(168,958)

47,320—(733,472)(9,728)(864,838)

Available-for-sale financial assets(24,078)———

24,078—Financial assets measured at FVTOCI

650 ¥31,106——(1,202)

15(28,095)(29,282)

Accrued expenses and provisions

68,333(3,528)—37,472

1,958

104,235

Defined benefit plans

2,378

303

3,241

10,314448

16,684

Deferred income

17,768

283

—

6

(519)

17,538

Unused tax losses

47,68730,418—52,705(3,467)

127,343

Tax credits

36,421(335)—

38,562(979)

73,669Investments in subsidiaries and associates(28,610)(20,353)—(113,900)(1,210)(164,073)

6,071

2,986

720

(20,989)(1,664)(12,876)(25,745) ¥75,724 ¥2,759 ¥

(803,026) ¥(27,782) ¥ (778,070)

Other
Total

¥

(1) Other consists primarily of foreign currency translation differences, reclassification of deferred tax assets and liabilities classified as held for saleand the tax impact of items recorded directly to equity. There was no amount of deferred tax recorded directly to equity for the period ended
March 31, 2018. The aggregate amount of deferred tax related to items recorded directly to equity for the period ended March 31, 2019 caused a
reduction in equity of 1,992 million JPY.
Takeda considers the probability that a portion, or all of the future deductible temporary differences, unused tax losses, or unused tax credits can beutilized against future taxable profits upon recognition of deferred tax assets. In assessing the recoverability of deferred tax assets, Takeda considers
the scheduled reversal of taxable temporary differences, projected future taxable profits, and tax planning strategies.

155Based on the level of historical taxable profits and projected future taxable profits during the periods in which the temporary differences become
deductible, Takeda determined that it is probable that the tax benefits can be utilized.

The unused tax losses, deductible temporary differences, and unused tax credits for which deferred tax assets were not recognized are as follows:
JPY (millions)
As of March 31
2018
2019
Unused tax losses
Deductible temporary differences¥

Unused tax credits

36,878 ¥11,593840,867
45,135

7,954

6,054

The unused tax losses and unused tax credits for which deferred tax assets were not recognized will expire as follows:

JPY (millions)
As of March 31
2018
2019

Unused tax losses
1st year— ¥—2nd year¥92

1

3rd year

8,901

22,690

4th year505

163

5th year

301

615

After 5th year

25,189741,044

Indefinite

1,890

76,35436,878 ¥840,867

Total¥

JPY (millions)
As of March 31
2018
2019

Unused tax credits
Less than 5 years¥

5 years or more
Indefinite
Total

¥

3,201 ¥

1,200

4,383

4,460

370

394

7,954 ¥

6,054

The aggregate amounts of temporary differences associated with investments in subsidiaries for which deferred tax assets were not recognized were140,647 million JPY and 1,728,537 million JPY as of March 31, 2018 and 2019, respectively.
The aggregate amounts of temporary differences associated with investments in subsidiaries for which deferred tax liabilities were not recognized
were 157,656 million JPY and 2,462,928 million JPY as of March 31, 2018 and 2019, respectively.

156

8.

Earnings per Share

The basis for calculating basic and diluted earnings per share (“EPS”) (attributable to owners) is as follows:
As of March 31
2018

2019

Net profit for the year attributable to owners of the Company:
Net profit for the year attributable to owners of the Company JPY (millions)
Net profit used for calculation of earnings per share JPY (millions)¥

186,886¥

109,126

186,886

109,126

780,812

961,477

5,895

5,420

786,707966,897

Basic (JPY)239.35113.50

Diluted (JPY)

237.56112.86Weighted-average number of ordinary shares outstanding during the year (thousands ofshares) [basic]
Dilutive effect (thousands of shares)
Weighted-average number of ordinary shares outstanding during the year (thousands ofshares) [diluted]
Earnings per share

Basic EPS is calculated by dividing the net profit for the year attributable to owners of the Company, with the weighted average number of ordinary
shares outstanding during the year. This calculation excludes the average number of treasury shares. Diluted EPS is calculated by dividing the net
profit for the year attributable to owners of the Company, with the weighted-average number of ordinary shares outstanding during the year plus theweighted-average number of ordinary shares that would be issued upon conversion of all the dilutive ordinary shares into ordinary shares.
There were 814 thousand shares, such as stock options that are anti-dilutive, not included in the calculation of diluted earnings per share for the year
ended March 31, 2019. There were no anti-dilutive shares for the years ended March 31, 2018.

9.

Other Comprehensive Income (Loss)

Amounts arising during the year, reclassification adjustments to profit or loss, and tax effects for each component of other comprehensive income(loss) are as follows:157

JPY (millions)
For the Year Ended March 31
2018

2019

Re-measurement gain or (loss) on defined benefit plans:
Amounts arising during the year¥

Tax effects

1,156 ¥
(432)

Re-measurement gain or (loss) on defined benefit plans(14,906)
3,241

¥

724

¥

(11,665)

¥

8,125

¥

42,939Exchange differences on translation of foreign operations:
Amounts arising during the year
Reclassification adjustments to profit or (loss)

39,964(3,134)

Before tax effects
Tax effects

48,089(1,478)39,805(5,166)

Exchange differences on translation of foreign operations¥

46,611¥

34,639¥24,413¥—

Net changes on revaluation of available-for-sale financial assets
Amounts arising during the year
Reclassification adjustments to profit or (loss)
Before tax effects
Tax effects
Net changes on revaluation of available-for-sale financial assets¥(23,773)

—

640
4,074

—
—

4,714

¥

—

¥

— ¥

7,202

—

(1,202)

¥

— ¥

6,000

¥

Changes in fair value of financial assets measured at fair value through OCI:
Amounts arising during the year
Tax effects
Changes in fair value of financial assets measured at fair value through OCI:
Cash flow hedges:
Amounts arising during the year

(1,460) ¥(28,063)

Reclassification adjustments to profit or (loss)

4,240(6,363)

Before tax effects
Tax effects

2,780
(861)

(34,426)
633

Cash flow hedges

¥

1,919

¥

(33,793)

¥

3,130

¥

(4,088)

Hedging cost:
Amounts arising during the year
Reclassification adjustments to profit or (loss)

(815)

(908)

Before tax effects
Tax effects

2,315
(709)

(4,996)
87

Hedging cost

¥

1,606

¥

(4,909)

Share of other comprehensive income of investments accounted for using the equity method:Amounts arising during the year

¥

295

¥

(101)

Reclassification adjustments to profit or (loss)

87

7

Before tax effects
Tax effects

382
—

(94)
—

Share of other comprehensive income of investments accounted for using the equity method

¥

382

¥

(94)

Total other comprehensive income (loss) for the year¥

55,956 ¥(9,822)158

10.

Property, Plant and Equipment
JPY (millions)

Acquisition cost
Buildings andstructures

Machinery andvehicles¥¥ ¥As of April 1, 2017
Additions515,202
19,778—384,184
11,327

Acquisitions through businesscombinations
Transfers

15,741

19,184

Disposals and other decreases(864)(8,459)Reclassification to assets held
for sale (Note 19)
Foreign currency translationdifferences(1,830)(2,066)

630

5,020

Other
As of March 31, 2018

¥

—

(328)
¥

Tools, furniture,and fixtures¥

408,745

107,408
6,288

¥

—

(445)

548,329

69,58563¥

58,051
37,071

Total¥

1,134,432
74,527

—

—

1,615

72

(37,382)(770)(9,564)

(77)

(376)

(19,340)

(276)

(94)

—

(4,266)

767

541

626

7,584

313
¥

Construction inprogressLand

106,551(2)¥

70,089—(307)¥

57,684(769)¥

1,191,398

Additions

123,099

12,974

7,374

383

44,564

188,394

Acquisitions through businesscombinations
Transfers

267,871244,277

26,90946,117100,724

685,898

42,353

9,511

3,055

(11,519)(55,388)(11,988)

Disposals and other decreases(35,073)(23,933)(10,132)(3,397)(374)(72,909)

Reclassification to assets held
for sale (Note 19)
Foreign currency translationdifferences
Other(2,272)(167)(9,784)(69)—(12,292)

1,596(2,611)(1,271)125(3,841)(6,002)As of March 31, 2019

(4,418)¥(1,698)941,485¥

647,098(624)¥

Accumulated depreciation and accumulated impairment losses
As of April 1, 2017¥
(222,795) ¥(292,117)

122,078

2
¥

(809)

(7,547)

101,731¥

142,560¥

1,954,952¥ (89,197) ¥

(361)

¥

(2,619)¥(607,088)

Depreciation expenses(19,480)(21,357)(6,670 )——(47,507)

Impairment losses(13,620)

(454)

(9 )

—

(137)

(14,220)

Transfers

637

5

90

—

—

732

Disposals and other decreases

701

7,126

9,268

—

—

17,095

Reclassification to assets held for sale(Note 19)
Foreign currency translationdifferences
Other

525

846

171

—

—

1,542

(774)

(3,829)(533 )(34)—(5,170)

As of March 31, 2018
Depreciation expenses

106¥

Impairment losses(254,699)(24,261)21¥(309,759)(29,888)(108 )—¥ (86,988) ¥(9,169 )

(395)
—

—
¥

(2,756)—19¥(654,597)(63,318)

(355)

(151)

(72 )

—

(43)

(621)

Transfers(1,269)

374

895

—

—

—

Disposals and other decreases

27,04523,225

9,953

—

—

60,223

Reclassification to assets held for sale(Note 19)
Foreign currency translationdifferences
Other

1,109

168

9,342

—

—

10,619

1,203

3,535

831

21

9

5,599

2,249

1,179

246

—

—

3,674

¥

(248,978)(311,317)¥ (74,962) ¥

(374)

¥

(2,790)¥(638,421)¥

292,408¥

55,433¥527,344

As of March 31, 2019
Carrying amount

18,211¥ 69,225

As of March 31, 2018

As of April 1, 2017

293,630¥

92,06798,986

19,56369,69454,928536,801

As of March 31, 2019692,507335,781

47,116

101,357

139,770

1,316,531

159¥

Property, plant and equipment includes assets held under finance leases. The carrying amounts of these assets are as follows:
JPY (millions)

As of April 1, 2017
As of March 31, 2018

Buildings andstructures

Machineryand vehicles¥¥

As of March 31, 2019

61,37555,941
179,668

Tools, furnitureand fixtures

2,702 ¥
1,523

494
330

1,331

220

Takeda recognized the following impairment losses, which are reflected as follows, in the consolidated statements of income:JPY (millions)
For the Year Ended March 31
2018
Cost of sales
Selling, general and administrative expenses¥

Research and development expenses
Other operating expenses
Total

¥

2019
(365) ¥
—

(35)
(354)

—

(41)

(13,855)(191)(14,220) ¥(621)

Impairment loss for the year ended March 31, 2018 was related primarily to buildings and structures in research equipment which were deemed asunderutilized assets, related to the R&D transformation strategy.
Impairment loss for the year ended March 31, 2019 resulted primarily from facilities for administrative and sales activities in Japan that were
divested in the year ended March 31, 2019.
The carrying amounts of the impaired assets were reduced to the recoverable amounts, which were measured at the fair value less costs of disposal
using values, such as expected sales amounts. This fair value is classified as Level 3 in the fair value hierarchy.

160

11.

Goodwill

JPY (millions)
2018

2019

Acquisition cost
As of beginning of the year

1,020,471 ¥

1,029,291

Acquisitions (Note 31)

¥

3,256

3,105,512

Deconsolidation(899)(3,899)Foreign currency translation differences

6,512

30,499(49)—

Reclassification to assets held for sale (Note 19)
As of end of the year¥

1,029,291 ¥

4,161,403¥(897) ¥

(43)

Deconsolidation

899

40

Foreign currency translation differences

(45)

3

¥

(43) ¥—¥

1,019,574 ¥

1,029,248

1,029,248

4,161,403

Accumulated impairment losses
As of beginning of the year

As of end of the year
Carrying amount
As of beginning of the year
As of end of the year

Goodwill is allocated to the following groups of cash-generating units (“CGU”):
JPY (millions)
As of March 31
2018
Prescription drugs sold worldwide¥

Prescription drugs sold outside of the United States and Japan
Other
Total

¥

2019

527,481 ¥3,685,352

429,363
72,404403,474
72,577

1,029,248 ¥

4,161,403

Impairment loss for goodwill is recognized if the recoverable amount of goodwill is less than the carrying amount. The recoverable amount is thegreater of fair value less costs to sell, or value in use. Value in use is calculated by discounting the estimated future cash flows based on a three-year
projection approved by management using an appropriate growth rate and a discount rate. The projection includes assumptions about productlaunches, competition from rival products and pricing policy as well as the possibility of generics entering the market and loss of exclusivity. In
setting these assumptions, Takeda considers past experience, external sources of information, knowledge of competitor activity, and industry trends.
The significant assumptions used to calculate the recoverable amount (value in use) are as follows:
Growth Rate
Based on country/market
specific long-term average
growth rate for the CGU

Discount Rate
(Post-tax)
Based on country/market
specific weighted average cost ofcapitalDiscount Rate
(Pre-tax)
Based on country/market
specific weighted average cost ofcapitalMarch 31, 2018

1.5% – 3.2%

5.6% – 14.4%

8.0% – 18.0%

March 31, 20191.3% – 2.8%

6.1% – 11.8%

8.8% – 15.5%

The value in use exceeded the relevant carrying amount in each group of CGUs, and a reasonable change in the assumptions would not result in an
impairment.

161

12. Intangible Assets

JPY (millions)

Acquisition cost
As of April 1, 2017
Additions

Software¥69,153
16,934

Acquisitions through business combinations (Note 31)
Disposals and other decreases
Reclassification to assets held for sale (Note 19)
Deconsolidation
Foreign currency translation differences
As of March 31, 2018
AdditionsIntangible Assets
Associated with
Products¥—

41,764(1,975)
(158)
—
830
¥

1,977,596
32,59484,78526,188Other¥

23,3371¥2,070,087
49,529—41,764(4,517)(8)(6,500)(2,655)—(2,813)(2,356)—(2,356)(21,565)¥

Total

2,020,861
29,857(1,126)¥22,204
141(21,861)¥

2,127,850
56,186

Acquisitions through business combinations (Note 31)

51,7223,910,997—

3,962,719

Disposals and other decreases(2,522)

(131)

(11)

(2,664)

Reclassification to assets held for sale (Note 19)

(120)

—

—

(120)

Deconsolidation(220)(28,794)(4)(29,018)

Foreign currency translation differences

404

63,581

160,237 ¥5,996,371(45,011) ¥(951,122) ¥(10,917) ¥(1,007,050)(8,045)(126,108)(41)(134,194)(88)(19,080)—(19,168)

Reversal of impairment losses—

23,057—

23,057

Disposals and other decreases

1,242

2,397

6

3,645

Reclassification to assets held for sale (Note 19)

118

2,079

—

2,197

Deconsolidation

—

2,356

—

2,356

Foreign currency translation differences

13

15,557

1

15,571(51,771) ¥(13,774)(1,050,864) ¥(194,727)(10,951) ¥(61)(1,113,586)(208,562)

As of March 31, 2019
Accumulated amortization andaccumulated impairment losses
As of April 1, 2017¥¥

Amortization
Impairment losses

As of March 31, 2018
Amortization¥

Impairment losses

3¥

22,33363,988¥6,178,941(53)(8,645)—(8,698)

2,388

22

6

2,416

Reclassification to assets held for sale (Note 19)

59

—

—

59

Deconsolidation

153

17,8884

18,045

Foreign currency translation differences

55(8,325)23(8,247)¥(62,943) ¥(1,244,651) ¥(10,979) ¥(1,318,573)¥

24,143

Disposals and other decreases

As of March 31, 2019
Carrying amount
As of April 1, 2017

1,026,474 ¥

12,420 ¥1,063,037

As of March 31, 201833,014¥

969,997

11,253

1,014,264

As of March 31, 201997,2944,751,720

11,3544,860,368

There were no material internally generated intangible assets recorded in the consolidated statements of financial position.

162

The intangible assets associated with products are comprised of the following:
JPY (millions)
As of April 1, 2017
As of March 31, 2018
As of March 31, 2019Marketed Products

In-Process R&D

Carrying amount

¥

¥

¥

645,449
698,329

381,025
271,668

4,248,285

503,435

1,026,474
969,997
4,751,720

Marketed products mainly represent license rights associated with commercialized products. These include, but are not limited to, intangible assets
associated with PANTOPRAZOLE acquired through the acquisition of Nycomed, which represent 318,281 million JPY and 253,272 million JPY as ofMarch 31, 2018 and 2019, respectively, intangible assets associated with ALUNBRIG and ICLUSIG acquired through the acquisition of ARIAD
Pharmaceuticals, Inc., which represent 204,378 million JPY and 192,200 million JPY as of March 31, 2018 and 2019, respectively and TAKHZYRO,VYVANSE, GAMMAGARD, ADVATE/ADYNOVATE, and REPLAGAL, acquired through the acquisition of Shire, which represent 2,497,460 million
JPY as of March 31, 2019.
The remaining amortization period is 3 to 8 years as of March 31, 2019 for the assets acquired through the acquisition of Nycomed, 8 to 12 years forthe assets acquired through the acquisition of ARIAD Pharmaceuticals, Inc. and 1 to 20 years for the assets acquired through the acquisition of Shire.
In-process R&D mainly represents products in development and license rights obtained in connection with Takeda’s in-licensing and collaborationagreements. These agreements relate to the right to sell products that are being developed (Note 13). These intangible assets are not subject toamortization. These include intangible assets associated mainly with ALUNBRIG acquired through the acquisition of ARIAD Pharmaceuticals, Inc.,
which represent 182,002 million JPY and 189,184 million JPY as of March 31, 2018 and 2019, respectively and with SHP621 budesonide and
SHP620 Maribavir acquired through the acquisition of Shire, which represents 70,796 million JPY as of March 31, 2019.

Impairment
Takeda’s impairment assessment for intangible assets requires a number of significant judgments to be made by management to estimate therecoverable amount, including the estimated pricing and costs, likelihood of regulatory approval, and the estimated market and Takeda’s share of themarket. The most significant assumption for intangible assets associated with marketed products is the product market share of the therapeutic areaand estimated pricing, whereas the most significant assumption with pre-marketed products and in-process R&D is the probability of regulatory
approval. A change in these assumptions may have a significant impact on the amount, if any, of an impairment charge recorded during a period. For
example, negative results from a clinical trial may change the assumption and result in an impairment. Products in development may be fully
impaired when a trial is unsuccessful and there is no alternative use for the development asset.
Takeda recorded a reversal of impairment losses 3,889 million JPY (net of impairment losses) and impairment losses of 8,698 million JPY during theyears ended March 31, 2018, and 2019, respectively. These losses are primarily recognized in amortization and impairment losses on intangible
assets associated with products in the consolidated statement of income.
During the year ended March 31, 2018, Takeda recorded reversal of a previously recorded impairment losses of 23,057 million JPY mainly related to
COLCRYS based on more favorable sales performance. The recoverable amount of the assets related to the reversal was 49,113 million JPY. Thiswas offset by impairment losses of 19,168 million JPY primarily resulting from a decision to terminate development of certain products. The
recoverable amount of the impaired assets amounted to 3,185 million JPY.
During the year ended March 31, 2019, Takeda recorded impairment losses of 8,698 million JPY. The recoverable amount of the combined impaired
assets amounted to 29,667 million JPY. The impairment losses primarily resulted from the decision to terminate a collaboration agreement on
development of oncology products (Note 13).
Impairment losses were calculated by deducting the recoverable amount from the carrying amount.
The significant assumptions used to calculate the recoverable amount (value in use) are as follows:

March 31, 2018
March 31, 2019

Discount Rate
(Post-tax)

Discount Rate
(Pre-tax)

6.5% - 14.4%
11.0%

9.4% - 18.5%
14.2%

163

A part of the recoverable amount was measured at the fair value less costs of disposal (the amount that was expected to be received by selling theassets). This fair value is classified as Level 3 in the fair value hierarchy.

13.

Collaborations and Licensing Arrangements

Takeda is party to certain collaborations, in-licensing agreements and out-licensing arrangements.

Out-licensing agreements
Takeda has entered into various licensing arrangements where it has licensed certain product or intellectual property rights for consideration such as
up-front payments, equity interest of partners, development milestones, sales milestones and/or sales-based royalty payments. The receipt of thevariable considerations related to these substantive milestones is uncertain and contingent on the achievement of certain development milestones orthe achievement of a specified level of annual net sales by the licensee.

Collaborations and in-licensing arrangements
These agreements generally provide for commercialization rights to a product or products being developed by the counterparty, and, in exchange,
often resulted in an up-front payment being paid upon execution of the agreement and resulting an obligation that may require Takeda to make future
development, regulatory approval, or commercial milestone payments as well as sales-based royalty payments. In some of these arrangements,
Takeda and the licensee are both actively involved in the development and commercialization of the licensed product, and have exposure to risks andrewards that are dependent on its commercial success.
Under the terms of these collaboration and licensing arrangements, Takeda made the following payments during the years ended March 31:
JPY (millions)
Initial up-front and milestone payments
Acquisition of shares of collaboration and in- licensing partners¥

201832,594
15,074¥

2019
29,857
5,994

The following is a description of Takeda’s significant collaborations and in-licensing agreements.
Mersana Therapeutics (“Mersana”)
In March 2014, Takeda entered into an agreement with Mersana related to the development of antibody drug conjugates, which was expanded in
January 2015 and again in February 2016. In January 2019, Takeda and Mersana terminated the partnership. Accordingly, Takeda recognizedimpairment loss on intangible assets associated with products of 7,237 million JPY during the year ended March 31, 2019.
GlaxoSmithKline plc. (“GSK”)
In July 2017, Takeda entered into an exclusive licensing agreement with TESARO, Inc. ("TESARO") for the commercialization and clinicaldevelopment of Niraparib, a novel poly ADP-ribose polymerase inhibitor. TESARO was acquired by GSK during the year ended March 31, 2019.
The collaboration agreement grants Takeda the right to develop and commercialize all indications in Japan and all indications, except prostate cancer,
in South Korea, Taiwan, Russia and Australia. Under the terms of this agreement, Takeda has made an up-front payment and is required to makeadditional milestone payments upon the achievement of certain regulatory and commercial goals. GSK will also be eligible to receive from Takeda
tiered royalties based on a double-digit percentage of net product sales.
Denali Therapeutics (“Denali”)
In January 2018, Takeda entered into a collaboration agreement with Denali to develop and commercialize up to three specified therapeutic productcandidates for neurodegenerative diseases. Each program is directed to a genetically validated target for neurodegenerative disorders, including
Alzheimer’s disease and other indications, and incorporates Denali’s Antibody Transport Vehicle platform for increased exposure of biotherapeutic
products in the brain. Under the terms of the agreement, Takeda made an up-front payment in exchange for certain option rights and the purchase of
Denali equity. In addition, Denali is eligible to receive development and commercial milestone payments. Denali will be responsible for all
development activities and costs prior to Investigational New Drug filing for each of the three programs. Takeda has the option to co-develop and cocommercialize each of the three programs. If Takeda exercises the option, the parties will then jointly conduct clinical development and share allcosts equally. Denali will lead early clinical development activities and Takeda will lead late-stage clinical development activities. Takeda and Denali

164will jointly commercialize the products in the United States and China, and Takeda will have exclusive commercialization rights in all other markets.
The parties will share global profits equally.

Wave Life Sciences Ltd. (“Wave”)
In February 2018, Takeda entered into an agreement with Wave to discover, develop and commercialize nucleic acid therapies for disorders of thecentral nervous system (“CNS”). Under the agreement, Takeda has the option to co-develop and co-commercialize programs in areas of Huntington’sdisease (HD), amyotrophic lateral sclerosis (ALS), frontotemporal dementia (FTD) and spinocerebellar ataxia type 3 (SCA3). In addition, Takeda has
the right to license multiple preclinical programs targeting CNS disorders, including Alzheimer’s disease and Parkinson’s disease. Takeda made an
upfront payment and investment in Wave and has the potential to make future payments related to development and commercial milestone payments.

Rani Therapeutics LLC (“Rani”)
In January 2019, Takeda acquired a collaboration agreement with Rani to conduct research on the use of the RANI PILL technology for oral deliveryof Factor VIII (FVIII) therapy for patients with hemophilia A. This collaboration agreement was acquired through the acquisition of Shire. The
agreement provides Takeda an exclusive option to negotiate a license to develop and commercialize the technology for delivery of FVIII therapy
following completion of feasibility studies and a 0.84 % equity ownership in Rani.

Novimmune S.A. (“Novimmune”)
In January 2019, Takeda acquired a licensing agreement with Novimmune through its acquisition of Shire. The agreement provides Takeda a license
to the exclusive worldwide rights to develop and commercialize a bi-specific antibody for the treatment of hemophilia A and hemophilia A patientswith inhibitors. Under the terms of the agreement, Takeda will develop, and if approved, commercialize the product. Novimmune will be entitled toreceive additional potential milestone payments based on clinical, regulatory and commercial milestones and single-digit royalties.
AB Biosciences Inc. (“AB Biosciences”)
In January 2019, Takeda acquired a licensing agreement with AB Biosciences through its acquisition of Shire. The agreement grants Takeda a license
to exclusive worldwide rights to develop and commercialize a recombinant immunoglobulin product candidate and an exclusive, worldwide license
to AB Bioscience’s intellectual property relating to its pan receptor interacting molecule program. AB Biosciences is eligible to receive contingent
research, development, and commercialization milestone payments and tiered royalty payments.

14.

Investments Accounted for Using the Equity Method

Teva Takeda Pharma
Teva Takeda Pharma Ltd. ("Teva Takeda Pharma") is a business venture of Takeda and Teva Pharmaceutical Industries Ltd. ("Teva") headquartered in
Israel.
On April 1, 2016, Takeda sold its off-patented and long-listed products business in Japan to Teva Takeda Yakuhin Ltd. ("Teva Takeda Yakuhin”), a
subsidiary of Teva Takeda Pharma, and received 49.0% of shares of Teva Takeda Pharma as consideration for the business. The remainder of Teva
Takeda Pharma is owned by a subsidiary of Teva. The long-listed products business had a book value of 3,755 million JPY on the date of disposal.
Takeda has significant influence over Teva Takeda Pharma and has applied the equity method. Takeda accounted for the transaction based on IAS 28'Investments in Associates and Joint Ventures’. Under this accounting, Takeda recognized a gain for the difference between the fair value
consideration received (shares of Teva Takeda Pharma) and the carrying value of the business to the extent it had disposed of the business and it
deferred the remainder of the gain (49)%. The gain on transfer of business recorded in other operating income for the year ended March 31, 2017 was
115,363 million JPY, which included the gain of 102,899 million JPY recognized at the date of disposal. The remainder of the gain was deferred andis amortized over 15 years, which is the same period as the intangible assets identified in the purchase price allocation. The amortization of the gain isrecorded in other operating income.
Teva Takeda Pharma, which continues its generics business, and Teva Takeda Yakuhin, which operates the long-listed products business and its
generics business, are jointly engaged in business in Japan. Takeda recognizes revenue for product sales of goods related to its supply of the longlisted products, to Teva Takeda Yakuhin and service revenue for its distribution using its channel to deliver products including generic products ofTeva Takeda Pharma and Teva Takeda Yakuhin, to healthcare providers.

165

The summarized consolidated financial information of Teva Takeda Pharma and Teva Takeda Yakuhin is as follows:
JPY (millions)
For the Year Ended March 31
2018
Revenue¥

Net loss for the year

2019

103,719 ¥

89,686(66,301)(87,106)

Other comprehensive income (loss)——

Total comprehensive loss for the year

(66,301)(87,106)

Total comprehensive loss for the year (49.0%)(32,487)(42,682)

Other
Takeda’s share of loss for the year

¥

(137)

211

(32,624) ¥(42,471)

JPY (millions)
As of March 31

2018
¥

2019

163,979 ¥

111,379

Current assets

97,865

108,423

Non-current liabilities(31,901)(15,615)

Current liabilities(20,119)(18,695)

Non-current assets

Equity¥209,824 ¥

185,492

Takeda’s share of equity (49.0%)¥

102,814 ¥90,891

Goodwill

66,09432,921

Deferred gain

(73,554)(39,881)

95,354 ¥83,931

Carrying amount of investments accounted for using the equity method¥

The results of Teva Takeda Pharma and Teva Takeda Yakuhin for the year ended March 31, 2018 included an impairment loss of 104,753 million JPY
of which, 35,725 million JPY represents Takeda’s share. The results for the year ended March 31, 2019 included an impairment loss of 117,890
million JPY, of which 50,183 million JPY represents Takeda’s share. These impairments relate to changes in the business environment such as therevision of the pharmaceutical pricing system in Japan.
Takeda received dividends of 4,159 million JPY from Teva Takeda Pharma for the year ended March 31, 2018. There were no dividends received
from Teva Takeda Pharma for the year ended March 31, 2019. Teva Takeda Pharma cannot distribute its profits without the consent from the two
venture partners.

Associates that are individually immaterial to Takeda
Financial information for associates, which are individually immaterial to Takeda, is as follows: These amounts are based on the shareholding ratio ofTakeda.
JPY (millions)
For the Year Ended March 31

2018
Net profit (loss) for the year¥

Other comprehensive income (loss)
Total comprehensive income (loss) for the year

¥

166

2019
425 ¥

(1,156)

382

(94)

807 ¥

(1,250)

The carrying amount of the investments in associates, which are individually immaterial to Takeda, is as follows:

JPY (millions)
As of March 31
Carrying amount of investments accounted for using the equity method
15.

¥

2018
12,595 ¥2019
30,727

Other Financial Assets

JPY (millions)
As of March 31
2018
Derivative assets¥

2019
3,289 ¥

8,315

Investment in convertible notes at FVTPL

—

9,865

Investment in debt securities at FVTPL

—

1,608

Investment in equity instruments at FVTOCI—

168,732

Available-for-sale financial assets

169,814—

Restricted deposits

87,381

15,577

Other

16,598

11,420

Total¥

277,082 ¥

215,517

Non-current¥

196,436 ¥

192,241

Current¥

80,646 ¥23,276

As of March 31, 2018, available-for-sale financial assets included 163,030 million JPY of investments in public companies. As of March 31, 2019,equity instruments included 119,907 million JPY of investments in public companies. These are considered Level 1 in the fair value hierarchy as
defined in Note 27. The remainder of the equity instruments primarily relates to investments acquired in connection with collaborations and licensing
agreements (Note 13) and are considered Level 3 investments in the fair value hierarchy.
As of March 31, 2018, the restricted deposits mainly represent cash restricted for the acquisition of TiGenix NV (Note 31). These amounts were
subsequently released following the completion of the acquisition. As of March 31, 2019, the restricted deposits mainly represent amounts related to
Takeda’s business combinations.

16.

Inventories

JPY (millions)
As of March 31
2018
2019
Finished products and merchandiseWork-in-process¥

Raw materials and supplies
Total

¥

86,254 ¥63,145

280,738
544,41163,545

161,595

212,944 ¥986,744

The amount of inventory write-offs recognized was 10,292 million JPY, and 9,321 million JPY for the years ended March 31, 2018 and 2019respectively, and were included within cost of sales. Inventory as of March 31, 2019 increased due to the recording of the acquired inventory at fairvalue upon the acquisition of Shire (Note 31).

167

17.

Trade and Other Receivables

JPY (millions)
As of March 31
2018
2019
Trade receivables
Other receivables¥

Impairment loss allowance
Total

18.

¥

369,652 ¥
59,414660,999
84,226(8,819)(3,318)420,247 ¥741,907

Cash and Cash Equivalents

JPY (millions)
As of March 31
2018
2019
Cash and deposits
Short-term investments¥

243,324 ¥
51,198462,890239,203

Total¥

294,522 ¥702,093

19.

Assets and Disposal Groups Held for Sale

Takeda has classified certain assets as held for sale in the consolidated statement of financial position. Non-current assets and disposal groups aretransferred to assets held for sale when it is expected that their carrying amounts will be recovered principally through a sale and the sale isconsidered highly probable. The non-current assets and disposal groups held for sale are held at the lower of carrying amount or fair value less costs
to sell.
Gains or losses recognized from measuring the disposal groups classified as held for sale at the lower of their carrying amounts or fair value lesscosts to sell when assets or disposal groups are classified to held for sale, are recorded as other operating income or expense.

Assets Held for Sale
JPY (millions)
As of March 31
2018
2019
Buildings and structures
Land

¥

98 ¥
65

—
—

18

450

181 ¥

450

Investments accounted for using the equity method
Total

¥

The assets held for sale as of March 31, 2018 primarily represent buildings and structures that were classified as held for sale during the year thenended based on management decision to sell this property. No impairment was recorded upon classification of the building as held for sale. These
items were sold during the year ended March 31, 2019. The fair value of the assets is based on valuations by independent appraisers who holdrecognized and relevant professional qualifications in the respective location of assets held for sale. The valuations, which conform to the standardsof the location, are based on market evidence of transaction prices for similar assets.
The assets held for sale as of March 31, 2019 primarily represent an investment accounted for using the equity method in PRA Health Sciences thatwere classified as held for sale based on management decision to sell the investment. No impairment was recorded upon classification of theinvestments as held for sale. This investment was sold in May 2019. The fair value of the assets is based on expected sales price less costs ofdisposal.
The fair value of assets held for sale is classified as Level 3 in the fair value hierarchy.

168

Disposal Groups Held for Sale
JPY (millions)
As of March 31
2018
2019
Property, plant and equipment
Intangible assets

¥

— ¥
—

451
58

Inventories

1,202

—

Trade and other receivables

1,466

179

Cash and cash equivalents

451

629

Other

692

1,379

3,811 ¥

2,696

— ¥

383

Total assets¥

Net defined benefit liabilities¥

Provisions
Trade and other payables
Other
Total liabilities

¥

1,066

—

165

210

1,983

959

3,214 ¥

1,552

The disposal groups held for sale as of March 31, 2018, consisted mainly of a group of assets, liabilities, and other comprehensive income related to
Takeda's consolidated subsidiary, Multilab Indústria e Comércio de Produtos Farmacêuticos Ltda., and reclassified as held for sale. The shares of thesubsidiary were sold in July 2018. The fair value of the disposal group is based on the publicly announced sales price less costs of disposal and isclassified as Level 2 in the fair value hierarchy as of March 31, 2018.
The disposal groups held for sales as of March 31, 2019, consisted mainly of a group of assets and liabilities related to Takeda's consolidated
subsidiary, Axcelead Drug Discovery Partners, Inc., and reclassified as held for sale following management decision to sell the subsidiary. The sharesof the subsidiary were sold in April 2019. The fair value of the disposal group is based on the agreed upon sales price with the third party less costs ofdisposal and is classified as Level 3 in the fair value hierarchy as of March 31, 2019.
Takeda recorded a loss of 3,213 million JPY on the classification of the disposal group as held for sale for the year ended March 31, 2018. No loss on
the classification was recorded for the year ended March 31, 2019.

Items classified as held for sale at acquisition
There were certain asset and disposal groups that were acquired from Shire with the intention to be sold that were classified as held for sale at theacquisition date. These relate to the Xiidra® (lifitegrast ophthalmic solution) product which Takeda has subsequently announced a sale agreement for,as included in Note 33. These also include the research and development program referred to as SHP647 that the European Union had required to bedisposed as a condition to the acquisition of Shire by Takeda.
JPY (millions)
As of March 31
2019
Intangible assets¥

Inventories

455,340
13,682

Deferred tax assets

7,592

Total assets¥

476,614

Deferred tax liabilities¥

102,947

Provisions

78,836

Other financial liabilities

17,810Total liabilities¥

199,593169

20.

Bonds and Loans
JPY (millions)
As of March 31
2018

2019

¥

172,889 ¥18

3,196,365
500,002812,755

2,054,584

Total

¥

985,662 ¥

5,750,951

Non-current
Current¥¥

985,644 ¥18 ¥4,766,005
984,946

Bonds
Short-term loans
Long-term loans

The composition of bonds is as follows:
JPY (millions)
Carrying value

InstrumentthPrincipal Amountin contractual
currency (millions)

As of
As of
March 31, 2018 March 31, 2019

Interest Rate (%)

Maturity

14 Unsecured Straight Bonds

60,000 JPY ¥59,967 ¥59,9920.540%

15th Unsecured Straight Bonds

60,000 JPY

59,94459,9680.704%

Jul 2020

USD Unsecured Senior Notes

500 USD

52,97855,1292.450%Jan 2022

1,750 EUR—

5,750 EUR

2018 EUR Unsecured Senior Notes –variable rate
2018 EUR Unsecured Senior Notes – fixed
rate
2018 USD Unsecured Senior Notes – fixed
rate
Unsecured Senior Notes Assumed in Shire
Acquisition
Unsecured Senior Notes Assumed in Shire
Acquisition
Total

Jul 2019

Nov 2020 - Nov 2022—

216,717 3 month EURIBOR + margin(0.550-1.100%)
708,860
0.375-3.000%

5,500 USD—

605,2613.800-5.000%

Nov 2020 - Nov 2028

12,100 USD—

1,278,490

1.900-3.200%

Sep 2019 - Sep 2026

1,925 USD—

211,9482.875%-5.250%

Jun 2020 - Jun 2045

172,889 ¥3,196,365¥

Nov 2020 - Nov 2030

The composition of loans is as follows:

JPY (millions)
Carrying value

Instrument

Principal Amountin contractual
As of
As of
currency (millions) March 31, 2018 March 31, 2019
120,000
200,000

3 month LIBOR + 0.010%
0.200–0.300%

Jul 2019 - Jul 2020
Apr 2023 - Apr 2026

120,000 JPY
200,000 JPY

Syndicated Loans 2017

113,500 JPY

113,500

113,500

0.350%

Apr 2027

USD Syndicated Loans 2017

1,500 USD

159,255

165,599

6 month LIBOR + 0.500%

Apr 2027

Syndicated Loans 2019

500,000 JPY—

500,000

1 month TIBOR + 0.100%

Jul 2019

USD Syndicated Loans 20197,500 USD—

819,482

LIBOR + variable margin(0.750-1.500%)

Jan 2024

USD Japan Bank for International
Cooperation 2019
Other

3,700 USD—

409,346

6 month LIBOR + 0.600%

Dec 2025¥

120,000 ¥200,000

Maturity

Syndicated Loans 2013
Syndicated Loans 2016

Total

¥

Interest Rate (%)

220,018

226,659

812,773 ¥2,554,586

170

The bonds and loans incurred by Takeda to fund a portion of the Shire Acquisition comprised of the following:
•
•

•

•
•

•

2018 EUR Unsecured Notes - variable rate comprised of 1,000 million EUR at 3 month EURIBOR + 0.550% interest maturing in
2020, 750 million EUR at 3 month EURIBOR + 1.100% interest maturing in 2022.
2018 EUR Unsecured Notes - fixed rate comprised of 1,250 million EUR at 0.375% interest maturing in 2020, 1,500 million
EUR at 1.125% interest maturing in 2022, 1,500 million EUR at 2.250% interest maturing in 2026, and 1,500 million EUR at
3.000% interest maturing in 2030.
2018 USD Unsecured Notes - fixed rate comprised of 1,000 million USD at 3.800% annual interest maturing in 2020, 1,250
million USD at 4.000% annual interest maturing in 2021, 1,500 million USD at 4.400% annual interest maturing in 2023, and
1,750 million USD at 5.000% annual interest maturing in 2028.
Syndicated Loans 2019 comprised of a Senior Short-Term Loan Facility agreement with aggregate principal amounts up to
500,000 million JPY at 1 month TIBOR + 0.100% interest maturing in July 2019.
USD Syndicated Loans 2019 comprised of a Term Loan Credit Agreement with aggregate principal amounts up to 7,500 million
USD, out of which 3,500 million USD was made available in Euros. These syndicated loans mature in 2024, and have an interest
rate of LIBOR plus a variable margin based on the public debt rating. As of March 31, 2019, the principal amounts in USD and
EUR were 4,000 million USD and 3,057 million EUR, respectively.
Loan Agreement with the Japan Bank for International Cooperation (the "JBIC Loan") with aggregate principal amount of up to
3,700 million USD. The JBIC loan has interest of 6 month LIBOR + 0.600% interest, and matures in 2025.

The bonds and loans assumed from Shire with the acquisition are mainly comprised of the following:•••

Shire Unsecured Senior Notes, guaranteed by Takeda Pharmaceuticals Company Limited, comprised of 3,300 million USD at
1.900% interest maturing in 2019, 3,300 million USD at 2.400% interest maturing in 2021, 2,500 million USD at 2.875% interest
maturing in 2023, 3,000 million USD at 3.200% interest maturing in 2026.
Shire Unsecured Senior Notes, guaranteed by Takeda Pharmaceuticals Company Limited, comprised of 405 million USD at
2.875% interest maturing in 2020, 220 million USD at 3.600% interest maturing in 2022, 800 million USD at 4.000% interest
maturing in 2025, and 500 million USD at 5.250% interest maturing in 2045.
Shire Revolving Credit Facilities Agreement – On December 12, 2014, Shire entered into a 2,100 million USD revolving credit
facilities agreement with a number of financial institutions. This agreement was terminated in February 2019.

At their respective times of issuance, Takeda entered into a currency and interest rate swap agreement to hedge the JPY amount for 200 million USDof the USD Unsecured Senior Notes and 925 million USD of the USD Syndicated Loans 2017. Takeda entered into an interest rate swap agreement
to fix the interest rate for 120,000 million JPY of the Syndicated Loans 2013 and 575 million USD of the USD Syndicated Loans 2017.
As of March 31, 2019, Takeda had borrowing availability of 300,000 million JPY.
The 2018 USD Senior Notes have registration rights that, among other things, require Takeda to file a registration statement with the US Securities
and Exchange Commission for an offer to exchange the 2018 USD Senior Notes for registered notes prior to August 23, 2019. To the extent that thisis not accomplished, Takeda will be required to pay penalty interest until remedied. There are long-term financing agreements that contain various
financial covenants which require Takeda to maintain certain financial ratios and other restrictions including the level of the company’s borrowings.
The most restrictive of these covenants is that profit before tax must not be negative for two consecutive years. Takeda was in compliance with all
such covenants as of March 31, 2019.

171

21.

Other Financial Liabilities

JPY (millions)
As of March 31
2018
Derivative liabilities
Finance lease obligations

¥

2019
8,871
53,149Contingent consideration liabilities arising frombusiness combinations
Other

¥

8,745
179,41130,56971,062

28,247

23,908

Total¥

120,836¥

283,126

Non-current
Current¥¥

91,22329,613¥¥

235,786
47,340Finance lease obligations
The future minimum payments related to the finance lease obligations are as follows:
JPY (millions)
As of March 31
Minimum Lease Payments
2018
Within one year
Between one year and five years¥

More than five years
Total

¥

Less: Future finance charges

2019

Present Value of Minimum
Lease Payments
2018

2019

4,808 ¥
14,335

6,925 ¥
37,7382,127 ¥
4,704

80,018288,470

46,318167,632

99,161 ¥

333,133 ¥53,149 ¥179,41146,012

153,722

Present value of minimum lease payments¥

53,149 ¥179,411

Non-current
Current¥¥

51,022 ¥
2,127 ¥

177,266
2,145

2,145
9,634

Financial liabilities associated with contingent consideration arrangements
Financial liabilities associated with contingent consideration arrangements represent consideration related to business combinations or license
agreements that is payable only upon future events such as the achievement of development milestones and sales targets, including pre-existing
contingent consideration arrangements of the companies that are acquired by Takeda. At each reporting date, the fair value of contingent
consideration is re-measured based on risk-adjusted future cash flows discounted using appropriate discount rate.
As of the year ended March 31, 2018, financial liabilities associated with contingent consideration arrangements primarily consists of contingent
consideration related to the performance of the COLCRYS business which was acquired in the acquisition of URL Pharma. Inc. in June 2012.
As of the year ended March 31, 2019, the balance primarily relates to pre-existing contingent consideration arrangements from Shire’s historicalacquisitions.
The pre-existing contingent consideration acquired from Shire through Shire’s historical acquisitions is due upon the achievement of certain
milestones related to the development, regulatory, first commercial sale and other sales milestones of products at various stages of development andmarketing, which could total up to 83,802 million JPY of undiscounted payments over a period of over 20 years. The fair value of the contingent
consideration payable could increase or decrease due to changes in certain assumptions which underpin the fair value measurements. The
assumptions include probability of milestones being achieved.
The fair value of financial liabilities associated with contingent consideration arrangements are classified as Level 3 in the fair value hierarchy.

172

JPY (millions)
For the Year Ended March 31
2018
As of the beginning of the year

¥

2019

28,976 ¥30,569Additions arising from business combinations (Note 31)

3,164

52,046

Changes in the fair value during the period

12,784(2,223)

Settled and paid during the period(12,606)(7,734)—(1,648)Settled during the period and reclassified to other payables
Foreign currency translation differences(1,243)

175

(506)

(123)

30,569 ¥71,062Other
As of the end of the year¥

JPY (millions)
As of March 31
2018
Payment term (undiscounted)
Within one year

¥

2019

10,620 ¥17,604

Between one and three years

18,584

19,470Between three and five years

4,641

10,885More than five years

2,831

54,536

The following sensitivity analysis represents effect on the fair value of financial liabilities associated with contingent consideration arrangementsfrom changes in major assumptions:
JPY (millions)
As of March 31
2018
¥

2019
—

¥

3,204

Probability of technical milestones being achieved for
Shire’s historical contingent consideration arrangements

Increase by 5%
Decrease by 5%—(3,204)

Discount rate

Increase by 0.5%
Decrease by 0.5%

(257)
256

(1,626)
1,626

173

22.

Employee Benefits

Defined Benefit Plans
The Company and some of its subsidiaries have various defined benefit plans such as lump-sum retirement payments plans and defined benefit
pension plans, which define the amount of benefits that an employee will receive on or after retirement, usually based on one or more factors, such asage, years of employment, compensation, classes, and service.
The Company’s defined benefit plans account for the majority of Takeda’s defined benefit obligations and plan assets.

Defined benefit pension plans
Japan
The Company’s corporate defined benefit pension plan in Japan is a funded defined benefit pension plan, which is regulated by the Defined-Benefit
Corporate Pension Act, one of the Japanese pension laws. Benefits are paid in exchange for services rendered by employees who worked for morethan a specified period, typically three years, considering their years of service and the degree of their contribution to the Company.
The Company’s pension fund (the “Fund”) is an independent entity established in accordance with the Japanese pension laws, and Takeda has an
obligation to make contributions. The Director(s) of the Fund has the fiduciary duty to comply with laws; the directives by the Minister of Health,
Labor and Welfare, and the Director-Generals of Regional Bureaus of Health and Welfare made pursuant to those laws; and the by-laws of the Fundand the decisions made by the Board of Representatives of the Fund. Contributions are also regularly reviewed and adjusted as necessary to theextent permitted by laws and regulations.

Foreign
Other types of defined benefit pension plans operated by Takeda are generally established and operated in the same manner as described above and inaccordance with local laws and regulations where applicable.
The present value of the defined benefit obligation is calculated annually based on actuarial valuations that are dependent upon a number ofassumptions, including discount rates and future salary (benefit) increases, in accordance with IAS 19 ‘Employee Benefits’. Service costs charged tooperating expense related to defined benefit plans represent the increase in the defined benefit liability arising from pension benefits earned by active
participants in the current period. Takeda is exposed to investment and other experience risks and may need to make additional contributions where itis estimated that the benefits will not be met from regular contributions, expected investment income, and assets held.
The amounts recognized in the consolidated statements of income and the consolidated statements of financial position are as follows:
Consolidated statements of income
JPY (millions)
For the Year Ended March 31
2018
Japan

¥

ForeignDefined benefit costs

¥

2019

4,582 ¥

4,621

5,772

6,786

10,354 ¥11,407174

Consolidated statements of financial position

JPY (millions)
As of March 31, 2018
Japan
Present value of defined benefit obligations
Fair value of plan assets
Net defined benefit liabilities (assets)

Foreign

Total¥

198,686 ¥
230,42199,174 ¥21,207

297,860
251,628¥(31,735) ¥77,967 ¥46,232¥9,604 ¥

78,007 ¥87,611

41,33940

41,379(31,735) ¥77,967 ¥46,232

Consolidated statement of financial position
Net defined benefit liabilities
Net defined benefit assets
Net amount of liabilities (assets) recognized in the consolidated statement of financial
position¥

JPY (millions)
As of March 31, 2019

Consolidated statement of financial position
Japan
Present value of defined benefit obligations¥

Fair value of plan assets
Net defined benefit liabilities (assets)¥

Net defined benefit liabilities¥

Net defined benefit assets
Net amount of liabilities (assets) recognized in the consolidated statement of financial
position¥

Foreign

Total

198,293 ¥

227,975 ¥426,268

223,191

80,625

303,816(24,898) ¥147,350¥

122,452

9,461 ¥

147,435¥

156,896

34,35985

34,444(24,898) ¥147,350 ¥

122,452

Net defined benefit assets were included in other non-current assets on the consolidated statements of financial position. Net defined benefit assets
included 771 million JPY in assets held for sale, and net defined benefit liabilities included 383 million JPY in liabilities held for sale as of March 31,
2019, related to disposal groups held for sale (Note 19).

175

Defined benefit obligations
A summary of changes in present value of the defined benefit obligations for the periods presented is as follows:
JPY (millions)
For the Year Ended March 31, 2018
Japan
At beginning of the year
Current service cost¥

Interest cost

Foreign

217,026
4,866

¥

Total

90,424
4,295¥

307,450
9,161

1,424

1,713

3,137

3,294

(1,179)

2,115

(3)

782

779

Experience adjustments

466

297

763

Past service cost

11

5

16

Re-measurement gains and losses of defined benefit plans
From changes in demographic assumptions
From changes in financial assumptions

Settlement(2,515)

2,346

(169)

Benefits paid

(13,134)(3,093)(16,227)

Effect of business combinations anddisposals
Foreign currency translation differences(12,749)

81(12,668)

—

3,503

3,503

198,686 ¥99,174 ¥297,860

At end of the year¥

JPY (millions)
For the Year Ended March 31, 2019Japan
At beginning of year¥

Foreign

Total

198,686 ¥99,174 ¥297,860

Current service cost

4,774

5,041

9,815

Interest cost

1,390

2,356

3,746

Re-measurement gains and losses of defined benefit plans
From changes in demographic assumptions

1,499

(44)

1,455

From changes in financial assumptions

2,577

13,101

15,678Experience adjustments

301(1,301)(1,000)

Past service cost

71

—

71

Settlement

(262)

—

(262)

Benefits paid

(11,784)(5,156)(16,940)

1,041

116,060

117,101—(1,256)(1,256)198,293 ¥

227,975 ¥426,268

Effect of business combinations anddisposals
Foreign currency translation differences
At end of the year¥

The remaining weighted average duration of the defined benefit obligations was 14.4 years and 15.2 years as of March 31, 2018 and 2019,respectively.

176

Significant actuarial assumptions used to determine the present value are as follows:
Discount Rate

Future Salary Increases

Japan
Foreign

0.7%
1.7%

0.2%
2.7%

Japan
Foreign

0.6%
1.7%

0.2%
2.2%

2018

2019

A 0.5% change in these actuarial assumptions would affect the present value of defined benefit obligations at the end of the reporting period, while
holding all other assumptions constant, by the amounts shown below:
JPY (millions)
Discount Rate
2018

Change inassumptionJapan+0.50 %
-0.50 %

Foreign

Future Salary Increases

Impact¥Change inassumption

Impact(12,250)
13,778+0.50 %
-0.50 %

¥

517
(477)

+0.50 %

(7,371)+0.50 %

479

-0.50 %

8,247

-0.50 %

(665)

+0.50 %

(12,608)+0.50 %

499

-0.50 %

14,193-0.50 %

(470)

+0.50 %

(19,158)+0.50 %

2,745

-0.50 %

17,699-0.50 %

(3,995)2019
Japan
Foreign

Plan assets
The defined benefit plans are independent of Takeda and funded only by contributions from Takeda. Takeda's investment policies are designed tosecure the necessary returns in the long-term within acceptable risk levels to ensure payments of pension benefits to eligible participants, including
future participants. The acceptable risk level in the return rate on the plan assets is derived from a detailed study considering the mid- to long-term
trends and the changes in income such as contributions and payments. Based on policies and studies, after consideration of issues such as the
expected rate of return and risks, Takeda formulates a basic asset mix which aims at an optimal portfolio on a long-term basis with the selection of
appropriate investment assets.
A summary of changes in fair value of plan assets for the periods presented is as follows:
JPY (millions)

Balance at beginning of the year
Interest income on plan assets
Re-measurement of defined benefit plans
Return on plan assets

For the Year Ended March 31
2018
2019
¥
265,031 ¥
251,628
1,959
2,225

Contributions by the employer
Settlement
Benefits paid
Effect of business combinations and disposals
Foreign currency translation differences
Balance at end of the year

¥

4,813

468

4,753
(3,564)(11,507)(11,225)
1,368

5,706
—
(12,923)
55,133
1,579

251,628 ¥

303,816

Takeda expects to contribute 7,770 million JPY to the defined benefit plans for the year ending March 31, 2020.

177

The breakdown of fair value by asset class is as follows:
JPY (millions)
As of March 31
2018With Quoted
Prices in Active
Markets
Equities:
Japan
Foreign
Bonds:
Japan
Foreign
Life insurance company general accounts¥

Cash and cash equivalent
Investments in trusts
OthersTotal plan assets¥

2019
No Quoted
Prices in
ActiveMarkets

With Quoted
Prices in Active
Markets

No Quoted
Prices in
ActiveMarkets

15,494 ¥
6,396

2,804 ¥
58,28615,025 ¥20,6803,444
74,309

1,568
2,278
—

19,15738,716
68,551

1,040
12,011—

16,52334,25088,178

8,452

—

9,663

—

—
514

—
29,412—404

18,683
9,606

34,702 ¥216,926 ¥

58,823 ¥244,993

Equities and bonds with no quoted prices in active markets includes pooled funds that are primarily invested in listed securities on active markets.
Life insurance company general accounts are accounts with guaranteed capital and minimum interest rate, in which life insurance companies manage
funds on a contractual basis.
Defined Contribution Plans
The Company and some of the Company’s subsidiaries offer defined contribution benefit plans.
Benefits of defined contribution plans are linked to contributions paid, the performance of each participant’s chosen investments, and the form inwhich participants choose to redeem their benefits. Contributions made into these plans are generally paid into an independently administered fund.
Contributions payable by Takeda for these plans are charged to operating expenses. Takeda has no exposure to investment risks and other experiencerisks with regard to defined contribution plans.
The amount of defined contribution costs was 19,525 million JPY, and 21,068 million JPY for the years ended March 31, 2018 and 2019,respectively. These amounts include contributions to publicly provided plans.
Other Employee Benefit Expenses
Major employee benefit expenses other than retirement benefits for each fiscal year are as follows:
JPY (millions)
For the Year Ended March 31
2018
SalaryBonuses
Other¥

215,256 ¥
70,70881,616

2019272,930
89,43993,711

The above table does not include severance expenses.

178

23.

Provisions

The movements in the provisions are as follows:
JPY (millions)
Rebates andLitigation(Note 32)
As of April 1, 2017
Increases¥

Restructuring

ReturnReserves

Other

Total

33,446 ¥3,692

27,118 ¥
5,935

90,870 ¥310,070

22,470 ¥14,009173,904
333,706

Decreases (utilized)(12,372)(19,183)(284,164)(11,579)(327,298)

Decreases (reversed)

(286)

(128)

(9,557)(2,045)(12,016)

—

(133)

—

(107)

(240)

Reclassification to liabilities held for sale

(676)

—

—

(390)

(1,066)

Foreign currency translation differences

(622)

(993)

(5,378)826(6,167)23,182 ¥10,382

12,616 ¥30,547

101,841 ¥
441,188

23,184 ¥13,198160,823
495,315

Acquisitions through business combinations

29,57014,506217,002

17,912278,990

Decreases (utilized)(11,426)(8,594)(462,335)(10,836)(493,191)

Decreases (reversed)(3,146)(679)(11,447)(3,335)(18,607)(1,032)

-

994

(295)

(2,321)

(755)

1,285

8,107

(1,549)7,088

46,775 ¥49,681 ¥

293,362 ¥38,279 ¥428,097

Decreases from deconsolidation

As of March 31, 2018
Increases¥

Decreases from deconsolidation
Foreign currency translation differences
As of March 31, 2019¥

The current portion of the provision is 135,796 million JPY, 132,781 million JPY, and 392,733 million JPY as of April 1, 2017,
March 31, 2018 and 2019, respectively. The non-current portion of the provision is 38,108 million JPY, 28,042 million JPY and 35,364
million JPY, as of April 1, 2017, March 31, 2018 and 2019, respectively.
Restructuring
Takeda has various restructuring efforts in place during the years ended March 31, 2018 and 2019, in connection with the following:•Transform its R&D function – Takeda has commenced various restructuring efforts during the years ended March 31,2018 and 2019, in connection with efforts to transform its R&D function and to improve the efficiency of its operations.
These initiatives included consolidation of sites and functions and reduction in workforce.

•

Integration of Shire - In the year ended March 31, 2019, Takeda commenced various restructuring efforts following theacquisition of Shire. The integration of Shire includes initiatives to consolidate systems, sites, and functions, and to
optimize the workforce.

•

Acquired restructuring programs – Takeda acquired various restructuring programs in connection with the Shire
Acquisition. These include Shire program related to completing the integration of Baxalta, Inc., which was acquired by
Shire in June 2016.

•

Various other efforts to improve the efficiency of its operations and related facilities

A restructuring provision is recorded when Takeda has a detailed formal plan for the restructuring. Takeda records the provision and associatedexpenses based on estimated costs associated with the plan. The ultimate cost and the timing of any payments under the plan will be impacted by theactual timing of the actions and the actions of employees impacted by the restructuring activities. The payments for non-current restructuringprovision are expected to be made within approximately 3 years.

179

Restructuring expenses recorded are as follows:

JPY (millions)
For the Year Ended March 31
2018
Cash:
Severance
Consulting fees
Other
Total
Non-Cash:
Depreciation and impairment
Total

2019

¥

6,397 ¥
7,205
16,52817,574
19,04044,906¥30,130 ¥81,520¥14,606 ¥1,442¥

44,736 ¥82,962The other restructuring costs mainly relate to retention and contract termination costs. The other restructuring costs for the year ending March 31,
2019 includes personnel costs of 20,754 million JPY mainly related to retention bonus and salary of employees fully dedicated to restructuring
programs.
Rebates and Returns
Takeda has recognized a provision related mainly to sales rebates and returns for products and merchandises, which include sales-linked rebates suchas government health programs in the US. These are expected to be paid out generally within one year. Sales rebates and sales returns are reviewed
and updated monthly or when there is a significant change in its amount.
Other
Other provisions are primarily related to asset retirement obligations, contract termination fees and onerous contracts.

24.

Other Liabilities

Accrued expenses¥

JPY (millions)
As of March 31
2018
2019
231,497¥
406,956

Deferred income

52,52745,431

Other

48,206

60,675

Total¥

332,230¥

513,062

Non-current
Current¥¥

68,300263,930¥¥

75,174
437,888

Accrued expenses include accrued labor cost of 108,766 million JPY and 163,241 million JPY as of March 31, 2018 and 2019, respectively.
Deferred income includes government grants for the purchase of property, plant and equipment. The grants received were 23,937 million JPY and21,145 million JPY during the years ended March 31, 2018 and 2019, respectively. The primary government grants relate to funding a portion of
Takeda’s investment in the development and production of new influenza vaccines. Takeda was reimbursed for investments it made in facilities. The
grant income is recognized over the life of the associated assets and is recorded as an offset to the depreciation expense (included in cost of sales,
selling, general, and administrative expenses, and research and development expenses). Deferred income also includes unearned co-promotion fees
received in advance of 21,656 million JPY and 16,756 million JPY as of March 31, 2018 and 2019, respectively. When the co-promotion fees arerecognized, they will offset selling, general and administrative expenses.

180

25.

Trade and Other Payables

JPY (millions)
As of March 31
2018

2019

Trade payables
Other payables¥

133,705
106,554¥

212,348
115,046

Total¥

240,259¥

327,394

Trade payables relate to expenditures associated with Takeda’s manufacturing and other payables relate to other expenditures associated with its dayto-day operations.

26.

Equity and Other Equity Items(Thousands of Shares)
2018
Authorized shares as of April 1
Outstanding shares:
At April 1

20193,500,000

3,500,000

790,521794,688

Exercise of stock options

617

15

Issuance of shares (Note 31)

3,550

770,303794,688

1,565,006

At March 31

The shares issued by the Company are ordinary shares with no par value that have no restrictions on any rights. The number of treasury shares
included in the above outstanding shares was 9,680 thousand shares, 13,379 thousand shares, and 10,226 thousand shares as of March 31, 2017,2018, and 2019, respectively. The number of treasury shares as of March 31, 2018 and March 31, 2019 includes 13,133 thousand shares and 9,976
shares, respectively, held by the Employee Stock Ownership Plan ("ESOP") Trust and the Board Incentive Plan ("BIP") Trust. The ESOP and BIP
Trust acquired 246 thousand shares and sold 3,403 thousand shares during the year ended March 31, 2019.
During the year ended March 31, 2018, the Company issued 3,550 thousand shares through third- party allotment to the Master Trust Bank of Japan,
Ltd., which is the trust account for Takeda’s ESOP subsidiary. The issuance of these shares resulted in an increase in share capital of 11,388 million
JPY and share premium of 11,286 million JPY. The Master Trust Bank of Japan is a co-trustee of the ESOP. This issuance was approved by the
resolution of our Board of Directors. These shares were reacquired by the Company from the ESOP trust for distribution of share based compensation
awards. The reacquisition of the shares resulted in an increase in treasury shares of 22,773 million JPY.
During the year ended March 31, 2019, the Company issued 770,303 thousand ordinary shares to fund the acquisition of Shire (Note 31).

JPY (millions)
Total Dividends

Dividends Per
Share JPY

Q1 2017

71,13390.00

March 31, 2017

June 29, 2017

Q3 2017

71,16590.00

September 30, 2017

December 1, 2017

Q1 2018

71,507

90.00

March 31, 2018

June 29, 2018

Q3 2018

71,50990.00

September 30, 2018

December 3, 2018

Dividends Declared and Paid

Basis Date

Effective Date

April 1, 2017, to March 31, 2018

April 1, 2018, to March 31, 2019

181

Dividends declared for which the effective date falls in the following fiscal year are as follows:
JPY(millions)
Total Dividends

Dividends Declared

Dividends
Per Share
JPY

Basis Date

Effective Date

April 1, 2019, to March 31, 2020
Q1 2019¥

140,836 ¥90.00 March 31, 2019

182

June 28, 2019

27.

Financial Instruments

Takeda promotes risk management to reduce the financial risks arising from business operations. The principal risks to which Takeda is exposed
include market risk, counterparty credit risk, and liquidity risk caused by changes in the market environment such as fluctuations in the price of
foreign currency, interest rates and market prices of commodities and other financial holdings. Each of these risks are managed in accordance with
Takeda’s policies.
Financial Assets and Liabilities
JPY (millions)
As of March 31, 2018

Loans andReceivables

Available-forsale financial
assetsDerivative
hedging
instruments

Measured atfair value
through profit
or loss

Other
Financial
Liabilities

Total

Financial Assets Measured at Fair Value
Other financial assets Available-for-sale financial assets— ¥169,814 ¥Derivative financial instruments

—

—

Other

—

—

— ¥

Total

¥

¥

— ¥

— ¥

— ¥

169,814

2,527

762

—

3,289

—

2,070

—

2,070

169,814 ¥2,527 ¥

2,832 ¥

— ¥175,173

87,381

—

—

—

— ¥

87,381

Financial Assets Not Measured at Fair Value
Other financial assets Restricted deposits

¥

Other

14,528————

14,528420,247

—

—

—

—

420,247

294,522

—

—

—

—

294,522816,678 ¥

— ¥

— ¥

— ¥

— ¥

816,678

Contingent considerations——

30,569— ¥30,569Derivative financial instruments

—

—

3,498

5,373

—

8,871

¥

— ¥

— ¥

3,498 ¥

35,942 ¥— ¥39,440

¥

— ¥

— ¥

— ¥

— ¥

53,149 ¥53,149————28,24728,247

Trade and Other Payables

—

—

—

—

240,259

240,259

Bonds and Loans

—

—

—

—

985,662

985,662

— ¥

— ¥

— ¥

— ¥

1,307,317 ¥

1,307,317

Trade and Other Receivables
Cash and cash equivalents
Total

¥

Financial Liabilities Measured at Fair Value
Other financial liabilities -

Total

— ¥

Financial Liabilities Not Measured at Fair
Value
Other financial liabilities Finance leases
Other

Total

¥

183

JPY (millions)
As of March 31, 2019
Measured at
Measuredfair value
atthrough otheramortized comprehensive
cost
incomeMeasured atfair value
through
profit or loss

Derivative
hedging
instruments

Other
Financial
Liabilities

Total

Financial Assets Measured at Fair Value
Other financial assets Equity instruments— ¥168,732 ¥—¥

168,732

Derivative financial instruments

¥

—

—

4,590

3,725

—

8,315

Investments in convertible notes

—

—

9,865

—

—

9,865

Investments in debt securities

—

—

1,608

—

—

1,608

Other
Total

¥

— ¥

— ¥

—

—

504

—

—

— ¥

168,732 ¥

16,567 ¥3,725 ¥—¥

504
189,024

Financial Assets Not Measured at Fair Value
Other financial assets Others¥

Trade and Other Receivables
Cash and cash equivalents

26,493 ¥

— ¥

— ¥

— ¥

— ¥

26,493741,907

—

—

—

—

741,907702,093702,093

—

—

—

—

¥ 1,470,493 ¥

— ¥

— ¥

— ¥

— ¥ 1,470,493

¥

— ¥

— ¥

71,062 ¥— ¥— ¥71,062

—

—

7,120

1,625

—

8,745

¥

— ¥

— ¥

78,182 ¥

1,625 ¥—¥

79,807

¥

— ¥

— ¥

— ¥

— ¥

179,411 ¥

179,411

—

—

—

—

23,90823,908Trade and Other Payables

—

—

—

—

327,394

327,394

Bonds and Loans

—

—

—

—

5,750,951

5,750,951

— ¥

— ¥

— ¥

— ¥ 6,281,664 ¥ 6,281,664

Total
Financial Liabilities Measured at Fair Value
Other financial liabilities Contingent considerations
Derivative financial instruments
Total
Financial Liabilities Not Measured at Fair Value
Other financial liabilities Finance leases
Other

Total

¥

Fair Value Measurement
Derivative and non-derivative financial instruments measured at fair value are categorized in the following three-tier fair value hierarchy that reflects
the significance of the inputs in making the measurements. Level 1 is defined as observable inputs, such as quoted prices in active markets for an
identical asset or liability. Level 2 is defined as inputs other than quoted prices in active markets within Level 1 that are directly or indirectly
observable. Level 3 is defined as unobservable inputs. Fair value information is not provided for financial instruments, if the carrying amount is areasonable estimate of fair value due to the relatively short period of maturity of these instruments.

184

JPY (millions)
For the Year Ended March 31, 2018
Level 1

Level 2

Level 3

Total

Assets:Financial assets measured at fair value through profit or loss
Derivatives¥— ¥Derivatives for which hedge accounting is applied—

Available-for-sale financial assets
Total

762 ¥

— ¥

762

2,527

—

2,527

34

—

163,064¥

163,030
163,030 ¥3,323 ¥

— ¥166,353¥— ¥5,373 ¥

— ¥

5,373

Liabilities:
Financial liabilities measured at fair value through profit or loss
Derivatives
Contingent considerations arising from business combinations
Derivatives for which hedge accounting is applied
Total

¥

—

—

30,56930,569

—

3,498

—

3,498

— ¥

8,871 ¥

30,569 ¥39,440JPY (millions)
For the Year Ended March 31, 2019
Level 1

Level 2

Level 3

Total

Assets:Financial assets measured at fair value through profit or loss
Derivatives¥— ¥4,590 ¥

— ¥

4,590

Investment in convertible notes

—

—

9,865

9,865

Investment in debt securities

—

—

1,608

1,608

Other

—

—

504

504

—

3,725

—

3,725

119,907—48,825

168,732

Derivatives for which hedge accounting is applied
Financial assets measured at fair value through OCI
Equity instruments
Total

¥

119,907 ¥8,315 ¥

60,802 ¥189,024¥— ¥7,120 ¥

— ¥

7,120

Liabilities:
Financial liabilities measured at fair value through profit or loss
Derivatives
Contingent considerations arising from business combinations——

71,062

71,062Derivative for which hedge accounting is applied

—

1,625

—

1,625

— ¥

8,745 ¥

71,062 ¥79,807Total¥

For the year ended March 31, 2018, available-for-sale financial assets and other financial assets for which it was difficult to reliably measure the fairvalue are excluded from the table. The carrying amounts of such assets as of March 31, 2018 were 6,750 million JPY and 2,070 million JPY
respectively. These assets were primarily unlisted equity investments and the fair value of the investments was difficult to reliably measure as they
are not traded on stock markets.

Valuation Techniques
The fair value of derivatives is measured at quoted prices or quotes obtained from financial institutions, whose significant inputs to the valuation
model used are based on observable market data.

185

The fair value of the investment in convertible notes is measured using techniques such as the discounted cash flow and option pricing models.
Equity investments and investments in debt securities are not held for trading. If equity instruments or investments in debt securities are quoted in an
active market, the fair value is based on price quotations at the period-end-date. If equity instruments or investments in debt securities are not quoted
in an active market, the fair value is calculated utilizing a net asset-book value method or multiples of EBITDA approach based on available
information as of each period-end-date and company comparable. The principle input that is not observable and utilized for the calculation of the fairvalue of equity instruments and investments in debt securities classified as Level 3 is the EBITDA rate used for the EBITDA multiples approach,which ranges from 4.6 times to 11.1 times. During the year ended March 31, 2019, a cumulative gain on equity investments of 44,230 million JPY
was reclassified from other comprehensive income to retained earnings upon the disposal of certain equity investments in publicly traded companies.
The fair value of these investments on the dates of disposal was 65,035 million JPY. The investments were disposed of after management’s
assessment of these investments relative to the investment strategy.
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination.
When the contingent consideration meets the definition of a financial liability, it is subsequently re-measured to fair value at each reporting date. The
determination of the fair value is based on models such as scenario-based methods and discounted cash flows. The key assumptions take into
consideration the probability of meeting each performance target, forecasted revenue projections, and the discount factor. The fair value measurementof contingent considerations arising from business combinations is discussed in Note 21.
The joint venture net written option, included in other Level 3 assets for the year ended March 31, 2019 above is valued at fair value, andsubsequently re-measured to fair value at each reporting date. The determination of the fair value is based on the Monte Carlo Simulation model. The
key assumptions include probability weighting, estimated earnings and assumed market participant discount rates that taken into account for the fairvalue.
Transfers between levels
Takeda recognizes transfers between levels of the fair value hierarchy, at the end of the reporting period during which the change has occurred. There
were no transfers among Level 1, Level 2, and Level 3 except transfers from Level 3 to Level 1 recorded in 2018 and 2019. These transfers resulted
from the investments in the companies whose shares were previously not listed on an equity or stock exchange and had no recent observable active
trades in the shares. During the years ended March 31, 2018 and 2019, the companies listed its equity shares on an exchange and are currently
actively traded in the market. As the equity shares have a published price quotation in an active market, the fair value measurement was transferredfrom Level 3 to Level 1 on the fair value hierarchy during the years ended March 31, 2018 and March 31, 2019 respectively.

Level 3 fair values
The following table shows a reconciliation from the opening balances to the closing balances for Level 3 financial asset fair values for the year ended
March 31, 2019. There were no Level 3 financial assets reflected in the consolidated financial statements of Takeda for the year ended March 31,
2018. The disclosure related to the Level 3 financial liabilities, which are related to contingent considerations arising from business combinations,
are included in Note 21.

JPY (millions)
Balance as of March 31, 2018
Adoption of IFRS 9¥

Balance as of April 1, 2018
Additions arising from business combinations
Gain recognized as finance income
Loss recognized as changes in fair value of financial assets measured at fairvalue through OCI and exchange differences on translation of foreign
operations—
47,78947,7896,183
587(4,060)Purchases
Sales
Transfers to Level 1
Other12,253(1,844)(111)
5

As of March 31, 2019¥

186

60,802Financial instruments not recorded at fair value
The carrying amount and fair value of financial instruments that are not recorded at fair value in the consolidated statements of financial position are
as follows:

JPY (millions)
As of March 31
2018
Carrying
Amount
Bonds
Long-term loans
Finance leases¥

2019
Fair Value

Carrying
AmountFair Value

172,889 ¥812,755

172,872 ¥
815,865

3,196,365 ¥2,054,584

3,323,592
2,058,929

53,14953,690179,411

181,776

Long-term debt is recognized at its amortized cost. The fair value of bonds is measured at quotes obtained from financial institutions whose
significant inputs to the valuation model used are based on observable market data. The fair value of loans and finance leases is measured at thepresent value of future cash flows discounted using the applicable market rate on the loans with consideration of the credit risk by each groupclassified in a specified period. The fair value of bonds, long-term loans, and finance leases are classified as Level 2 in the fair value hierarchy.

Market Risk
Major market risks to which Takeda is exposed are 1) foreign currency risk, 2) interest rate risk and 3) price fluctuation risk. Financial instruments
affected by market risk include loans and borrowings, deposits, equity investments and derivative financial instruments.
Foreign Currency Risk
Takeda’s exposure to the risk of changes in foreign exchange rates primarily relates to its operations (when revenue or expense is denominated in aforeign currency) and the Company’s net investments in foreign subsidiaries. The Company manages foreign currency risks in a centralized mannerusing derivative financial instruments. The Company's policy does not permit the use of speculative foreign currency financial instruments orderivatives, and Takeda does not enter into derivative contracts or financial instruments to manage its exposure currency translation risk.
Takeda uses forward exchange contracts, currency swaps, and currency options to hedge individually significant foreign currency transactions.
Takeda has also designated loans and bonds denominated in the US dollar and Euro, including the US dollar and Euro debt instruments used to fundthe Shire Acquisition, as hedges of net investments in foreign operations. As of March 31, 2018, the total fair value of the foreign currency
denominated loans and foreign currency denominated bonds was 61,200 million JPY and 31,930 million JPY, respectively. As of March 31, 2019, thetotal fair value of the foreign currency denominated loans and foreign currency denominated bonds was 1,404,031 million JPY and 3,203,040 million
JPY, respectively.
Takeda is exposed mainly to foreign currency risks of the US dollar and Euro. A depreciation of the JPY by 5% against the US dollar and Euro would
impact profit or loss by 12,533 million JPY, and 19,530 million JPY as of March 31, 2018 and 2019, respectively. These amounts do not include theeffects of foreign currency translation on financial instruments in the functional currency or on assets, liabilities, revenue, and expenses of foreign
operations. This analysis assumes that all other variables, in particular interest rates, remain constant. Takeda's exposure to foreign currency changes
for all other currencies is not material.

187

JPY (millions)
For the Year Ended March 31, 2018
Contract amount to be settled
in more than one year

Contract Amount

Fair Value

Forward exchange contracts:
Selling:Euro¥98,198 ¥

— ¥

(894)

United States Dollar

39,799—100

Chinese Yuan

20,528—(1,211)

Other

1,854

—

(1)

173,627—(964)

United States Dollar

9,585

—

(19)

Other

5,105

—

95

124,028

123,993(1,773)

Buying:Euro

Currency swaps:
Buying:United States Dollar

JPY (millions)
For the Year Ended March 31, 2019
Contract amount to be settled
in more than one year

Contract Amount

Fair Value

Forward exchange contracts:
Selling:Euro219,580 ¥

— ¥

544

200,571—(2,145)

722

—

(2)

Euro

357,550—(4,156)

United States Dollar

227,262—

3,254

123,993

123,959

2,621

Russian Ruble

11,463—(9)

Brazilian Real

13,507—(15)

United States Dollar
Other

¥

Buying:Currency swaps:
Buying:United States Dollar
Currency collar options:

The above currency swaps were related to bonds and loans denominated in foreign currency, which the Company designated as hedging instruments
in a cash flow hedges. The cash flow hedge reserve related to the currency swaps were reclassified to profit or loss in the same period as the hedged
expected future cash flows occur.

Interest Rate Risk
Takeda’s exposure to the risk of changes in benchmark interest rates and foreign exchange rate relates primarily to the outstanding borrowings withfloating interest rates. Takeda may use interest and currency swaps that fix the amount of future payments to manage interest and foreign exchange

188rate risks through cash flow hedge strategies. The following summarizes interest and cross currency interest rate swaps designated as cash flow
hedges for the periods ended March 31:

JPY (millions)
For the Year Ended March 31
Notional Amount
2018
2019

¥

300,938 ¥
308,078

More than
One Year
300,938 ¥
248,078

Fair Value
(970)
2,100

The above swaps are related to the borrowings which the Company designated as hedging instruments in a cash flow hedge.
The following represents interest rate sensitivity analysis for the periods presented. This analysis assumes that all other variables, in particular foreign
currency exchange rates, remain constant.

JPY (millions)
As of March 31, 2018
Interest rate
+1%
Impact on net profit or loss before tax¥

Impact on other comprehensive income (before tax effects)

As of March 31, 2019
Interest rate-1%—

16,543¥—(16,543)¥+1%(4,632)
14,840

¥

-1%
4,632
(14,840)

For the year ended March 31, 2018, there is an immaterial impact on net profit or loss because the amount of interest payments from all theoutstanding borrowings with floating rates are fixed using interest rate swaps. The ineffective portion of the hedges was immaterial.

Price Fluctuation Risk Management
Commodity Price Risk
For its business operations, Takeda is exposed to risks from commodity price fluctuations. Takeda manages this risk primarily by utilizing fixed pricecontracts, but may also use financial instruments to lock in a fixed price.
Market Price Risk
Market pricing and valuations of Takeda’s fixed-income financial assets and liabilities are impacted by changes in currency rates, interest rates andcredit spreads, which are managed as described above.
For equity instruments, the Company manages the risk of price fluctuations in the instruments by regularly reviewing share prices and financial
positions of the issuers. The analysis shows that if the market price of equity instruments held by Takeda and investments in trusts which hold equity
instruments on behalf of Takeda had increased by 10%, the hypothetical impact on other comprehensive income (before tax effect) would have been
16,303 million JPY and 11,991 million JPY as of March 31, 2018 and 2019 respectively. This analysis assumes that all other variables, in particularinterest rates and foreign currency exchange rates, remain constant.
Derivative Financial Instruments
As described above, Takeda is exposed to effects related to foreign exchange fluctuations in connection with our international business activities thatare denominated in various currencies and Takeda entities that have different functional currencies. Takeda is also exposed to currency and interest
rate fluctuations on our borrowings that we use to finance our business operations and our acquisitions. These borrowings are denominated in various
currencies and may bear interest at variable rates, resulting in the risk related to the currency and interest rate movements.
In order to manage the risk of currency exchange rate and interest rate fluctuations, Takeda may enter into derivative contracts with highly rated
financial institutions. Takeda enters into derivative contracts based our risk management policies, which determine the authority for entering into

189

such transactions and the transaction limits. The policy, which has been consistently followed, is that financial derivatives be used only for hedging
foreign currency and interest rate exposure and not for speculative purposes.
Takeda generally designates its derivatives as hedges for accounting purposes. In certain instances, Takeda enters into derivative contracts that do not
qualify for hedge accounting but are utilized to manage the underlying risk (‘‘economic hedges’’). Takeda does not use financial instruments for
trading purposes. The Company established guidelines for risk assessment procedures and controls for the use of financial instruments. They include
a clear segregation of duties with regard to execution on one side and administration, accounting and controlling on the other.
Summary of Financial Position and Financial Performance for Derivative and Hedging Activities
The following table details the items designated as hedging instruments as of March 31, 2019:

JPY (millions)
Carrying
Amount –Assets

Notional

Carrying
Amount –Liabilities

Line Item in the Statementof Financial Position where
Hedging Instrument isincluded

Average Rate Usedfor the Fair Valueof the Hedging
Instrument

Cash Flow Hedges
Interest risk
Interest rate swaps

120,000 million JPY

¥

—

¥

917 Other financial liabilities

0.66%

575 million USD

396— Other financial assets

2.83%

1,125 million USD

3,329

708 Other financial assets/liabilities

109.97 JPY
0.03%

12,881 million USD—

1,425,116 Bonds and loans

10,540 million EUR—

1,308,686 Bonds and loans

Currency and interest risk
Currency and interest rate
swaps

Net Investment Hedges
Foreign currency
denominated bonds andloans

The following table details the amounts within other components of equity related to items designated as hedged items as of March 31, 2019:
JPY (millions)

Balance in cash flow
hedges and exchange
differences ontranslation

Balance inhedge cost

Cash Flow Hedges
Interest risk
Interest rate swaps
Forward interest rate

¥

(362)
33

¥

—
—

Currency and interest risk
Currency and interest rate swaps

(109)

1,412

3,397

—

7,969

—

Currency risk
Hedge related to acquisition
Net Investment Hedges
Foreign currency denominated bonds and loans

190

The following table details the amounts of changes in fair value of hedging instruments recorded in other comprehensive income and the amounts
reclassified from the hedging reserve to profit or loss as of March 31, 2019:

JPY (millions)
Amount recognized in OCI
Change inFair Valueof Hedges

Amount reclassified to
Goodwill

Hedging
Costs

Cash Flow
Hedge

Hedging
Costs

¥

¥

¥

Amount reclassified to profit or loss

Cash Flow
Hedge

Hedging
Costs

Line item in which
reclassification
adjustment isincluded

Cash Flow Hedges
Interest risk
Interest rate swaps
Forward interest rate¥

(2,177)

—

—

—

¥

845

¥

— Financial expenses

—

—

—

—

53

— Financial expenses

7,204

627

—

—

(7,261)

Financial income and(908) Financial expenses(33,090)(4,715)35,773

4,715

Currency and interest risk
Currency and interest
rate swaps
Currency risk
Hedge related toacquisition
Net Investment Hedges
Foreign currency
denominated bonds andloans(8,488)

—

—

—

—

—

—

—

The amount relating to the ineffectiveness recorded in profit or loss was immaterial for the years ended March 31, 2018 and 2019. The amount ofhedging gains/losses recorded in other comprehensive income and reclassified to profit or loss as hedged future cash flows were no longer expected
to occur was immaterial for the years ended March 31, 2018 and 2019.

Capital Management
The capital structure of Takeda consists of shareholders’ equity (Note 26), bonds and loans (Note 20), and cash and cash equivalents (Note 18). The
fundamental principles of Takeda’s capital risk management are to build and maintain a steady financial base for the purpose of maintaining
soundness and efficiency of operations and achieving sustainable growth. According to these principles, Takeda conducts capital investment, profit
distribution such as dividends, and repayment of loans based on steady operating cash flows through the development and sale of competitive
products. Takeda balances and monitors its capital structure between debt and equity and adheres to a conservative financial discipline.

Credit Risk
Takeda is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits withbanks and financial institutions, foreign exchange transactions, and other financial instruments. The maximum exposure to credit risk, without taking
into account of any collateral held at the end of the reporting period, is represented by the carrying amount of the financial instruments which is
exposed to credit risk on the consolidated statement of financial position.
Customer Credit Risk
Trade and other receivables are exposed to customer credit risk. Takeda monitors the status of overdue balances, reviews outstanding balances foreach customer and regularly examines the credibility of major customers in accordance with Takeda’s policies for credit management to facilitate theearly evaluation and the reduction of potential credit risks. If necessary, Takeda obtains rights to collateral or guarantees on the receivables.

191

The following represents the age of trade receivables that are past due but not impaired:

Total
As of March 31, 2018¥16,222

Within 30
Days

JPY (millions)
Amount Past Due
Over 30
Over 60
Days but
Days butwithin 60
within 90
Days
Days

Over 90
Days butwithinOne YearOver One
Year

¥

¥

¥

¥

6,453

2,243

¥

782

5,042

1,702

The amounts in the above table are net of allowances for doubtful receivables. Takeda has provided loss allowances on trade receivables and otherreceivables not past due based on an analysis of credit histories. Takeda establishes loss allowances that represent an estimate of expected losses atthe end of the reporting period.
The following represents the carrying amount of the trade receivables categorized by due date and the analysis of impairment loss allowance as ofMarch 31, 2019:

JPY (millions) except for percentage
Amount Past Due

Current
Gross carrying amount¥
Impairment loss allowance
Net carrying amount
Weighted average loss rate (%)

613,062 ¥(2,350)610,7120.4%

Over 30
Days butwithin 60
Days

Within 30
Days
17,244 ¥(27)
17,2170.2%

7,441 ¥
(24)
7,417
0.3%

Over 60
Days butwithin 90
Days
5,968 ¥
(99)
5,869
1.7%

Over 90
Days butwithinOne Year
14,336 ¥(477)
13,8593.3%Over OneYear
2,948 ¥
(341)
2,607
11.6%

Total
660,999(3,318)657,6810.5%Management believes that the unimpaired amounts that are past due are still collectible in full, based on historical payment behavior and extensive
analysis of customer credit risk.
As of March 31, 2019, Takeda has provided loss allowance on trade receivables and other receivables not past due based on an analysis of credit
histories. Loss allowance for trade receivables are measured based on expected credit losses on a collective basis using the simplified approach.
However, when events that have a detrimental impact on the estimated future cash flows such as customers’ deterioration of financial conditions or
failure of payment overdue have occurred, expected credit losses are measured on an individual basis as credit-impaired financial assets. Takeda
considers a financial asset to be in default when the customer is unlikely to pay the obligation in full, without recourse by Takeda to take actions suchas realizing collaterals, if any.
The following is a summary of the change in the loss allowance for trade receivables and other assets for the year ended March 31, 2018. The loss
allowance recognized for other than trade receivables is immaterial. Comparative amounts for 2018 represent the allowance account for impairment
losses under IAS 39.
JPY (millions)2018
At beginning of the year¥

Increases
Decreases (written off)
Decreases (reversed)
Reclassification to assets held for sale
Foreign currency translation differences
At end of the year

9,733
1,946
(1,941)(1,130)
(45)
262

¥

8,825

192

The following is a summary of the change in the impairment loss allowance for trade receivables for the year ended March 31, 2019. The impairment
loss allowance recognized for other than trade receivables is immaterial.

JPY (millions)
Bad debt provisioncalculated by simplified
approach
At beginning of the year
Increases

Total

3,661 ¥
1,305

5,158 ¥
2,243

8,819
3,548

Decreases (written off)

(2,716)(5,257)(7,973)

Decreases (reversed)

(942)

(208)

(1,150)Reclassification to assets held for sale

(36)

—

(36)

Foreign currency translation differences

119

(9)

110

1,391 ¥

1,927 ¥

3,318

At end of the year¥

Bad debt provision
recognized to creditimpaired financial asset¥

Other Counterparty Credit Risk
Cash reserves of the subsidiaries are concentrated mostly with the Company and entities acting as the cash pool leader in the United States andEurope. These cash reserves are primarily managed exclusively by investments in highly rated short-term bank deposits and bonds of highly rated
issuers within the investment limits determined by reviewing the investment ratings and terms under Takeda’s policies for fund management,
resulting in limited credit risk. Cash reserves, other than those subject to the group cash pooling system, are managed by each consolidated subsidiaryin accordance with the Company’s fund management policies.
For derivatives, Takeda enters into trading contracts only with financial counterparties rated investment grade or higher in order to minimize
counterparty risk.

Liquidity Risk
The Company manages liquidity risk and establishes an adequate management framework for liquidity risk to secure stable short-, mid-, and longterm funds and sufficient liquidity for operations. Takeda manages liquidity risk by monitoring forecasted cash flows and actual cash flows. In
addition, Takeda has commitment lines with some counterparty financial institutions to manage liquidity risk (Note 20). Takeda strives to maximize
the available liquidity with a combination of liquid short-term investments and committed credit lines with strong rated counterparties. The objective
is to maintain levels in excess of project cash needs to mitigate the risk of contingencies.
The table below presents the balances of financial liabilities by maturity. The total contract amount below reflects cash flows presented on an
undiscounted cash flow basis, including interest expense. The amounts disclosed as of March 31, 2018 and 2019 are undiscounted cash flows using
the respective spot foreign exchange rates as of March 31, 2018 and 2019.

193

JPY (millions)
Carrying
AmountBetween
One and
Two Years

Within One
Year

Total

Between
Two andThree Years

BetweenThree andFour Years

BetweenFour andFive Years

More than Five
Years

As of March 31, 2018
Bonds and loans
Bonds

¥

172,889 ¥

179,567 ¥2,050 ¥

61,824 ¥61,429 ¥54,264 ¥812,773872,738

5,556

66,611

76,8796,881

Trade and other payables

240,259

240,259

240,259

—

—

—

—

—

Finance leases

53,14999,161

4,808

5,410

3,495

2,709

2,721

80,018Derivative liabilities

8,871

6,364

5,639

40

(336)

1,021

—

—

Derivative assets(3,289)(33,590)(3,049)(3,383)(3,729)(3,698)(3,699)(16,032)

3,196,365 ¥

3,790,239 ¥

507,158 ¥572,336 ¥625,401 ¥358,700 ¥490,302 ¥1,236,342

2,554,586

2,780,332

603,589

152,453

75,627

190,754787,720

970,189

Trade and other payables

327,394

327,394

327,394

—

—

—

—

—

Finance leases

179,411333,133

6,925

8,996

9,360

9,575

9,807

288,470

Loans

— ¥

—

81,882634,929

As of March 31, 2019
Bonds and loans
Bonds

¥

Loans

Derivative liabilities

8,745

7,106

7,246

(301)

161

—

—

—

Derivative assets(8,315)(30,902)(8,090)(2,983)(2,576)(2,633)(2,816)(11,804)

Derivative
Assets Usedfor Hedge ofDebts

Derivative
Liabilities
Used for
Hedge of
Debts

Reconciliation of liabilities arising from financing activities

JPY (millions)Long-term
Loans

Bonds
As of April 1, 2017¥

179,836¥

560,000

Finance
Lease
Obligations

Short-term
Loans¥

405,054¥

58,811

¥

—

¥

—

Total
¥

1,203,701

Cash flows from financing activities
Net increase (decrease) in short-term
loans
Proceeds from long-term loans——(403,931)———(403,931)—

337,955

—

—

—

(801)

337,154—(80,000)

—

—

—

—

(80,000)

Proceeds from bonds

55,951

—

—

—

348

—

56,299

Repayments of bonds(60,000)

—

—

—

—

—

(60,000)———(2,658)——(2,658)———(2,855)——(2,855)(3,019)(5,244)(1,105)(2,610)——(11,978 )Change in fair value

—

—

—

—

(528)

2,754

2,226

New and amended finance leases

—

—

—

375

—

—

375

Others

121

44

—

2,086

—

—

2,251

(180) ¥

1,953

Repayments of long-term loans

Repayments of obligations under financeleaseInterest paid
Non-cash items
Foreign exchange movement

As of March 31, 2018¥

172,889¥

812,755

¥

18

194

¥

53,149¥¥1,040,584

JPY (millions)

As of April 1, 2018

¥

Bonds

Long-term
Loans

172,889¥

812,755

Finance
Lease
Obligations

Short-term
Loans

18

¥

¥

53,149Derivative
Assets Usedfor Hedge of
Debts

¥

(180)

Derivative
Liabilities
Used for
Hedge of
Debts

¥

Total

1,953

¥ 1,040,584

Cash flows from financing activities
Net increase (decrease) in short-term
loans
Proceeds from long-term loans
Proceeds from bonds
Repayments of obligations underfinance lease
Interest paid
Acquisitions through businesscombinations
Non-cash items
Foreign exchange movement
Change in fair value
New and amended finance leases
Others
As of March 31, 2019——367,319———

367,319—
1,580,400

1,215,526
—

—
—

—
—

—
—

—
—

1,215,526
1,580,400———(1,741)——(1,741)———(4,643)——(4,643)

1,461,627

4,170

138,674

8,685

—

—

1,613,156(23,562)——
5,011

21,955——178(6,009)
—
—
—

1,281
—
118,037
4,643—(3,149)———(1,245)——(6,335)(4,394)
118,037
9,832

500,002 ¥179,411 ¥(3,329) ¥¥ 3,196,365 ¥ 2,054,584 ¥708 ¥ 5,927,741

Others includes increase in debts due to application of amortized cost method.

28.

Share-based Payments

Takeda maintains certain share-based compensation payment plans for the benefit of its directors and certain of its employees. Takeda recorded totalcompensation expense related to its share-based payment plans of 22,172 million JPY and 18,787 million JPY for the years ended March 31, 2018and 2019, respectively, in its consolidated statements of income.

Equity-settled Plans
Stock Options
Takeda had maintained a stock option plan under which it granted awards to members of the board, corporate officer, and senior management
through the year ended March 31, 2014. There were no stock options granted during the years presented in these financial statements and all
previously granted awards are fully vested. These awards generally vested three years after the grant date. The stock options are exercisable for 10
years after the grant date for options held by directors and 20 years for options held by corporate officers and senior management. The individual
must be either a director of the Company or an employee of Takeda to exercise the options, unless the individual retired due to the expiration of theirterm of office, mandatory retirement or other acceptable reasons.
There was no compensation expense during the years ended March 31, 2018 or 2019 as all awards were fully vested.
The following table summarizes the stock option activities:

195

For the Year Ended March 31
2018

2019

Weighted
average
exercise
price (JPY)

Number ofoptions(shares)Number ofoptions(shares)

Weighted
average
exercise
price (JPY)As of beginning of the year
Exercised

4,020,900 ¥(617,100)

4,026
3,876

3,403,800 ¥(14,600)

4,054
3,721

As of end of the year

3,403,800

4,054

3,389,200

4,055

All of the stock options were exercisable as of March 31, 2018, and 2019.
The weighted-average share price at the date of exercise was 5,965 JPY and 4,679 JPY during the year ended March 31, 2018 and 2019, respectively.
The weighted-average exercise price and weighted-average remaining contractual life of the share options outstanding were 4,054 JPY and 14 years,
and 4,055 JPY and 13 years, as of March 31, 2018 and 2019, respectively.
Stock Incentive Plans
Takeda has two stock-based incentive compensation plans for its directors and members of senior management, including the following:
Board incentive plan (BIP) - The BIP is a stock-based incentive plan for directors of the Company whereby Restricted Share and Performance Shareawards are granted to the directors. Each award is settled in a single share of stock of the Company. Under the BIP, Restricted Shares vest one third
each year over a three-year period and Performance Shares vest three years from the date of grant. The settlement of the awards is based on stock
price, foreign exchange rates (in countries other than Japan), and company dividends. Performance shares are also based on the achievement ofcertain performance criteria, which are established at the grant date, including, among others, accumulated revenue, operating free cash flow,
earnings per share and R&D goals, which are transparent and objective indicators. Takeda, through a wholly owned trust, buys shares of theCompany in the market on the grant date, and uses these shares to settle the awards. The number of shares the individual receives (either throughphysical settlement or cash) is based on the achievement of the performance criteria and vesting of the award. The trust settles the awards through theissuance of shares to individuals in Japan. For individuals outside of Japan the trust sells the share the individual is eligible to receive and pays the
cash to the individual.
Employee Stock Ownership Plan (ESOP) - The ESOP is a stock-based incentive plan for senior management whereby awards are granted to theemployees. Each award is settled in a single share of stock of the Company. The vesting of the awards under this plan is the same as the BIP for
certain members of senior management with the remainder of the employees’ awards vesting one third each year over a three-year period. The
settlement of the awards is based on stock price, foreign exchange rates (in countries other than Japan), and company dividends. Performance shares,
are also based on the achievement of certain performance criteria, which are established at the grant date including, among others, accumulated
revenue, operating free cash flow, earnings per share and R&D goals, which are transparent and objective indicators. Takeda, through wholly owned
trust, buys shares of the Company in the market on the grant date and uses these shares to settle the awards. The number of shares the individual
receives (either through physical settlement or cash) is based on the achievement of the performance criteria and vesting of the award. The trust
settles the awards through the issuance of shares to individuals in Japan. For individuals outside of Japan the trust sells the share the individual iseligible to receive and pays cash to the individual.
The total compensation expense recognized related to these plans was 18,610 million JPY and 20,084 million JPY during the years ended March 31,2018 and 2019, respectively.
The weighted average fair value of the awards at the grant date is as follows (in JPY):
For the Year Ended March 31
2018

2019

BIP:
Weighted average fair value at grant date¥

5,709 ¥

4,631

5,709

4,678

ESOP:
Weighted average fair value at grant date

196

The grant date fair value was calculated using the Company's share price on the grant date as it was determined to be approximately the same as thefair value of the awards.
The following table summarizes the award activity related to the stock incentive plans (number of awards):

For the Year Ended March 31
2018
ESOP

2019
BIP

ESOP

BIP

At beginning of the year
Granted

6,471,104
3,944,938

414,933
188,695

6,891,762
5,021,627

433,260
252,647

Forfeited/expired before
vesting
Settled

(602,245)—(781,033)(17,832)(2,922,035)(170,368)(3,192,681)(182,843)

At end of the year

6,891,762

433,260

7,939,675

485,232

There were no exercisable shares as of March 31, 2018 and 2019. The weighted average remaining contractual life of the outstanding awards was one
year as of each year end for both the BIP and the ESOP plans.

Liability Settled Awards
Takeda has a phantom stock appreciation rights (PSARs) plan and a restricted stock units (RSUs) plan for certain of its employees. The value of theseawards is linked to share price of the Company and are settled in cash. The total compensation expense recorded associated with these plans was
3,562 million JPY during the years ended March 31, 2018. A reversal of total compensation expense of 1,297 million JPY was recorded during theyear ended March 31, 2019. The total liability reflected in the consolidated statements of financial position as of March 31, 2018 and 2019, is 4,872
million JPY and 2,597 million JPY, respectively.

Phantom stock appreciation rights (PSARs)
The PSARs vest one third each year over a three-year period from the end of the fiscal year during which the awards were granted and can be
exercised for a period of 10 years from the end of the fiscal year during which the awards were granted. The awards are settled through a cash
payment to the holder based on the difference between the share price of the Company at the date of exercise, and the share price at the date of grant.
The following table summarizes the award activity related to the PSARs:

For the Year Ended March 31
2018

Number of
PSARs
As of beginning of the year
GrantedForfeited before vesting

9,282,080 ¥2019

Weighted Average
Exercise Price(JPY)

Number of
PSARs

5,017

—

4,584,937 ¥——Weighted Average
Exercise Price
(JPY)
4,650
—

—

—

—

—

(4,335,961)

5,072(214,296)

4,428

Forfeited/expired after
vesting(361,182)

5,505(195,294)

4,940

As of end of the year

4,584,937

4,650

4,175,347

4,849

Exercised

All PSARs were exercisable as of March 31, 2018, and 2019.

197

Restricted stock units (RSUs)
The RSUs vest one third each year over a three-year period from the end of the fiscal year during which the awards were granted. The RSUs aresettled upon vesting based on the share price at the vesting date plus any dividends paid on shares during the vesting period. There is no exercise
price payable by the holder.
The following table summarizes the award activity related to the RSUs (number of RSUs):

For the Year Ended March 31
2018

2019

As of the beginning of the year
Granted448,286
254,710

398,479
279,436

Forfeited/expired before vesting(82,388)(92,829)

Settled(222,129)(183,933)

As of the end of the year

398,479

401,153

There are no exercisable balances as of March 31, 2018, and 2019. The total intrinsic value of vested cash-settled share-based payments was 2,442
million JPY as of March 31, 2018. There was no intrinsic value of vested cash-settled share-based payments as of March 31, 2019.

29.

Subsidiaries and Associates

The number of consolidated subsidiaries increased by 240 in the year ended March 31, 2019, primarily due to acquisition of Shire and Tigenix anddecreased by 13 primarily due to divestitures including Guangdong Techpool Bio-Pharma Co., Ltd. The number of associates accounted for using theequity method increased by 7 primarily due to the acquisition of Shire and decreased by 3 primarily due to divestitures.
The following is a listing of the Company's consolidated subsidiaries as of March 31, 2019:

Takeda Austria GmbH
Baxter AG

Austria
Austria

Voting Share
Capital Hd
100.0%
100.0%

Baxalta Innovations GmbH

Austria100.0%

Takeda Distribuidora Ltda.

Brazil100.0%

Shire Pharma Canada ULC

Canada100.0%

Takeda (China) Holdings Co., Ltd.

China

100.0%

Shire BioScience (Shanghai) Co. Ltd

China

100.0%

Takeda Pharmaceutical (China) Company Limited

China

100.0%

Takeda Pharma A/S

Denmark

100.0%

Takeda France S.A.S.

France100.0%

Shire France S.A.S

France100.0%

Takeda GmbHGermany

100.0%

Shire Deutschland GmbHGermany

100.0%

Takeda Ireland Limited

Ireland100.0%

Shire Pharmaceutical Holdings Ireland Limited

Ireland100.0%

Shire Pharmaceuticals International Unlimited Company

Ireland100.0%

Shire Pharmaceuticals Ireland Limited

Ireland100.0%

Shire Acquisitions Investments Ireland Designated Activity Company

Ireland100.0%

Shire Ireland Finance Trading Limited

Ireland100.0%

Takeda Italia S.p.A.

Italy

100.0%

Shire Italia S.p.A.

Italy

100.0%

Takeda Consumer Healthcare Company Limited

Japan

100.0%

Nihon Pharmaceutical Co., Ltd.

Japan

87.3%

Company NameCountry198

Shire Japan KK

Japan

Voting Share
Capital Hd
100.0%

Shire plc

Jersey100.0%

Takeda Pharmaceuticals Korea Co., Ltd.

Korea

100.0%

Takeda AS

Norway100.0%

Takeda Pharmaceuticals Limited Liability Company

Russia100.0%

Takeda Development Center Asia, Pte. Ltd.

Singapore

100.0%

Takeda Vaccines Pte. Ltd.

Singapore

100.0%

Shire Pharmaceuticals Iberica S.L.U.

Spain

100.0%

Takeda Pharmaceuticals International AG

Switzerland

100.0%

Baxalta GmbH

Switzerland

100.0%

Baxalta Manufacturing S.à r.l.

Switzerland

100.0%

Baxalta Recombinant S.à r.l

Switzerland

100.0%

Shire International GmbH

Switzerland

100.0%

Takeda UK Limited

U.K

100.0%

Takeda Development Centre Europe Ltd.

U.K

100.0%

Shire Pharmaceuticals Limited

U.K.

100.0%

Shire Pharmaceutical Development Limited

U.K.

100.0%

Takeda Pharmaceuticals International, Inc.

U.S.A.

100.0%

Takeda Pharmaceuticals U.S.A., Inc.

U.S.A.

100.0%

Millennium Pharmaceuticals, Inc.

U.S.A.

100.0%

ARIAD Pharmaceutical, Inc.

U.S.A.

100.0%

Takeda California, Inc.

U.S.A.

100.0%

Takeda Vaccines, Inc.

U.S.A.

100.0%

Takeda Development Center Americas, Inc.

U.S.A.

100.0%

Baxalta Incorporated

U.S.A.

100.0%

Baxalta US Inc.

U.S.A.

100.0%

Shire Human Genetic Therapies Inc

U.S.A.

100.0%

Shire ViroPharma Incorporated

U.S.A.

100.0%

Shire-NPS Pharmaceuticals, Inc.

U.S.A.

100.0%

Dyax Corp.

U.S.A.

100.0%

Meritage Pharma, Inc.

U.S.A.

100.0%

Shire Development LLC

U.S.A.

100.0%

Shire North American Group Inc.

U.S.A.

100.0%

Company NameCountry

301 immaterial subsidiaries

The following is a listing of the Company's associates accounted for using the equity method as ofMarch 31, 2019:
Company NameCountry

Cerevance, LLC
Teva Takeda Pharma Ltd.
Amato Pharmaceutical Products, Ltd.
16 immaterial associates

U.S.A.
Japan
Japan

199

Voting Share
Capital Hd
27.8%
49.0%
30.0%

30.

Related Party Transactions

Transactions with Affiliates
Takeda has one major affiliate, Teva Takeda Pharma, to which Takeda sells products and acts as a sales agent. Total transactions with Teva Takeda
Pharma for the years ended March 31, 2018 and 2019 were 18,166 million JPY and 10,380 million JPY, respectively. Balances of receivables andpayables are as follows:

JPY (millions)
As of March 31
2018
Trade receivables
Other receivables¥

Other payables

2019

4,187 ¥
1,507

2,885
1,892

30,066

26,844

The terms and conditions of the related party transactions are entered into on terms consistent with third-party transactions and considering market
prices. In addition, the receivables and payables are settled in cash and consistent with terms of third-party settlements.
There is no outstanding balance of collateral or guarantee. Impairment loss allowances are not recognized for the receivables.

Compensation for Key Management Personnel
Key management personnel are defined as members of the Board and the Chief Financial Officer. The compensation for key management personnel
is as follows:
JPY (millions)
For the Year Ended March 31
2018

2019

Basic compensation and bonuses
Share-based compensation (expensed amount)
Retirement benefits

¥

1,332
1,176
26

2,226
1,305
73

Total

¥

2,534

3,604

31.

Business Combinations

Acquisitions during the Year Ended March 31, 2019
Shire plc
On January 8, 2019, Takeda completed the acquisition of 100% of the outstanding shares of Shire plc in a cash and equity transaction valued at
6,213,335 million JPY. Takeda paid $30.33 in cash for each Shire ordinary share and issued either 0.839 of a new share (a "New Takeda Share") or
1.678 American Depositary Shares (“ADSs”) in Takeda (one ADS equals 0.5 New Takeda Share). Takeda incurred 23,750 million JPY of acquisition
related costs, which were expensed as incurred and recorded in selling, general and administrative expenses. Takeda has entered into several
borrowing agreements to fund the cash portion of the acquisition price (Note 20). Shire was a leading global biotechnology company focused onserving people with rare diseases. This acquisition creates a global R&D driven biopharmaceutical with an attractive geographic footprint as well as
strengthens Takeda’s core therapeutic areas, bringing together complementary positions in gastroenterology (GI) and neuroscience. Some of theShire's marketed products include GAMMAGARD, HYQVIA and TAKHZYRO for Immunology, ADVATE, ADYNOVATE, VONVENDI and FEIBA for
Hematology, VYVANSE and ADDERALL XR for Neuroscience, LIALDA/MEZAVANT and PENTASA for Internal Medicine, ELAPRASE and
REPLAGAL for Genetic Diseases. Shire’s R&D focused on rare diseases.

200

The total consideration transferred was comprised of the following:

JPY (millions)
AmountCash
Takeda equity (770,303,013 shares)¥

3,029,431
3,131,282¥

6,213,335

Cash for cash settled awards
Total

52,622The Company issued 770,303,013 ordinary shares allocated to the former shareholders of Shire as part of the purchase consideration. The issue pricewas 4,065 JPY per share, of which 2,032.50 JPY per share is recorded as share capital and the remainder is recorded as share premium. The total
increase in equity was 3,131,282 million, of which 1,565,641 million JPY is recorded as share capital and the remainder is recorded as sharepremium. The fair value of the Takeda shares issued as part of the consideration paid was determined based on the trading price of Takeda shares atthe opening of the Tokyo Stock Exchange on the date of acquisition.
The total cash outflow was 2,891,937 million JPY, which represents the initial cash consideration transferred of 3,082,053 million JPY and basis
adjustment of 37,107 million JPY, less cash acquired of 227,223 million JPY.
The following represents the preliminary estimate of the fair value of assets acquired and liabilities assumed:
JPY (millions)
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant & equipment
Intangible assets
Assets held for sale
Other assets
Trade and other payables
Provisions
Bonds and loans
Deferred tax liabilities
Liabilities held for sale
Other liabilities
Basis adjustments
Goodwill¥

Net assets acquired¥

Amount227,223
326,154825,985
684,487
3,899,298
463,526
103,283(61,382)(342,202)(1,603,199)(809,667)(196,294)(354,139)(37,107)3,087,369
6,213,335

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and costsynergies of the combined Takeda/Shire group. Goodwill recognized as a result of the acquisition is not deductible for tax purposes (Note 11).
Provisions include 29,570 million JPY associated with amounts payable related to legal proceedings (Note 32). Other liabilities also include preexisting contingent consideration related to Shire’s historical acquisitions. The assumed pre-existing contingent consideration is payable mainly
upon the achievement of certain milestones, and the fair value of the potential payments Takeda could be required to make is 52,046 million JPY(Note 21).
The estimated fair values primarily consisting of intangible assets, deferred tax liabilities and goodwill noted above are preliminary and are subject tochange. As Takeda finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments will be recorded during
the measurement period during fiscal year 2019. Fair value estimates are based on a complex series of judgments about future events anduncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets
acquired and liabilities assumed, as well as asset lives, can materially impact the Takeda’s results of operations. The finalization of the purchaseaccounting assessment will result in a change in the valuation of assets acquired and liabilities assumed, and may have a material impact on Takeda’s
results of operations and financial position.

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Takeda held foreign currency denominated deposits and entered into foreign currency options to hedge foreign currency risks for the acquisition of
Shire, and Takeda applied the hedge accounting to the instruments. Basis adjustment represents accumulated change in fair value of the hedging
instruments recorded in other comprehensive income of 37,107 million JPY that was added to the amount of goodwill at the acquisition date.
Takeda recorded 309,198 million JPY of revenue and 126,068 million JPY of net loss related to the operating results of Shire between the acquisition
date and March 31, 2019.
Pro forma information
The following pro forma financial information presents the combined results of the operations of Takeda and Shire as if the acquisition of Shire had
occurred as of April 1, 2018. The pro forma financial information is not necessarily indicative of what the consolidated results of operations would
have been had the respective acquisitions been completed on April 1, 2018. In addition, the pro forma financial information does not purport toproject the future results of operations of the combined Company.

JPY (millions)
For the Year Ended
March 31, 2019
Revenues
Net loss¥

3,412,468(90,581)

For the purpose of the pro forma financial information, Shire’s historical financial information has been conformed from U.S. Generally Accepted
Accounting Principles to IFRS, and to Takeda’s accounting policies for material accounting policy differences.
TiGenix NV ("TiGenix")
On April 30, 2018, Takeda made an all cash voluntary public takeover bid for the entire issued ordinary shares, warrants, and ADSs (collectively the“Securities”) of TiGenix not already owned by Takeda. On June 8, 2018, the Company acquired the Securities tendered in the first acceptance period
for 470.2 million EUR. In response to the takeover bid with the Securities already owned by Takeda, Takeda acquired 90.8% of the voting rights.
Takeda incurred 767 million JPY of acquisition related costs, which were expensed as incurred and recorded in selling, general and administrative
expenses.
TiGenix is a biopharmaceutical company which develops novel stem cell therapies for treatment of medical conditions. This acquisition will expand
Takeda's late stage gastroenterology (GI) pipeline with the U.S. rights to Cx601 (darvadstrocel), a suspension of allogeneic expanded adipose-derived
stem cells (eASC) under investigation for the treatment of complex perianal fistulas in patients with non-active/mildly active luminal Crohn’s disease(CD). Following the 2nd Takeover bid and a squeeze-out ended in July 2018, TiGenix became a wholly owned subsidiary of Takeda.
The total consideration transferred was comprised of the following:
JPY (millions)
AmountCash
The ordinary shares of TiGenix already owned by Takeda immediately prior to the acquisition date¥

67,319
2,684

Total

¥

70,003

The total cash outflow was 66,749 million JPY, which represents the initial cash consideration transferred of 67,319 million JPY and basis adjustmentof 3,381 million JPY, less cash acquired of 3,951 million JPY.

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The following represents provisional fair value of assets acquired and liabilities assumed:
JPY (millions)
AmountIntangible assets
Other assets¥

63,421
5,541

Deferred tax liabilities(8,043)

Other liabilities(5,678)Basis adjustments(3,381)

Goodwill

18,143

Net assets acquired¥

70,003

Goodwill comprises increased earnings expected from the future business development. Goodwill is not deductible for tax purposes.
The fair value primarily consisting of intangible assets, deferred tax liabilities and goodwill assumed as of the acquisition date have been recorded
provisionally based on the information available as of March 31, 2019.These amounts are subject to change as the Company is in the process ofreviewing further details of the basis for the fair value measurement. For the year ended March 31, 2019, goodwill at the acquisition date decreased
by 1,831 million JPY as a result of the adjustment to the provisional fair value, while other assets and deferred tax liabilities decreased by 253 million
JPY and 2,084 million JPY, respectively.
Takeda entered into a forward exchange contract to hedge foreign currency risks for the acquisition of TiGenix, and applied the hedge accounting to
the contract. Basis adjustment represents a fair value of the hedging instrument of 3,381 million JPY that was added to the amount of goodwill at theacquisition date.
No gains or losses were recognized as a result of remeasurement of fair value of the ordinary shares of TiGenix already owned by Takeda
immediately prior to the acquisition date.
The revenue and net profit of TiGenix for the post-acquisition period, which were recognized in the consolidated financial statements for the year
ended March 31, 2019 were immaterial.
The impact on Takeda’s revenue and net profit for the year ended March 31, 2019 assuming the acquisitions date of TiGenix had been April 1, 2018
was immaterial.

Acquisitions during the Years ended March 31, 2018
During the year ended March 31, 2018, Takeda acquired a business for 28,328 million JPY, which was fully paid in cash.
32.

Commitments and Contingent Liabilities

Operating Lease
Takeda is the lessee under several operating leases, primarily for office and other facilities, and certain office equipment.
Future minimum lease payments by maturity under non-cancellable operating leases that have initial or remaining lease terms in excess of one year
are as follows:

JPY (millions)
As of March 31
2018
Within one year
Between one and five years¥

More than five years
Total

¥

2019

12,053 ¥31,27831,172
91,10533,720111,301

77,051 ¥

233,578203

Total future minimum sublease payments expected to be received under non-cancellable subleases as of March 31, 2018 and 2019 were 34,482
million JPY and 13,140 million JPY, respectively.
Rent expense for operating lease contracts and sublease income recognized in profit or loss are as follows:
JPY (millions)
For the Year Ended March 31,
2018

2019

Rent expense
Sublease income¥

21,384 ¥(2,493)27,444(3,579)Total¥

18,891 ¥23,865Purchase commitments
The amount of contractual commitments for the acquisition of property, plant and equipment was 14,078 million JPY and 33,991 million JPY as ofMarch 31, 2018 and 2019, respectively.

Irish Revenue Authority assessment
Shire received a tax assessment from the Irish Revenue Authority on November 28, 2018 for 398 million EUR. This assessment relates to a potential
taxable gain from a 1,635 million USD break fee Shire received from AbbVie, Inc. ("AbbVie") in connection with the terminated offer to acquire
Shire made by AbbVie in 2014. Takeda is currently in the appeal process with regards to this assessment as it does not believe a tax liability shouldarise from the break fee.

Milestone Payments
As discussed in Note 13, Takeda has certain contractual agreements related to the acquisition of intangible assets that require it to make payments of
up to 517,017 million JPY and 655,531 million JPY as of March 31, 2018 and 2019, respectively. These commitments include development
milestone payments in relation to R&D programs under development and expected maximum commercial milestone payments in relation to launched
products. As for the programs under development, the possibility to meet certain conditions for commercial milestone payments is uncertain and therelated commercial milestone payments were not included in the commitments.

Guarantees
The amount of contingent liabilities related to guarantees was 186 million JPY and 99 million JPY as of March 31, 2018 and 2019, respectively.
These are all related to transactions with financial institutions and are not recognized as financial liabilities in the consolidated statement of financial
position because the possibility of loss from contingent liabilities was remote.

Litigation
Takeda is involved in various legal and administrative proceedings. The most significant matters are described below.
Takeda may become involved in significant legal proceedings for which it is not possible to make a reliable estimate of the expected financial effect,
if any, which may result from ultimate resolution of the proceedings. In these cases, appropriate disclosures about such cases would be included inthis note, but no provision would be made for the cases.
With respect to each of the legal proceedings described below, other than those for which a provision has been made, Takeda is unable to make areliable estimate of the expected financial effect at this stage. This is due to a number of factors, including, but not limited to, the stage ofproceedings, the entitlement of parties to appeal a decision, if any, and lack of clarity as to the merits of theories of liability, the merits of Takeda’s
defenses, the amount and recoverability of damages and/or governing law. The Company does not believe that information about the amount soughtby the plaintiffs, if that is known, is, by itself, meaningful in every instance with respect to the outcome of those legal proceedings.
Legal expenses incurred and charges related to legal claims are recorded in selling, general and administrative expenses. Provisions are recorded,
after taking appropriate legal and other specialist advice, where an outflow of resources is considered probable and a reliable estimate can be made ofthe likely outcome of the dispute. For certain product liability claims, Takeda will record a provision where there is sufficient history of claims made204

and settlements to enable management to make a reliable estimate of the provision required to cover unasserted claims. As of March 31, 2019,
Takeda’s aggregate provisions for legal and other disputes were 46,775 million JPY. The ultimate liability for legal claims may vary from theamounts provided and is dependent upon the outcome of litigation proceedings, investigations and possible settlement negotiations. Unless otherwise
stated below, Takeda is unable to predict the outcome or duration of these matters at this time.
Takeda’s position could change over time, and, therefore, there can be no assurance that any losses that result from the outcome of any legal
proceedings will not exceed, by a material amount, the amount of the provisions reported in these consolidated financial statement.
Certain of the matters discussed below were originally brought against Shire or its subsidiaries prior to Takeda’s acquisition of Shire. Refer to Note
31 on Business Combination for discussion of Takeda’s purchase accounting for the acquisition of Shire.

Product Liability and Related Claims
Pre-clinical and clinical trials are conducted during the development of potential products to determine the safety and efficacy of products for use byhumans following approval by regulatory bodies. Notwithstanding these efforts, when drugs and vaccines are introduced into the marketplace,unanticipated safety issues may become, or be claimed by some to be, evident. Takeda is currently a defendant in a number of product liability
lawsuits related to its products. For the product liability lawsuits and related claims, other than those for which a provision has been made, Takeda isunable to make a reliable estimate of the expected financial effect at this stage.
The Company’s principal pending legal and other proceedings are disclosed below. The outcomes of these proceedings are not always predictable
and can be affected by various factors. For those legal and other proceedings for which it is considered at least reasonably possible that a loss has
been incurred, the Company discloses the possible loss or range of possible loss in excess of the recorded loss contingency provision, if any, wheresuch excess is both material and estimable.

ACTOS
Takeda has been named as a defendant in lawsuits in U.S. federal and state courts in which plaintiffs allege to have developed bladder cancer or otherinjuries as a result of taking products containing type 2 diabetes treatment pioglitazone (U.S. brand name ACTOS). Eli Lilly and Company ("Lilly"),which co-promoted ACTOS in the United States for a period of time, also has been named as a defendant in many of these lawsuits. Under theparties’ co-promotion agreement, Takeda has agreed to defend and indemnify Lilly in the U.S. matters. Outside the U.S., lawsuits and claims havealso been brought by persons claiming similar injuries.
In April 2015, Takeda reached an agreement with the lead plaintiffs’ lawyers that resolved the vast majority of ACTOS product liability lawsuits
pending against Takeda and Lilly in the U.S. The settlement covered all bladder cancer claims pending in any U.S. court as of the date of settlement.
Claimants with unfiled claims in the U.S. represented by counsel as of the date of settlement and within three days thereafter were also eligible toparticipate. The settlement became effective when 95% of litigants and claimants opted-in. In connection with this broad settlement, Takeda has paid
2.4 billion USD (approximately 288 billion JPY) into a qualified settlement fund. Takeda received insurance proceeds totaling approximately 58
billion JPY under various policies covering product liability claims against Takeda. Takeda also established provisions for the remaining ACTOS
claims and lawsuits.
In addition to remaining product liability claims, the following lawsuits have been filed against Takeda by public and private third-party payors, aswell as consumers, seeking damages for alleged economic losses:
A purported nation-wide class action lawsuit has been filed in federal court in California—the Painters’ Fund case—on behalf of third-party payors
and consumers seeking, among other things, reimbursement of monies spent on ACTOS. In April 2018, the court dismissed the Painters’ Fund case.
Plaintiffs appealed.

A purported California class action has been filed in federal court in California asserting claims similar to the Painters’ Fund case.
The States of Mississippi and Louisiana have filed lawsuits against Takeda and Lilly alleging that defendants did not warn about bladder cancer andother risks of ACTOS. The lawsuits seek reimbursement of the cost of ACTOS, paid by the states on behalf of patients through programs such as
Medicaid, and for medical treatment of patients allegedly injured by ACTOS, attorneys’ fees and expenses, and punitive damages. The court granted
Takeda’s motion to dismiss the Louisiana case. The decision has been appealed. In November 2018, Takeda and Lilly agreed to settle the lawsuitbrought by the State of Mississippi. The lawsuit brought by the State of Louisiana remains pending.

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Proton Pump Inhibitor (“PPI”) Related Claims
As of June 10, 2019 approximately 6,000 product liability lawsuits involving PREVACID and DEXILANT have been filed against Takeda in U.S.
federal and state courts. The federal lawsuits are consolidated for pre-trial proceedings in a multi-district litigation in federal court in New Jersey. The
plaintiffs in these cases allege they developed kidney injuries as a result of taking PREVACID and/or DEXILANT, and that Takeda failed toadequately warn them of this potential risk. It remains unclear how many of the plaintiffs actually took PREVACID and/or DEXILANT. Similarcases are pending against other manufacturers of drugs in the same PPI class as Takeda’s products, including AstraZeneca plc (“AstraZeneca”),
Procter & Gamble Company (“Procter & Gamble”) and Pfizer Inc. (“Pfizer”). Outside the U.S., three proposed class actions have been filed in threeprovinces in Canada (Quebec, Ontario, and Saskatchewan). The defendants in these actions include Takeda, AstraZeneca, Janssen Pharmaceutical
Companies (“Janssen”) and several generic manufacturers. It is unclear how many additional actions, if any, may be filed against Takeda in the U.S.,
Canada or elsewhere.

ELAPRASE
In 2014, Shire’s Brazilian affiliate, Shire Farmaceutica Brasil Ltda, was served with a lawsuit brought by the State of Sao Paulo where the Brazilian
Public Attorney’s office has intervened alleging that Shire would be obligated to supply ELAPRASE for an indefinite period at no cost to patients
who participated in ELAPRASE clinical trials in Brazil, and seeking recoupment to the Brazilian government for amounts paid on behalf of thesepatients to date, and moral damages associated with these claims.
On May 6, 2016, the trial court judge ruled on the case and dismissed all the claims under the class action, which was appealed. On February 20,
2017, the Court of Appeals in Sao Paulo issued a decision upholding the decision rendered by the lower court judge, dismissing, therefore, all theclaims under the class action. On July 12, 2017, the Public Prosecutor filed an appeal addressed to the Supreme Court. On October 10, 2017, theState of Sao Paulo filed appeals addressed to the Superior Court of Justice and to the Supreme Court. On November 13, 2017, Shire submitted its
answers to the aforementioned appeals. On July 3, 2018 the President of Sao Paulo Court of Appeals issued a decision denying the remittance of all
appeals to the Superior Courts. Against such decision, both the State (on August 23, 2018) and the Public Prosecutor (on October 3, 2018) filed an
appeal. By virtue of such appeal, the case records were remitted to the Superior Court of Justice on February 27, 2019. Takeda is currently waiting
the assignment of the case to one of the Justices of the Superior Court of Justice.
Intellectual property
Intellectual property claims include challenges to the validity and enforceability of Takeda’s patents on various products or processes as well as
assertions of non-infringement of those patents. A loss in any of these cases could result in loss of patent protection for the product at issue. The
consequences of any such loss could be a significant decrease in sales of that product and could materially affect future results of operations for
Takeda.

PREVACID
In January 2018, Takeda received notice from Zydus Pharmaceuticals (USA) Inc. ("Zydus") that it has amended its application for a generic versionof SoluTab. In response, Takeda filed a patent infringement lawsuit against Zydus and in response, Zydus filed a counterclaim asserting that Takeda’s
challenge of Zydus’ abbreviated new drug application (“ANDA”) product violates antitrust laws. Takeda believes the counterclaim is without merit.
In June 2009, Apotex Pharmaceuticals Inc. ("Apotex") filed a lawsuit in Toronto, Canada, against Takeda and Abbott Laboratories ("Abbott") seeking
alleged damages for delayed market entry of its generic lansoprazole capsules due to a prior patent infringement lawsuit against Apotex. Previously,
Abbott and Takeda filed a patent infringement lawsuit against Apotex in response to Apotex’s regulatory submission to the Canadian Minister of
Health seeking permission to market generic lansoprazole capsules before the expiration of various Canadian patents relating to this drug. In January
2019, the parties settled the lawsuit.

PANTOPRAZOLEOn January 15, 2016, Mylan Inc. ("Mylan") filed a suit at the Federal Court against Takeda claiming damages as a result of the dismissal of Takeda´sprevious PM(NOC) proceeding against Mylan. Mylan claimed damages due to being held-off the market with its generic pantoprazole magnesium
product during the time period of June 27, 2013 until June 15, 2015. The parties settled the lawsuit in May 2018.

206

AMITIZAIn March 2017, Sucampo Pharmaceuticals, Inc. ("Sucampo") (Takeda’s licensor) received a paragraph IV certification directed to AMITIZA from
Amneal Pharmaceuticals, and in August 2017 received a paragraph IV certification directed to AMITIZA from Teva Pharmaceutical Industries Ltd.
("Teva"). These parties contend that the patents listed in FDA’s Orange Book for AMITIZA are invalid and/or not infringed by their ANDA product.
In response, Sucampo and Takeda filed a patent infringement lawsuit against the parties. Patent litigation against other ANDA filers for AMITIZA
were previously settled, and patent litigation against Amneal Pharmaceuticals and Teva was settled in June 2018.

TRINTELLIX
Takeda has received notices from sixteen generic pharmaceutical companies that they have submitted ANDAs with paragraph IV certifications
seeking to sell generic versions of TRINTELLIX. To date, at least four generic companies are challenging the patents covering the compound,vortioxetine, which expire in 2026. Takeda filed patent infringement lawsuits against the ANDA filers in federal court in Delaware.

ENTYVIO
F. Hoffmann-La Roche, Ltd. ("Roche") has filed patent infringement lawsuits against Takeda in Germany and Italy alleging that ENTYVIO infringesa Roche patent issued in Germany and Italy. Takeda is vigorously defending these lawsuits. Additionally, Takeda has filed a lawsuit in the U.K.
seeking nullification of Roche’s patent in the U.K.

MYDAYISOn October 12, 2017, Shire was notified that Teva Pharmaceuticals USA, Inc. had submitted an ANDA to the FDA seeking permission to market ageneric version of MYDAYIS. Within the requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the District of Delaware against
Teva Pharmaceuticals USA, Inc., Actavis Laboratories, Inc. and Teva Pharmaceutical Industries Limited (collectively the “Teva entities”). A
Markman hearing took place on January 23, 2019. A trial is scheduled to begin on December 9, 2019.
On March 8, 2018, Shire was notified that Impax Laboratories, Inc. (“Impax”) had submitted an ANDA to the FDA seeking permission to market ageneric version of MYDAYIS. Within the requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the District of Delaware against
Impax. A Markman hearing took place on January 23, 2019. A trial is scheduled to begin on December 9, 2019.
On April 19, 2018, Shire was notified that SpecGX LLC (“SpecGX”) had submitted an ANDA to the FDA seeking permission to market a genericversion of MYDAYIS. Within the requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the District of Delaware against SpecGx.
Shire and SpecGx settled the lawsuit on January 28, 2019.
Petitions to institute inter partes reviews (“IPRs”) against U.S. Patent numbers 8,846,100 and 9,173,857 were filed by KVK Tech in January 2018
and the petitions were granted in July 2018. Both of these patents are listed in the Orange Book as covering MYDAYIS and are among the patents-insuit in the infringement action brought against the Teva entities and Impax as noted above. A decision on the merits is expected on or before July 10,
2019.

ADYNOVATEOn December 5, 2016, Bayer Healthcare LLC (“Bayer”) filed a lawsuit in the US District Court for the District of Delaware against Baxalta
Incorporated and Baxalta US Inc. (collectively "Baxalta"), which are direct or indirect wholly owned subsidiaries of Shire, and Nektar Therapeutics(“Nektar”) filed alleging infringement of U.S. Patent No. 9,364,520 in connection with the sales of ADYNOVATE [antihemophilic factor(recombinant), PEGylated]. The case was tried before a jury beginning on January 28, 2019. The jury found in favor of Bayer determining that thepatent is infringed. The jury further awarded damages in the amount of 155.2 million USD. Takeda is considering its further options. Takeda
established a provision against this case in purchase accounting (Note 31).
On September 15, 2017, Baxalta and Nektar filed a lawsuit in the US District Court for the District of Delaware against Bayer alleging infringementof US Patent Nos. 7,199,223; 7,863,421; 8,143,378; 8,247,536; 8,519,102; 8,618,259; 8,889,831: This case was consolidated on December 7, 2018with Baxalta’s and Nektar’s lawsuit filed on August 31, 2018 alleging infringement of 7,026,440; 7,872,072; 8,273,833; 8,809,453; and 9,187,569 inconnection with the BAY-94 (subsequently approved and marketed as Jivi® (antihemophilic factor (recombinant PEGylated-aucl)). On July 2, 2018,
an amended complaint was filed adding US Patent No. 9,999,657. Markman hearings are scheduled to take place on June 21, 2019 and August 20,
2019. A trial is scheduled to begin on April 27, 2020.

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OtherIn addition to the individual patent litigation cases described above, Takeda is party to a number of cases where Takeda has received notices thatcompanies have submitted ANDAs with paragraph IV certifications to sell generic versions of other Takeda products. These include other Takeda
products including Alogliptin. Takeda has filed patent infringement lawsuits against parties involved in these situations.
Sales, Marketing, and Regulation
Takeda has other litigations related to its products and its activities, the most significant of which are describe below.

ACTOS
There have been purported class action lawsuits filed in federal court in New York by several end payors and wholesalers against Takeda alleging
anticompetitive conduct to delay generic competition for ACTOS. In September 2015, the court granted defendants’ motions to dismiss the antitrust
claims asserted by the end payors. The end payors appealed this decision to the Federal 2nd Circuit Court of Appeals. The wholesalers’ lawsuit had
been stayed pending the appellate court’s decision in the end payors’ lawsuit. In February 2017, the appellate court reversed in part the dismissal of
the end payors’ case and allowed one of plaintiffs’ antitrust theories to proceed in the trial court. Specifically, the court ruled that plaintiffs
sufficiently alleged that Takeda’s characterizations of two patents in the FDA Orange Book were false, and that this resulted in delaying Teva’slaunch of generic ACTOS. Takeda disagrees with these allegations and believes the Orange Book listings were correct. The court, however, affirmed
the trial court’s dismissal of other antitrust theories. The end payors’ case, along with the wholesalers’ case, is proceeding in the trial court, where
Takeda has filed a motion to dismiss the remaining legal theory.

VANCOCIN
On April 6, 2012, ViroPharma Incorporated (“ViroPharma”) received a notification that the United States Federal Trade Commission (“FTC”) was
conducting an investigation into whether ViroPharma had engaged in unfair methods of competition with respect to VANCOCIN, which Shireacquired in January 2014. Following its divestiture of VANCOCIN in August 2014, Shire retained certain liabilities including any potential liabilities
related to the VANCOCIN citizen petition.
On August 3, 2012, and September 8, 2014, ViroPharma and Shire respectively received Civil Investigative Demands from the FTC requesting
additional information related to this matter. Shire has fully cooperated with the FTC’s investigation.
On February 7, 2017, the FTC filed a complaint against Shire alleging that ViroPharma engaged in conduct in violation of U.S. antitrust laws arisingfrom a citizen petition ViroPharma filed in 2006 related to FDA’s policy for evaluating bioequivalence for generic versions of VANCOCIN. The
complaint seeks equitable relief, including an injunction and disgorgement. Shire filed a motion to dismiss on April 10, 2017. On March 20, 2018, thecourt granted Shire’s motion. On April 11, 2018, the FTC filed a Notice of Appeal. On February 25, 2019, the Court of Appeals for the Third Circuit
affirmed the dismissal of the FTC’s complaint.
At this time, Takeda is unable to predict the outcome or duration of this case.

Investigation of Patient Assistance Programs
In November 2016, the U.S. Department of Justice (through the U.S. Attorneys’ Office in Boston) issued a subpoena to ARIAD, which was acquired
by Takeda during the year ended March 31, 2017, seeking information from January 2010 to the present relating to ARIAD’s donations to 501(c) (3)co-payment foundations, financial assistance programs, and free drug programs available to Medicare beneficiaries and the relationship between
these co-payment foundations and specialty pharmacies, hubs or case management programs. ARIAD is cooperating in the investigation.
In June 2019, the U.S. Department of Justice (through the U.S. Attorney’s Office in Boston, Massachusetts) issued a subpoena to Shire
Pharmaceuticals LLC, which was acquired by Takeda during the year ended March 31, 2019 (through Takeda’s acquisition of Shire plc). The
subpoena generally seeks information about Shire’s interactions with 501(c)(3) organizations that provide financial assistance to Medicare patientstaking Shire drugs, including the hereditary angioedema medications Firazyr and Cinryze. Shire is cooperating with the investigation.

208

33.

Subsequent Events

On May 9, 2019, Takeda announced the sale of Xiidra® (lifitegrast ophthalmic solution), which was obtained as part of the Shire acquisition, to buyer
Novartis. The product is currently marketed in the United States and Canada. Under the terms of the agreement, Takeda will receive total
consideration of up to 5.3 billion USD (approximately 590.0 billion JPY), including 3.4 billion USD in cash at closing and up to 1.9 billion USD incontingent payments. The contingent payments become payable to Takeda at specified milestones based on sales of Xiidra® or a comparable genericproduct. The product was recorded as held for sale at the date of the Shire acquisition, as Takeda intended to dispose of the product. The disposalgroup including the product was recorded at the acquisition date based on the estimated consideration to be received in the transaction. The deal is
expected to be closed in the second quarter ended September 30, 2019.
On May 9, 2019, Takeda announced the sale of TachoSiltm (Fibrin Sealant Patch) to buyer Ethicon for 400 million EUR (approximately 50 billion
JPY). In addition, Takeda entered in a long-term manufacturing services agreement with the buyer. The transaction includes the sale of product rights
and transfer of related workforce. The deal is expected to be closed in the second quarter ended September 30, 2019.
On May 14, 2019, Takeda announced the issuance of 11,350 thousand shares at an issuance price of 4,318 JPY per share through third- party
allotment to The Master Trust Bank of Japan, Ltd., which is the trust account for Takeda’s ESOP subsidiary. This issuance was approved by the
resolution of the Board of Directors. These shares are issued with the intention to be reacquired by Takeda from the ESOP trust for distribution ofshare-based compensation awards.
On June 6, 2019, Takeda issued hybrid bonds (subordinated bonds) (“Hybrid Bonds”) with an aggregate principal amount of 500 billion JPY. The
proceeds from this Hybrid Bonds offering were used to repay the existing syndicated loans comprised of the senior short-term loan facility that was
utilized to finance the acquisition of Shire. The Hybrid Bonds will mature on June 6, 2079. Under the terms and conditions of the Hybrid Bonds,
Takeda may make an early repayment of all of the principal of the Hybrid Bonds on each interest payment date beginning October 6, 2024. Interest is
payable semi-annually at a rate per annum subject to revision. The Hybrid Bonds are unsecured, and Takeda is not subject to any financial covenants
related to these bonds.

209

(2)Others
1) Quarterly financial information for the year ended March 31, 2019
Three months
Nine months
Six months ended
Fiscal year ended
ended June 30,
ended December
September 30, 2018
March 31, 20192018
31, 2018

Cumulative period
JPY(millions)
JPY
Profit before tax(millions)
Total comprehensive income for the
JPYperiod(millions)
Revenue

Basic earnings per share

JPY

Fiscal period
Basic earnings (loss) per shareJPY

449,834

880,6111,380,013

2,097,224

93,863

160,780

208,379

94,89678,242

126,668

164,434

109,126

100.05161.76209.87113.50Three months
ended June 30,
2018

Three months
ended September
30, 2018

100.0561.73

2) Litigation and others
Refer to Note 32 Commitments and Contingent Liabilities in (1) Consolidated Financial Statements.

210

Three months
Three months
ended December ended March 31,
31, 2018
2019
48.14

△40.602 Unconsolidated Financial Statements and Others(1) Unconsolidated Financial Statements
1) Unconsolidated Balance Sheet
JPY (millions)Fiscal 2017
(As of March 31, 2018)

Note
ASSETS
CURRENT ASSETS
Cash and deposits
Notes receivable
Accounts receivable
Securities
Merchandise and products
Work in process
Raw materials and supplies
Income taxes receivables
Short-term loans receivable from subsidiaries and affiliates
Other
Allowance for doubtful accounts
Total current assets

¥
3

3
3
¥

174,395
1,804
129,866－
37,666
31,56420,055－47,12893,015(3,765)
531,728

Fiscal 2018
(As of March 31, 2019)¥¥

303,808
1,830
141,762
64,98236,81429,47623,365
4,389
110,634
98,264(25)
815,299

NONCURRENT ASSETS
Tangible noncurrent assets

Buildings and structures
Machinery and equipment
VehiclesTools and fixtures
Land
Lease assets
Construction in progress
Total tangible noncurrent assets
Intangible noncurrent assets
Investments and other assets
Investment securities
Investment in subsidiaries and affiliates
Contributions to subsidiaries and affiliates
Long-term deposits
Prepaid pension costs
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

¥

3

¥

211

125,791
38,061
45
5,052
34,3642,110
9,790
215,213
20,35896,417
1,415,005
560,216
6,003
36,63757,5329,457(4)2,181,263
2,416,835
2,948,562¥¥

124,143
29,97431
7,841
33,477
1,643
5,666
202,775
18,54070,272
8,277,521
30,896
5,148
38,43464,835
10,926(1)
8,498,031
8,719,346
9,534,645

JPY (millions)Fiscal 2017
(As of March 31, 2018)

Note
LIABILITIESCURRENT LIABILITIES
Accounts payable
Other payable
Accrued expenses
Income taxes payable
Short-term loans
Deposits received
Bonds (Due within one year)
Loans (Due within one year)
Reserve for employees’ bonuses
Reserve for share-based payments
Reserve for bonuses for directors and corporate auditors
Reserve for restructuring costs
Other reserve
Other
Total current liabilities

3
3
3

¥

46,15688,01638,485
4,482
78,54952,111－－
19,937
1,391
377
2,369
2,116
20,050354,039¥¥¥

173,179
813,151
4,294
1,146
2,155
5,440
4,047
17,753
7,446
1,028,611
1,382,650¥

1,652,027
1,990,874
5,028
1,066
2,031
6,732
2,748
12,522
5,681
3,678,709
4,887,474¥

77,914¥

1,643,585

3
3¥

NONCURRENT LIABILITIES
Bonds
Long-term loans
Reserve for employees’ retirement benefits
Reserve for SMON compensation
Reserve for share-based payments
Reserve for restructuring costs
Asset retirement obligations
Long-term deferred income
Other
Total noncurrent liabilities
Total liabilities

Fiscal 2018
(As of March 31, 2019)

¥

3

¥

44,112
161,571
58,208－646,287
137,637
60,00060,00019,826
1,833
633
3,436
614
14,6081,208,765

NET ASSETSSHAREHOLDERS' EQUITY
Common stock
Capital surplus
Additional paid-in capital
Other capital surplus

Total capital surplus

64,0081
64,0091,629,679
1
1,629,680

15,885
1,437,172
5,000
11,000
2,400
1,054
434
24
32,662814,500
570,098
1,453,057(74,343)
1,520,637

15,885
1,382,387
5,000
11,000
2,400
1,054
434
－
29,120814,500
518,879
1,398,272(57,114)4,614,423

44,056(112)
43,944
1,332
1,565,913
2,948,562

26,814
4,607
31,421
1,327
4,647,171
9,534,645

Retained earnings

Legal reserve
Other retained earnings
Reserve for retirement benefits
Reserve for dividends
Reserve for research and development
Reserve for capital improvements
Reserve for promotion of exports
Reserve for special depreciation
Reserve for reduction of noncurrent assets
General reserve
Unappropriated retained earnings
Total retained earnings
Treasury stock
Total shareholders' equity
VALUATION AND TRANSLATION ADJUSTMENTS
Unrealized gains on available-for-sale securities
Deferred gains on derivatives under hedge accounting
Total valuation and translation adjustments
Stock acquisition rights
Total net assets
Total liabilities and equity

2
2

¥

212

¥

2) Unconsolidated Statement of Income

Note
Net sales
Cost of sales
Gross profit
Selling, general and administrative expense
Operating income
Non-operating income
Interest and dividend income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Expenses associated with acquisition
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on sales of investment in subsidiaries
Gain on sales of tangible assets
State subsidy
Insurance income
Total extraordinary income
Extraordinary loss
Restructuring costs
Impairment loss
Loss on valuation of investment securities
Total extraordinary loss
Income before income taxes
Income taxes-current
Income taxes-deferred
Income taxes
Net income

1
1

¥

1,2

JPY (millions)Fiscal 2017
(April 1, 2017 toMarch 31, 2018)
659,462
290,952
368,510
300,774
67,736¥

Fiscal 2018
(April 1, 2018 toMarch 31, 2019)651,347
285,681
365,666
291,801
73,8651
160,733
16,897
77,63017,486
11,03228,5181

6,580－
12,842
19,422125,944

28,55038,667
17,652
84,86917,51432,709104,923－－
3,272
140,904

34,591
2,926
8,030
7,775
－
53,322

9,916
5,202
3,793
18,911
247,937(4,641)
65,57460,933
187,004

12,541－－
12,54158,295(25,179)(4,757)(29,936)
88,231

1

3

4
4

¥

213

¥

3) Unconsolidated Production Cost
JPY (millions)Fiscal 2017
(April 1, 2017 toMarch 31, 2018)
Classification

Note

Amount¥Fiscal 2018
(April 1, 2018 toMarch 31, 2019)

Percentage

10.9

12,46911.1

40,745

35.3

42,58037.8

Gross production cost

115,302

100.0

112,577

100.0

Beginning work-in-process

32,379III Expenses

1

¥

Total

147,681

144,141¥

29,476

1,886

1,415

114,231

113,250

JPY (millions)Fiscal 2017
(April 1, 2017 toMarch 31, 2018)

Fiscal 2018
(April 1, 2018 toMarch 31, 2019)2

Cost of products manufactured

31,56431,564Ending work-in-process

Transfer to other accounts

12,553¥51.1

II Labor cost

53.8

Percentage

57,527

I Raw materials cost

62,004

Amount(Note1) The major items of expenses are as follows:

Depreciation and amortization
Outsourced labor cost¥

13,244
12,781¥(Note2) The account includes transfers to expenses related to pre-launch products in non-operating expenses.
(Note3) The method of cost accounting is an actual and continuous costing by process and by lot.

214

14,744
12,166

4) Unconsolidated Statement of Changes in Net Assets(April 1, 2017 to March 31, 2018)

JPY (millions)Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Common stock Additional paidin capital

Balance at the beginning of the fiscal year¥

Other capitalsurplus

Total capitalsurplus

Legal reserve

Reserve forretirement
benefits

Reserve fordividends

65,20351,300151,30015,8855,000

11,00065,20351,300151,301

15,8855,000

11,00012,711

12,708Cumulative effects of changes in accounting
policies
Opening balance after cumulative effects ofchanges in accounting policies
Changes of items during the fiscal year
Issuance of new stock(Exercise of stock acquisition rights)

12,708Dividends from surplus
Reversal of reserve for special depreciation
Provision for reserve for reduction of noncurrent
assets
Reversal of reserve for reduction of noncurrent
assets
Net income
Purchase of treasury stock
Disposal of treasury stock00

Net change in items other than shareholders’equity during the fiscal year
Total changes of items during the fiscal year
Balance at the end of the fiscal year¥

12,711

12,7080

12,708－－－77,91464,0081

64,00915,8855,000

11,000JPY (millions)Shareholders’ equity
Retained earnings
Other retained earnings

Balance at the beginning of the fiscal year¥

Reserve forresearch anddevelopment

Reserve forcapitalimprovements

Reserve forpromotion ofexports

Reserve for
specialdepreciation

Reserve for
reduction of
noncurrent
assetsGeneral reserve

Unappropriatedretained earnings

2,400

1,054

434

48

34,050814,500

520,045

Cumulative effects of changes in accounting
policies

3,935

Opening balance after cumulative effects ofchanges in accounting policies

2,400

1,054

434

48

34,050814,500

523,980

Changes of items during the fiscal year
Issuance of new stock(Exercise of stock acquisition rights)(142,298)

Dividends from surplus(24)

Reversal of reserve for special depreciation
Provision for reserve for reduction of noncurrent
assets
Reversal of reserve for reduction of noncurrent
assets24
1,222(1,222)(2,610)2,610

Net income

187,004

Purchase of treasury stock
Disposal of treasury stock
Net change in items other than shareholders’equity during the fiscal year
Total changes of items during the fiscal year
Balance at the end of the fiscal year

¥

－

－

－

(24)

(1,388)－

46,118

2,400

1,054

434

24

32,662814,500

570,098

215

(April 1, 2017 to March 31, 2018)

JPY (millions)
Valuation and translation
adjustments

Shareholders' equity

Balance at the beginning of the fiscal year¥

Treasury stock

Total
shareholders’equity(48,721)

1,472,197

Cumulative effects of changes in accounting
policies

Unrealized gains Deferred gains
or losses onor losses onavailablederivatives underfor-salehedge
securities
accounting
56,837

(174)

Stock
Acquisitionrights

1,587

3,935

Opening balance after cumulative effects ofchanges in accounting policies(48,721)

1,476,132

Total net assets

1,530,447
3,935

56,837

(174)

1,587

1,534,382

Changes of items during the fiscal year
Issuance of new stock(Exercise of stock acquisition rights)
Dividends from surplus
Reversal of reserve for special depreciation
Provision for reserve for reduction of noncurrent
assets
Reversal of reserve for reduction of noncurrent
assets
Net income

25,41925,419(142,298)(142,298)

－

－

－

－

－

－

187,004

187,004

Purchase of treasury stock(41,529)(41,529)(41,529)

Disposal of treasury stock

15,907

15,907

15,907

Net change in items other than shareholders’equity during the fiscal year
Total changes of items during the fiscal year
Balance at the end of the fiscal year¥－

(12,779)

62

(255)

(12,972)(25,622)44,503(12,779)

62

(255)

31,531(74,343)

1,520,637

44,056

(112)

1,332

1,565,913

216

(April 1, 2018 to March 31, 2019)

JPY (millions)Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Common stock Additional paidin capital

Balance at the beginning of the fiscal year¥

77,91464,0081,565,671

1,565,671

Other capitalsurplus

Total capitalsurplus

Legal reserve1

64,00915,8855,000

11,000Reserve forretirement
benefits

Reserve fordividends

Changes of items during the fiscal year
Issuance of new stock(Exercise of stock acquisition rights)

1,565,671

Dividends from surplus
Reversal of reserve for special depreciation
Provision for reserve for reduction of noncurrent
assets
Reversal of reserve for reduction of noncurrent
assets
Net income
Purchase of treasury stock
Disposal of treasury stock

(0)

(0)

Net change in items other than shareholders’equity during the fiscal year
Total changes of items during the fiscal year
Balance at the end of the fiscal year¥

1,565,671

1,565,671(0)

1,565,671－－－

1,643,585

1,629,679

1

1,629,680

15,8855,000

11,000JPY (millions)Shareholders’ equity
Retained earnings
Other retained earnings

Balance at the beginning of the fiscal year¥

Reserve forresearch anddevelopment

Reserve forcapitalimprovements

Reserve forpromotion ofexports

Reserve for
specialdepreciation

Reserve for
reduction of
noncurrent
assetsGeneral reserve

Unappropriatedretained earnings

2,400

1,054

434

24

32,662814,500

570,098

Changes of items during the fiscal year
Issuance of new stock(Exercise of stock acquisition rights)(143,016)

Dividends from surplus(24)

Reversal of reserve for special depreciation
Provision for reserve for reduction of noncurrent
assets
Reversal of reserve for reduction of noncurrent
assets24
1(1)(3,543)

3,543

Net income

88,231

Purchase of treasury stock
Disposal of treasury stock
Net change in items other than shareholders’equity during the fiscal year
Total changes of items during the fiscal year
Balance at the end of the fiscal year

¥

－

－

－

(24)

(3,542)－(51,219)

2,400

1,054

434

－

29,120814,500

518,879217

(April 1, 2018 to March 31, 2019)

JPY (millions)
Valuation and translation
adjustments

Shareholders' equity

Balance at the beginning of the fiscal year¥

Treasury stock

Total
shareholders’equity(74,343)

1,520,637

Unrealized gains Deferred gains
or losses onor losses onavailablederivatives underhedge
for-salesecurities
accounting
44,056

(112)

Stock
Acquisitionrights1,332

Total net assets

1,565,913

Changes of items during the fiscal year
Issuance of new stock(Exercise of stock acquisition rights)

3,131,342

3,131,342

Dividends from surplus(143,016)(143,016)

－

－

－

－

－

－

88,231

88,231

Reversal of reserve for special depreciation
Provision for reserve for reduction of noncurrent
assets
Reversal of reserve for reduction of noncurrent
assets
Net income
Purchase of treasury stock(1,172)(1,172)(1,172)

Disposal of treasury stock

18,401

18,401

18,401

Net change in items other than shareholders’equity during the fiscal year
Total changes of items during the fiscal year
Balance at the end of the fiscal year¥－

(17,242)

4,719

(5)

(12,528)

17,2293,093,786(17,242)

4,719

(5)

3,081,258(57,114)4,614,423

26,814

4,607

1,327

4,647,171

218

Notes to Unconsolidated Financial Statements
Going Concern Assumption
No events to be noted for this purpose.
Significant Accounting Policies
1. Valuation of Important Assets(1) Valuation of Securities
Shares of subsidiaries and affiliates:
Available-for-sale securities
With market values:

Without market values:(2) Valuation of Derivatives:(3) Valuation of Inventories
Merchandise and products:

Work in process:Raw materials and Supplies:

Valued at cost using the moving-average method
Valued at market prices on the balance sheet date
(Unrealized gains and losses are included in net assets,
and cost of securities sold is calculatedusing the moving-average method.)
Valued at cost using the moving-average method
Valued at fair value

Cost determined by gross average method(Balance sheet values are calculated by markdown
based on decreases in profitability)
Cost determined by gross average method(Balance sheet values are calculated by markdown
based on decreases in profitability)
Cost determined by gross average method(Balance sheet values are calculated by markdown
based on decreases in profitability)

2. Important Noncurrent Asset Depreciation Method(1) Tangible noncurrent assets (excluding lease assets)
The Company uses the declining-balance method
However, for buildings (excluding building improvements) acquired on or after April 1, 1998, the straight-line method isapplied.
Estimated useful lives are mainly as follows:
Buildings and structures:
15-50 years
Machinery and equipment:
4-15 years(2) Intangible noncurrent assets (excluding lease assets)
The Company uses the straight line depreciation method for intangible noncurrent assets.
The depreciation period is based on the period of availability.
(3) Lease assets
The Company uses the straight line depreciation method based on the lease period for lease assets related to finance leases
with no transfer of ownership rights.
3. Reserves(1) With respect to allowance for doubtful receivables, in order to account for potential losses from uncollectible notes andaccounts receivable, the Company recognizes reserve for uncollectible receivables based on historical loss ratios. Specificclaims are evaluated in the light of the likelihood of recovery and provision is made to the allowance for doubtful receivablesin the amount deemed uncollectible.
(2) Reserve for employees’ bonuses is stated at the projected amount of bonuses required to be paid to eligible employees at thebalance sheet date based on the applicable payment period in order to cover payment of bonuses to employees.

(3) Reserve for bonuses for directors and corporate auditors is stated as the projected amount to be paid in order to cover paymentof bonuses to directors and corporate auditors.

219

(4) Reserve for employees’ retirement benefits is based on the present value of the projected retirement benefit obligation as of thebalance sheet date estimated at the beginning of each fiscal year, less the estimated fair value funded under the corporate
pension plans in order to cover payment of retirement benefits to employees.
In calculating retirement benefit obligations, the benefit formula basis is used as the method of attributing expected benefit toperiods up to this fiscal year end.
Prior service cost is amortized using the straight-line method over a fixed number of years (five years) within the averageremaining years of service when obligations arise.
Unrecognized net actuarial gains and losses are expensed from the period of occurrence in proportional amounts, on a straightline basis over the fixed number of years (five years) within the average remaining years of service in each period whenobligations arise.
(5) Reserve for SMON compensation is stated at an amount calculated in accordance with the Memorandum Regarding the
Settlements and the settlements entered into with the Nationwide Liaison Council of SMON Patients’ Associations, etc. in
September 1979, in order to prepare for the future costs of health care and nursing with regard to the subjects of thesettlements applicable to the Company as of the balance sheet date.
(6) Reserve for share-based payments is stated at the projected amount of share-based obligations as of the balance sheet datemainly in order to grant the Company's share to directors and employees in accordance with the share-based paymentprescription.
(7) Reserve for restructuring costs is reasonably estimated based on costs arising from the R&D transformation and the integration
with Shire.
4. Other Significant Accounting Policies for the Unconsolidated Financial Statements(1) Hedge Accounting
1) Methods of hedge accounting
The Company uses deferred hedging. Appropriation processing is adopted for forward exchange transactions that meet therequirements for that method and special processing is adopted for interest rate swaps that meet the requirements for special
processing.
2) Hedging instruments, hedged items and hedging policies
The Company uses interest rate swaps to hedge a portion of cash flow related to future financial income or loss that is linked
to short-term variable interest rates. In addition, the company uses forward foreign exchange transactions etc. to hedge a
portion of foreign currency denominated transactions that can be individually recognized and which are financially material.
Foreign currency risk of the investments in foreign operations is managed through the use of foreign-currency-denominatedborrowing. These hedge transactions are conducted in accordance with established policies regarding the scope of usage andstandards for selection of financial institutions.
3) Method of assessing effectiveness of hedges
Preliminary testing is conducted using statistical methods such as regression analysis, and post-transaction testing is conductedusing ratio analysis. The company omits the verification if material terms of the transaction are the same and also the hedging
effect is extremely high.
(2) Stated AmountAll amounts shown are rounded to the nearest million JPY, i.e., a half of a million or more is rounded up to a full one million
and less than a half of a million is disregarded.
(3) Consumption taxes
Consumption taxes are excluded from the items in the statement of income.
(4) Consolidated taxation system
The Company has adopted the consolidated taxation system.

220

Changes in accounting policies
The Company adopted "Application Guidelines of Accounting Standards for Tax Effect Accounting (ABSJ Statement No.28
February 16, 2018) from the year ended March 31, 2019 and revisited the accounting treatment for the taxable temporary
differences on investments in subsidiaries. This change in accounting policies has been applied retrospectively. As a result,unappropriated retained earnings as of April 1, 2018 increased by 3,935 million JPY.

Changes in presentation
The Company adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ABSJ Statement No.28
February 16, 2018) at the beginning of the fiscal year ended March 31, 2019 and changed the classification of deferred tax
assets to investments and other assets, and deferred tax liabilities to noncurrent liabilities.
As a result, deferred tax assets of 65,871 million JPY which had been classified to current assets and deferred tax liabilities of
12,273 million JPY which had been classified to noncurrent liabilities were presented as deferred tax assets of 57,532 million
JPY under investments and other assets on the balance sheet as of March 31, 2018.
In addition, in the note to Income Taxes, the Company added the contents described in the annotation (Note 8) (excluding total
valuation allowance) and the annotation (Note 9), both for the “Accounting Standard for Tax Effect Accounting,” stipulated
in Paragraph 3 through Paragraph 5 of the Partial Amendments to Tax Effect Accounting Standard. However, of thesecontents, information concerning the previous fiscal year is not described pursuant to the transitional treatment stipulated in
Paragraph 7 of the Partial Amendments to Tax Effect Accounting Standard.

Unapplied accounting standards"Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 30, 2018)"Implementation Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No. 30, March 30, 2018)(1) Outline
It is a comprehensive accounting standard for revenue recognition. Revenue is recognized by applying the following five
steps:
Step 1: Identify the contracts with customers
Step 2: Identify the separate performance obligations
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the separate performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation(2) Effective date
It will be applied from the beginning of the year ended March 31, 2022.
(3) The impact of application of new accounting standards
The Company is evaluating the impact at the time of preparation of the financial statement.
Additional Information
Long-Term Incentive Scheme
The Company has a long-term incentive scheme for the directors and senior management for the purpose of employees' welfare
benefits.
(1) Outline of the scheme
Please refer to "Notes to Consolidated Financial Statement, 28 Share-based Payments, Equity-settled Plans, Stock Incentive
Plans" in Consolidated IFRS Financial Statements for the year ended March 31, 2019.
(2) Treasury stocks owned by the trust
As for accounting treatment of long-term incentive scheme, the Company applied "Practical treatment concerning transactions
which grant stocks of the company to employees etc. through trusts" (Report No.30 of the Practice Corresponding Report,
March 26, 2015) and recognizes carrying amount (excluding incidental acquisition costs) of treasury stocks owned by the trust
as "Treasury stock" in "Net Assets". The carrying amount and number of the treasury stocks were 73,564 million JPY, 13,133
thousand units and 56,320 million JPY, 9,976 thousand units as of March 31, 2018 and 2019, respectively. The amounts ofdividend paid to the treasury stocks were 1,713 million JPY and 2,080 million JPY for the years ended March 31, 2018 and2019, respectively. Dividends declared to the treasury stocks for which the effective date falls in the following fiscal year were
898 million JPY.

221

Notes on Unconsolidated Balance Sheet
1. Contingent liabilities(Guarantees)

The Company has given guarantees to the following persons/subsidiaries mainly for obligations to cover the repayment ofbonds, rental fees based on the real-estate contracts, purchase payments of intangible assets, and liabilities for the issuance ofbonds by Shire's subsidiaries which are taken over from Shire plc due to the acquisition:
JPY (millions)Fiscal2017
Fiscal2018(As of March 31, 2018) (As of March 31, 2019)
186
99
Employees of Takeda Pharmaceutical Company Limited
Shire Acquisitions Investments Ireland Designated Activity Company
Baxalta Incorporated
Pharma International Insurance Designated Activity Company
Millennium Pharmaceuticals, Inc.
Takeda UK Limited
Takeda Pharma, S.A. (Argentine)
Takeda S.A.S Columbia
Total

－
－
－
33,153467
185
53
34,044

1,339,433
215,286
50,87232,313334
89
55
1,638,481

2.
Fiscal 2017 (April 1, 2017 to March 31, 2018)
Reserve for special depreciation and reserve for reduction of noncurrent assets are accumulated based on the Special Taxation
Measures Law.
Fiscal 2018 (April 1, 2018 to March 31, 2019)
Reserve for reduction of noncurrent assets are accumulated based on the Special Taxation Measures Law.

JPY (millions)Fiscal2017
Fiscal2018(As of March 31, 2018) (As of March 31, 2019)
104,826
169,180
3,732
2,129
155,830
376,340
1
4

3. Receivables from and payables to subsidiaries and affiliates

Short-term receivables
Long-term receivables
Short-term payables
Long-term payables

222

Notes on Nonconsolidated Statement of Operations

Fiscal2017(As of March 31, 2018)

JPY (millions)Fiscal2018(As of March 31, 2019)118,98147,08377,285

121,936
47,85064,234

61,883
1,308

21,53881

1. Transactions with subsidiaries and affiliates

Operating transactions:
Net sales
Purchases
Other
Non-operating transactions:Non-operating income
Non-operating expenses

2. Selling, general and administrative expenses
JPY (millions)Fiscal2017
Fiscal2018(As of March 31, 2018) (As of March 31, 2019)
2,139
3,408
10,027
9,542(1) Selling expense

Advertising
Sales promotion

JPY (millions)Fiscal2017
Fiscal2018(As of March 31, 2018) (As of March 31, 2019)13,09013,001
6,757
6,783
33,922
20,360148,631
119,776(2) General and administrative expense

Reserve for bonuses
Depreciation
Commission
Research and development
3. Extraordinary income
Fiscal 2017 (April 1, 2017 to March 31, 2018)(Gain on sales of investment in subsidiaries)
The gain was mainly from the sale of shares in Wako Pure Chemical Industries, Ltd., which used to be a consolidated subsidiary.
Fiscal 2018 (April 1, 2018 to March 31, 2019)(Gain on sales of tangible assets)
The gain was mainly from the sale of underutilized company housings.
4. Extraordinary loss
Fiscal 2017 (April 1, 2017 to March 31, 2018)(Restructuring costs)
The loss is from reorganization costs to build an efficient operating model. The major factor of the restructuring expenses was
impairment loss recognized for the following assets which were deemed as underutilized assets, related to the R&D
transformation strategy.
UseClassification
Location
AmountBuildings and structures
Research Equipment
Fujisawa-shi, Kanagawa
9,575 million JPY
and other
The book values of underutilized assets such as buildings and structures were written down to the recoverable amount, andresulting decrease was recognized as impairment loss, because they aren't used in business operations although they are part of
Shonan Research center.
The recoverable amounts of these assets were measured by the net selling price which was based on the theoretical value.
(Impairment loss)
The company primarily group its business assets by business segment, the management accounting categories which areemployed to enable continuous monitoring of the group’s earning situation. However, Patent rights, Sales rights, underutilized
assets and others are classified as an individual unit for impairment testing.
In total, 5,202 million JPY of impairment losses were recognized for the year ended March 31, 2018. The major assets of themwere as follows:
Use
Exclusive rights forpharmaceutical products

Classification

Location

AmountPatent rights

Japan

4,922 million JPY

The book values of underutilized assets such as patent rights were written down to the recoverable amount, and resulting
decrease was recognized as impairment loss, because they aren't used in business operations and don't have a definite plan foruse.
The recoverable amounts of these assets were measured by the net selling price which was based on the theoretical value.
223

Fiscal 2018 (April 1, 2018 to March 31, 2019)(Restructuring costs)
The loss is from reorganization costs to build an efficient operating model.

Notes on Securities
Fiscal 2017 (As of March 31, 2018)
Regarding Investment in subsidiaries and affiliates (Carrying amount Investment in subsidiaries: 1,407,585 million JPY,
Investment in affiliates: 7,420 million JPY), fair value of the investment is not disclosed as it is extremely difficult to measure.
Fiscal 2018 (As of March 31, 2019)
Regarding Investment in subsidiaries and affiliates (Carrying amount Investment in subsidiaries: 8,269,789 million JPY,
Investment in affiliates: 7,732 million JPY), fair value of the investment is not disclosed as it is extremely difficult to measure.

224

Accounting for Deferred Income Taxes
1. Major components of deferred tax assets and deferred tax liabilities:
JPY (millions)Fiscal2017(As of March 31, 2018)

Fiscal2018(As of March 31, 2019)

6,096
18,253
12,470
－
8,256
9,703
1,313
2,388
7,534
11,388
4,830
79,178
11,482
17,427
190,318

6,063
12,957
7,235
2,497
9,020
6,202
1,538
3,110
7,235
8,542
6,997
714,486
239,466
16,6291,041,977－－(204,909)(732,069)

Valuation allowance total (Note1)
Total deferred tax assets(83,146)
107,172(936,978)104,999(Deferred tax liabilities)
Prepaid pension costs
Unrealized gain on available-for-sale securities
Reserve for reduction of noncurrent assets
Other
Total deferred tax liabilities(11,316)(19,450)(14,387)(4,487)(49,640)(11,753)(11,155)(12,827)(4,429)(40,164)

Net deferred tax assets

57,532

64,835(Deferred tax assets)
Reserve for employees’ bonuses
Research and development costs
Inventories
Hedge
Accrued expenses
Deferred income
Reserve for employees’ retirement benefits
Reserve for restructuring costs
Excess depreciation of tangible noncurrent assets
Patent rights
Sales rights
Share appraisal losses/ disposal losses
Net operating loss carryforwards on tax basis (Note2)
Other
Deferred tax assets - subtotal
Valuation allowance in related with net operating loss carryforwards
on tax basis (Note2)
Valuation allowance in related with deductible temporary difference(Note)(1) In order to organize capital in subsidiaries, the subsidiaries in Europe were restructured during this period. The increase invaluation allowance was mainly due to the recognition of valuation allowance in related with deductible temporary difference,
which arose from recognition of dividend in kind of sub-subsidiaries at fair value on tax basis in association with subsidiaries
liquidation.
(2)

Net operating loss carryforwards on tax basis and for which deferred tax assets will expire as follows:
Fiscal2018 (As of March 31, 2019)
JPY (millions)(a) The amount of net operating loss carryforwards on tax basis is multiplied by the effective tax rate.
(b) As a result of the restructuring described above, the losses from liquidation subsidiaries were booked as taxable loss
which resulted in a substantial amount of Net operating loss carry forwards. Among 239,466 million JPY of Net operating
loss carry forwards, 34,557 million JPY was considered as recoverable based on the estimation of future taxable profit.

225

2. The effective income tax rate of the Company after application of deferred tax accounting differs from the statutory tax rate for thefollowing reasons:Statutory tax rate
(Adjustments)
Expenses not deductible for tax purposes
Dividend income and other items permanently nontaxable
Variation in valuation allowance
Unitary tax on overseas subsidiaries
Variation in unrecognized deferred tax liability
Other
Effective tax rate after application of deferred tax accounting

226

Fiscal2017(As of March 31, 2018)
30.8

(%)
Fiscal2018(As of March 31, 2019)
30.6

0.7
(7.3)
(1.9)
0.1
－
2.2
24.6

1.8
(1,630.3)
1,459.2
79.6
7.3
0.4
(51.4)

Significant Subsequent Events
On May 14, 2019, On May 14, 2019, Takeda announced the issuance of 11,350 thousand shares at an issuance price of
4,318 JPY per share to The Master Trust Bank of Japan, Ltd., which is the trust account for Takeda’s ESOP subsidiary.
This issuance was approved by the resolution of the Board of Directors.
On June 6, 2019, Takeda issued hybrid bonds (subordinated bonds) with an aggregate principal amount of 500 billion
JPY.
Please refer to "Notes to Consolidated Financial Statements, 33. Subsequent Events", Consolidated IFRS Financial
Statements for the year ended March 31, 2019.

227

5) Supplementary Schedules[Details of Tangible noncurrent assets and Intangible noncurrent assets]

Class of assets

Balance at the
beginning of year

Buildings and structures

Increasein current year

Decreasein current year

Depreciationin current year

Balance at theend of year

Accumulated
depreciation

Acquisition costat the end of year

JPY (millions)

JPY (millions)

JPY (millions)

JPY (millions)

JPY (millions)

JPY (millions)

JPY (millions)

125,791

10,237

1,871

10,014

124,143

171,241

295,384

12,69929,974

180,958

210,932(261)
Machinery and equipment

38,061

5,479

867
(765)

VehiclesTools and fixtures

45

9

0

23

31

444

475

5,052

5,646

102

2,755

7,841

20,502

28,343(37)
Land34,364－887－

33,477－33,477

Lease assets

2,110

176

20

623

1,643

4,042

5,685

(0)
Construction in progress

9,790

4,341

8,465

－

5,666

－

5,666

215,21325,888

12,212

26,114

202,775

377,187

579,962

230

176

4

32

194

285

479

Other intangible noncurrent assets

20,128

3,865

641

5,006

18,34635,11553,461

Total intangible noncurrent assets

20,358

3,865

645

5,038

18,54035,40053,940Total tangible noncurrent assets(1,063)
Use right of facilities(Note1) The reason for major increase for the year is as follows:
Buildings and structures

Global headquarters in Tokyo

5,693 million JPY

Repair work of SRC in Shonan plant

2,759 million JPY

Construction of new building (PCTM) and addition of F34 line in Hikari plant
Machinery and equipment

Tools and fixtures

275 million JPY

Production of new influenza vaccine in Hikari plant

1,036 million JPY

construction of new building (PCTM) and addition of F34 line

736 million JPY

Repair work of SRC in Shonan plant

229 million JPY

Global headquarters in Tokyo

1,397 million JPY

Repair work of SRC in Shonan plant

253 million JPY(Note2) Numbers in parentheses in "Decrease in current year" represent impairment loss.
[Details of Reserve]

Item

Balance at the
beginning of year

Decrease in current year

Increase in current year

Balance at the end of year

JPY (millions)

JPY (millions)

JPY (millions)

JPY (millions)

Allowance for doubtful accounts

3,769

－

3,743

26

Reserve for employees' bonuses

19,937

19,826

19,937

19,826

Reserve for bonuses for directors
and corporate auditors

377

633

377

633

Reserve for restructuring costs

7,809

5,010

2,651

10,168Reserve for SMON compensation

1,146

－

80

1,066

Reserve for share-based payments

3,546

3,102

2,784

3,864

Other reserve

2,116

287

1,789

614

(Note) Exchange differences on reserve in foreign currency are booked as exchange gain or loss.

228

(2)

Major Assets and Liabilities
As the Consolidated Financial Statement is prepared, this item is omitted.

(3)

OthersFor details of major litigation matters, please refer to "Notes to Consolidated Financial Statements, 32. Commitment andContingent Liabilities, Litigation" in separate file, Consolidated IFRS Financial Statements for the year ended March 31,
2019.
Product-liability suits and related damage claims
ACTOS
PREVACID

229

VI. Overview of Administrative Procedures for shares of the Company

Fiscal year

From April 1 to March 31

Ordinary general meeting of shareholders

During June

Record date

March 31

Record dates for dividends of surplus

March 31, September 30

Number of shares in one unit

100 shares

Buyback and increase in holdings of sharesless than one unit
Place of handling

Mitsubishi UFJ Trust and Banking Corporation
Osaka Securities Agency Division
6-3, Fushimicho 3-chome, Chuo-ku, Osaka

Administrator of shareholder registry

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Forwarding office̶Fees for buyback and increase in holdings

Free of charge

Method of giving public notice

The Company carries out its public notifications by means of electronic public notice.
However, in the event of an accident, or the occurrence of similar circumstances whichcannot be controlled, public notification shall be posted in the Nihon Keizai Shimbun.
The electronic public notices are posted on the Company’s website, and the URL is asfollows:
https://www.takeda.com/jp/investors/public-notice/(Japanese Only)

Shareholder privileges

None

230

VII. Reference Information on the Company
1. Information on the Parent Company
The Company does not have the parent company and other companies prescribed in Article 24-7, paragraph 1 of
the Financial Instruments and Exchange Act.
2. Other Reference Information
The Company filed the following documents during the period from the commencing date of the fiscal year ended March 31,
2019 to the filing date of Annual Securities Report.
(1) Annual Securities Report Fiscal Yearand documents attached, (141st)
and Confirmation Letter

From

April 1, 2017

To

March 31, 2018(2) Internal Control Reportand documents attached

From

April 1, 2017

To

March 31, 2018

From

April 1, 2018

To

June 30, 2018(3) Quarterly Report andConfirmation Letter

Fiscal Year(141st)Fiscal Year
(142nd First Quarter)

From
Fiscal Year
(142nd Second Quarter) To
Fiscal Year
(142nd Third Quarter)

From
To

Filed with Director of the Kanto
Local Finance Bureau on June 28,
2018
Filed with Director of the Kanto
Local Finance Bureau on June 28,
2018
Filed with Director of the Kanto
Local Finance Bureau on August 10,
2018

July 1, 2018

Filed with Director of the Kanto
Local Finance Bureau on
September 30, 2018 November 8, 2018
October 1, 2018

Filed with Director of the Kanto
Local Finance Bureau on
December 31, 2018 February 14, 2019(4) Extraordinary Report
The Extraordinary Report pursuant to Article 19, paragraph 2, item 9-2 of theFiled with Director of the Kanto
Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (results of Local Finance Bureau on July 2,
resolution at the general meeting of shareholders)
2018
The Extraordinary Report pursuant to Article 19, paragraph 2, item 9-2 of theFiled with Director of the Kanto
Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (results of Local Finance Bureau on
resolution at the general meeting of shareholders)
December 7, 2018
The Extraordinary Report pursuant to Article 19, paragraph 2, items 3 and 8-2 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs
Local Finance Bureau on May 8,(acquisition of subsidiary company involving changes to specified subsidiary2018
companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, items 12 and 19 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (event Local Finance Bureau on May 8,
with potentially serious effects on the finance, business results and cash flow of the 2018
reporting company and consolidated subsidiary companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, items 12 and 19 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (event Local Finance Bureau on June 8,
with potentially serious effects on the finance, business results and cash flow of the 2018
reporting company and consolidated subsidiary companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, items 12 and 19 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (event Local Finance Bureau onwith potentially serious effects on the finance, business results and cash flow of the October 26, 2018
reporting company and consolidated subsidiary companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, items 12 and 19 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (event Local Finance Bureau on November
with potentially serious effects on the finance, business results and cash flow of the 16, 2018
reporting company and consolidated subsidiary companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, items 12 and 19 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (event Local Finance Bureau on November
with potentially serious effects on the finance, business results and cash flow of the 20, 2018
reporting company and consolidated subsidiary companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, items 12 and 19 of Filed with Director of the Kanto
the Cabinet Office Ordinance Concerning Disclosure of Corporate Affairs (event Local Finance Bureau on December
with potentially serious effects on the finance, business results and cash flow of the 3, 2018
reporting company and consolidated subsidiary companies)
The Extraordinary Report pursuant to Article 19, paragraph 2, item 2 of the Cabinet Filed with Director of the Kanto
Office Ordinance Concerning Disclosure of Corporate Affairs (acquisition of
Local Finance Bureau on January 10,231subsidiary company involving changes to specified subsidiary companies)
2019
The Extraordinary Report pursuant to Article 19, paragraph 2, item 3 of the Cabinet Filed with Director of the Kanto
Office Ordinance Concerning Disclosure of Corporate Affairs (changes to specified Local Finance Bureau on May 8,
subsidiary companies)
2018(5) Amendment Report for Extraordinary Report
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 12 and 19 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 12 and 19 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 12 and 19 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 12 and 19 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 12 and 19 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 12 and 19 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs
The Amendment Report for the Extraordinary Report submitted on May 8, 2018,
pursuant to Article 19, paragraph 2, items 3 and 8-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs

Filed with Director of the Kanto
Local Finance Bureau on June 8,
2018
Filed with Director of the Kanto
Local Finance Bureau on October
26, 2018
Filed with Director of the Kanto
Local Finance Bureau on November
16, 2018
Filed with Director of the Kanto
Local Finance Bureau on November
20, 2018
Filed with Director of the Kanto
Local Finance Bureau on December
3, 2018
Filed with Director of the Kanto
Local Finance Bureau on December
21, 2018
Filed with Director of the Kanto
Local Finance Bureau on January 8,
2019(6) Securities Registration Statement (using the Reference Method) andAccompanying Documents
Securities Registration Statement pertaining to issuance of common stocks through Filed with Director of the Kanto
increases in third-party allotment
Local Finance Bureau on May 14,
2019

232

Part 2.

Information on Guarantors for Takeda

Not applicable233

English translation of the auditor’s report originally issued in Japanese.

Independent Auditor’s Report

June 27, 2019
To the Board of Directors of Takeda Pharmaceutical Company Limited:
KPMG AZSA LLC
Koichi Kohori (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Naohiro Nishida (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Financial Statement Audit
We have audited the accompanying consolidated financial statements of Takeda Pharmaceutical Company
Limited and its consolidated subsidiaries provided in the “Financial Information” section in the company’s
Securities Report, which comprise the consolidated statement of income, statement of income and othercomprehensive income, statement of financial position, statement of changes in equity and statement ofcash flows for the year ended March 31, 2019, and a summary of significant accounting policies, otherexplanatory information and supplementary schedules, in accordance with Article 193-2(1) of the Financial
Instruments and Exchange Act of Japan.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards as prescribed in Article 93 of theRegulation on Terminology, Forms and Preparation Methods of Financial Statements and Consolidated
Financial Statements of Japan, and for such internal control as management determines is necessary toenable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgement, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the financial statement audit is not to
express an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.

English translation of the auditor’s report originally issued in Japanese.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Takeda Pharmaceutical Company Limited and its consolidated subsidiaries as at March 31,
2019, and their financial performance and cash flows for the year then ended in accordance with
International Financial Reporting Standards.

Internal Control Audit
We also have audited the accompanying internal control report of Takeda Pharmaceutical Company Limited
as at March 31, 2019, in accordance with Article 193-2(2) of the Financial Instruments and Exchange Act
of Japan.
Management’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the
preparation and fair presentation of the internal control report in accordance with assessment standards forinternal control over financial reporting generally accepted in Japan. Internal control over financial
reporting may not completely prevent or detect financial statement misstatements.
Auditor’s Responsibility
Our responsibility is to independently express an opinion on the internal control report based on our internal
control audit. We conducted our internal control audit in accordance with auditing standards for internal
control over financial reporting generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the internal control report is free frommaterial misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the assessment ofinternal control over financial reporting in the internal control report. The procedures selected depend on
the auditor’s judgement, including significance of effect on the reliability of financial reporting. Also, aninternal control audit includes evaluating the appropriateness of the scope, procedures and result of theassessment determined and presented by management, and the overall internal control report presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
OpinionIn our opinion, the internal control report, in which Takeda Pharmaceutical Company Limited states thatinternal control over financial reporting was effective as at March 31, 2019, presents fairly, in all material
respects, the assessment of internal control over financial reporting in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.
Emphasis of Matter
We draw attention to the matter described in the Internal Control Report. As described in the Internal
Control Report, Shire plc and its subsidiaries, which are consolidated subsidiaries of Takeda Pharmaceutical
Company Limited, are not included within the scope of assessment of the internal control over financial
reporting. Shire plc and its subsidiaries became consolidated subsidiaries of Takeda Pharmaceutical
Company Limited as a result of the share acquisition on January 8, 2019. As considerable time required toassess the internal control of the acquired group could not be secured, Takeda Pharmaceutical Company
Limited was unable to perform sufficient assessment of a certain portion of the internal controls overfinancial reporting due to unavoidable circumstances, thus did not include the acquired group within its
scope of assessment.

English translation of the auditor’s report originally issued in Japanese.

Our opinion is not modified in respect of this matter.

Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to
the provisions of the Certified Public Accountants Act of Japan.

Notes to the Reader of the Independent Auditor’s Report on the Financial Statements
And Internal Control Over Financial Reporting:
The Independent Auditor’s Report on the Financial Statements and Internal Control Over Financial Reportingherein is the English translation of the Independent Auditor’s Report on Financial Statements and Internal
Control Over Financial Reporting as required by the Financial Instruments and Exchange Act of Japan.

English translation of the auditor’s report originally issued in Japanese.

Independent Auditor’s Report

June 27, 2019
To the Board of Directors of Takeda Pharmaceutical Company Limited:

KPMG AZSA LLC
Koichi Kohori (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Naohiro Nishida (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
We have audited the accompanying financial statements of Takeda Pharmaceutical Company Limited
provided in the “Financial Information” section in the company’s Securities Report for the 142nd fiscal
year, which comprise the balance sheet as at March 31, 2019, and the statement of operations, statement ofchanges in net assets for the year then ended, and a summary of significant accounting policies and otherexplanatory information, in accordance with Article 193-2(1) of the Financial Instruments and Exchange Act ofJapan.

Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit as independent
auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on our judgement, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error.

In making thoserisk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, while
the objective of the financial statement audit is not to express an opinion on the effectiveness of the entity’sEnglish translation of the auditor’s report originally issued in Japanese.

internal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of
Takeda Pharmaceutical Company Limited as at March 31, 2019, and their financial performance for theyear then ended in accordance with accounting principles generally accepted in Japan.
Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to
the provisions of the Certified Public Accountants Act of Japan.
Notes to the Reader of the Independent Auditor’s Report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as
required by the Financial Instruments and Exchange Act of Japan.

Cover【Document title】

Internal Control Report【Clause of stipulation】

Article 24-4-4, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan【Place of filing】

Director-General of the Kanto Local Finance Bureau【Filing date】

June 27, 2019

【Company name】

Takeda Yakuhin Kogyo Kabushiki Kaisha【Company name in English】

Takeda Pharmaceutical Company Limited【Title and name of representative】

Christophe Weber, Representative Director, President &Chief Executive Officer【Title and name of chief financial officer】

Constantine Saroukos, Director & Chief Financial Officer【Address of registered head office】

1-1, Doshomachi 4-chome, Chuo-ku, Osaka【Place for public inspection】

Takeda Pharmaceutical Company Limited (Global
Headquarters)(1-1, Nihonbashi Honcho 2-chome, Chuo-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)Fukuoka Stock Exchange(14-2, Tenjin 2-chome, Chuo-ku, Fukuoka)
Sapporo Stock Exchange(14-1, Minamiichijonishi 5-chome, Chuo-ku, Sapporo)1. Matters relating to the basic framework for the internal controls over financial reporting
Christophe Weber, Representative Director, President and Chief Executive Officer, and Constantine Saroukos,
Director and Chief Financial Officer are responsible for maintaining the internal controls over financial reportingof Takeda Pharmaceutical Company Limited (the “Company”)and have established and maintained the internal
controls over financial reporting in accordance with the basic framework for internal controls as set forth in the“On the Revision of the Standards and Practice Standards for Management Assessment and Audit concerning
Internal Control Over Financial Reporting (Council Opinions)” published by the Business Accounting Council.
The internal controls over financial reporting is designated to achieve its objectives to the extent reasonablethrough the basic elements of the internal controls functioning effectively in combination and as a whole.
Therefore, the internal controls over financial reporting may not completely prevent or detect misstatements.

2. Matters relating to the scope of assessment, the base date of assessment and the assessment procedures
The Company assessed the effectiveness of internal controls over financial reporting as of March 31, 2019 andmade this assessment in accordance with the assessment standards for internal control over financial reporting
generally accepted in Japan. In making this assessment, the Company evaluated controls which have a significant
effect on financial reporting on a consolidated basis (“company-level controls”) and based on the result of thisassessment, selected the business processes to be evaluated. In these business processes assessments, theCompany analyzed the selected business processes, identified key controls that have a significant impact on thereliability of financial reporting and assessed the internal controls by assessing the design and operating
effectiveness of these key controls.
The Company determined the required assessment scope of internal controls over financial reporting for theCompany, its subsidiaries and equity-method affiliated companies from the perspective to the significance they
have with respect to the reliability of financial reporting. The significance they have with respect to the reliabilityof financial reporting is determined taking into account the quantitative and qualitative significance. The
Company reasonably determined the assessment scope of internal controls over business processes after
considering the assessment results of company-level controls conducted for the Company, its 37 subsidiaries and1 equity-method affiliated company. The Company, for the assessment scope of company-level controls, did notinclude certain consolidated subsidiaries and equity-method affiliated company which do not have quantitativeor qualitative significance over the consolidated financial statements.
Regarding the assessment scope of internal controls over business processes, the Company accumulated revenue
at business locations in descending order (after eliminating intercompany transactions) in the fiscal year, andthose nine business locations that make up roughly two-thirds of consolidated revenue for the fiscal year ended
March 31, 2019 were selected as “significant business locations.” At the selected significant business locations,the Company included, in the assessment scope, those business processes related to revenue, accounts receivableand inventory as these accounts closely relate to the business objectives of the Company.
Aside from the aforementioned selected significant business locations, the Company added to the assessment
scope, those significant processes considering their effect they have to financial reporting, including processes
relating to significant accounts with higher risk of material misstatements, as they involve estimates or forecasts,

or as the processes relate to businesses or operations involving high-risk transactions.
The Company did not include Shire plc and its consolidated subsidiaries (“Shire”) within the assessment scopeof internal controls. Shire became a consolidated subsidiary as a result of the share acquisition on January 8,
2019. As considerable time required to assess the internal control could not be secured, the Company was unable
to perform sufficient assessment of a certain portion of the internal controls over financial reporting due tounavoidable circumstances.

3. Matters relating to the results of the assessment
As a result of the assessment above, the Company concluded that internal control over financial reporting of theCompany was effective as of March 31, 2019, although the Company determined that it could not perform
sufficient assessment procedures for a certain part of the internal controls over financial reporting due tounavoidable circumstances as the Company could not secure considerable time required to assess the internal
controls after Shire became a consolidated subsidiary as a result of the share acquisition on January 8, 2019.

4. Additional notes
Not Applicable.

5. Special notes
The Company has registered American Depositary Shares (ADSs) with the U.S. Securities and Exchange
Commission (SEC) this fiscal year, and plans to prepare an Internal Control Report starting next fiscal year basedon terminology, forms and preparation methods in accordance with requirements applicable to the U.S. SEC
registrants.

Cover【Document title】

Confirmation Letter【Clause of stipulation】

Article 24-4-2, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan【Place of filing】

Director-General of the Kanto Local Finance Bureau【Filing date】

June 27, 2019

【Company name】

Takeda Yakuhin Kogyo Kabushiki Kaisha【Company name in English】

Takeda Pharmaceutical Company Limited【Title and name of representative】

Christophe Weber, Representative Director, President &Chief Executive Officer【Title and name of chief financial officer】

Constantine Saroukos, Director & Chief Financial Officer【Address of registered head office】

1-1, Doshomachi 4-chome, Chuo-ku, Osaka【Place for public inspection】

Takeda Pharmaceutical Company Limited (Global
Headquarters)(1-1, Nihonbashi Honcho 2-chome, Chuo-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)Fukuoka Stock Exchange(14-2, Tenjin 2-chome, Chuo-ku, Fukuoka)
Sapporo Stock Exchange(14-1, Minamiichijonishi 5-chome, Chuo-ku, Sapporo)1. Matters Related to Adequacy of Statements Contained in the Annual Securities Report
Takeda’s Representative Director, President and Chief Executive Officer, Christophe Weber, and Director and Chief
Financial Officer, Constantine Saroukos, have confirmed that the content of the Annual Securities Report of Takeda
Pharmaceutical Company Limited for the 142th fiscal year (from April 1, 2018 to March 31, 2019) was described
appropriately based on the laws and regulations concerning the Financial Instruments and Exchange Act and Related
Regulations.

2. Special Notes
Not applicable.