Better Health, Brighter Future

TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW
Takeda’s executive compensation structure reflects our position as a patient-focused, values-based, R&Ddriven global biopharmaceutical company. We have an experienced and diverse Takeda Executive Team (the“TET”) representing nine nationalities and located in three countries, which includes three of our Board of
Directors (the “Internal Directors”). Our executive compensation programs are designed to be globallycompetitive and performance-oriented, while also considering local market factors.
COMPENSATION PAY FOR PERFORMANCE PHILOSOPHY AND OBJECTIVESOur executive compensation strategy is designed to closely link pay with performance and long-term
shareholder value creation while minimizing excessive risk-taking. To help us accomplish these important
objectives, we have adopted the following policies and practices over time:
What We Do
We conduct competitive benchmarking to ensure executive compensation is aligned with market practices and standards
We align short- and long-term incentives with company performance
We tie the majority of the TET compensation to long-term performance
We utilize a total shareholder return metric in the long-term incentive compensation to further align with long-term
stock performance and shareholder interests
We include caps on short-term incentive and Performance Share Unit awards payouts
We have adopted share holding requirement policies to foster executive share ownership and further align withshareholder interests
We have adopted a robust incentive recoupment (i.e., clawback) policy, further enhancing our compensation governancestandards
We engage independent compensation consultants
We actively engage with our shareholders
What We Don’t Do
We do not have automatic or guaranteed annual salary increases
We do not have guaranteed bonuses or long-term incentive awards
We do not allow short-sales and short-term trading (buy and sell within a 6-month period, subject to limited exceptions
related to the operation of equity compensation programs) of company shares, and hedging and pledging transactions
related to company shares

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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

Takeda’s Total Rewards Philosophy:

COMPONENTS OF THE COMPENSATION PROGRAM
We achieve these objectives through a combination of the following three primary components of our
executive compensation structure:
Base Salary: A fixed cash compensation amount that is competitive within the markets in which we compete
for talent. The Company provides appropriate levels of base salary to ensure that Takeda can attract andretain a global leadership team that will continue to meet our commitments to customers and patients andsustain long-term profitable growth for our shareholders and lead and grow the scale, size, and complexity ofthe business. Base salary is established for each of the TET members relative to his or her market
benchmarking based on their respective performance (including ESG individual objectives), experience,unique skills, internal equity with others at Takeda, and the Company’s operating budget.
Short-Term Incentive (“STI”): An annual cash bonus opportunity with payout levels based on the degree ofachievement of pre-established annual performance goals. The STI plan is designed to focus the entire teamon shared annual company performance goals and specific group goals. The STI program was structured inthis manner so that program participants have a clear line of sight to both company and division results,aligned with Takeda’s annual operating goals, in order to create value for our shareholders. STI target
amounts for participants are set as a percentage of base salary. It is important to note that the STI plan
extends beyond the TET to over 30,000 employees globally, uniting leaders and plan participants with acommon vision of delivering therapies for patients and value to shareholders.
Long-Term Incentives (“LTI”): The greatest emphasis among the three components is placed on longer-term
incentives, in order to focus and align our TET on the achievement of long-term shareholder value creation.
LTI compensation takes two forms: Performance Share Unit awards (subject to performance-based vesting
requirements) (“PSU” awards) and Restricted Stock Unit awards (subject to service-based vesting
requirements) (“RSU” awards). In Fiscal Year 2023, 60% of the LTI program is delivered in PSU awards and
40% in RSU awards.
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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

The mix of compensation for our TET reflects Takeda’s desire to link executive compensation withindividual, group, and company performance. A substantial portion of the target pay for executives isperformance-based. The STI and LTI PSU awards payouts are contingent upon company performance, with
the STI factoring in performance over a one-year period, and LTI PSU awards compensation factoring in
performance over a three-year period (as described below).
FY 2023 CEO Pay Mix:

The chart below depicts the annualized mix of target compensation for Takeda’s CEO:

11%
16%
73%

Base Salary

STI

LTI

CEO Contractual Agreements
Effective September 2020, Takeda updated the contractual arrangements for Christophe Weber toappropriately reflect his approximate work allocation between the Company’s offices in Japan and the UnitedStates. As it was anticipated that Mr. Weber will continue to spend considerable time in the United Stateswith the Company’s global team presence in the Boston area, the Company entered into two separate
agreements with Mr. Weber.
The first agreement, representing approximately 70% of Mr. Weber’s work allocation in Japan, is a Mandate
Agreement made between Takeda Pharmaceutical Company Limited and Mr. Weber, that describes the terms
and compensation arrangements for his role as Representative Director and Chief Executive Officer of theCompany. Under this Mandate agreement, 70% of Mr. Weber’s base salary, short-term incentives and longterm incentives are payable from Takeda Pharmaceutical Company Limited.
The second agreement, representing approximately 30% of Mr. Weber’s work allocation in the United States,
is an Employment Agreement made between Takeda Pharmaceutical U.S.A. Inc. (“TPUSA”) and Mr. Weber,that describes the terms and compensation arrangements for his role as Head of Global Business of TPUSA.
Under this employment agreement, 30% of Mr. Weber’s total direct compensation including base salary, STI
and LTI are payable from TPUSA. From FY 2023, 30% of his LTI is granted from TPUSA.
These agreements were designed to split the compensation for Mr. Weber according to his work allocation
and were not intended to increase any portion or total amount of his compensation. The Compensation
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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

Committee reviews and determines Mr. Weber’s compensation provided under both agreements annually.
The total amount of each Individual Director’s compensation is disclosed in the Company’s Annual
Securities Report submitted after its General Meeting of Shareholders.
COMPENSATION PROGRAM OVERSIGHT
Role of the Compensation Committee
The Board of Directors (the “Board”) has delegated to the Compensation Committee (the “Committee”)(an advisory committee of the Board) the authority to determine compensation for Internal Directors. The
Committee consists of four independent External Directors. For Fiscal Year 2023, the Committee
continued to utilize Semler Brossy as its primary independent compensation consultant. Semler Brossy,
which is retained directly by the Committee and does not have any other engagements with the Company,
attended select meetings at the invitation of the Committee, assisted the Committee with analyzing
competitive peer company market data and relevant information relating to the Company’s compensation
programs, and reported to the Committee regarding market trends and technical developments. In
addition, members of our management team keep abreast of developments in compensation matters andparticipate in the gathering and presentation of data related to these matters as requested by theCommittee. As part of an annual exercise, the Committee conducted a self-evaluation of the Committee’s
effectiveness and reported to the Board about the results of the self-evaluation and actions for further
improvement. To enhance transparency of the Company’s corporate governance, the Company has
externally disclosed the Compensation Committee Charter, which defines the Committee’s roles andresponsibilities, as a part of the Company’s corporate governance documents.
Compensation Determination
The level and the mix of compensation for Internal Directors are reviewed and established each year by theCommittee. The process begins with consideration of compensation levels, and compensation mix, forcomparable executives at companies in Takeda’s Fiscal Year Peer Group (see below). After this benchmark
review, the Committee establishes Internal Director compensation – base salary adjustments, annual shortterm incentive, and long-term incentive awards – relative to the peer median. Awards can be differentiatedfrom peer compensation levels based on each Internal Director’s individual performance, experience,leadership, and contributions to Takeda’s business and strategic performance. The remaining TET members
participate in the same compensation programs as the Internal Directors, and their compensation level andmix are set by our CEO in a manner that is generally consistent with the framework established by theCompensation Committee for Internal Directors.
Comparative Framework
Individual compensation levels and opportunities are compared to a peer group of global pharmaceuticalcompanies approved by the Committee and the Board to ensure our compensation programs and levels arecompetitive to attract and retain key talent in the global pharmaceutical market. Although the Committee
considers the compensation practices of peer companies, it does not make any determinations or changes incompensation in reaction to the market data alone. The Fiscal Year 2023 Takeda Peer Group included thefollowing companies:
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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW
Fiscal Year 2023 Takeda Peer Group
AbbVie (United States)

Amgen (United States)

Astellas (Japan)

AstraZeneca (United Kingdom)

Bristol Myers Squibb (United States)

Eli Lilly (United States)

Gilead Sciences (United States)

GlaxoSmithKline (United Kingdom)

Merck & Co (United States)

Merck Group (Germany)

Novartis (Switzerland)

Pfizer (United States)

Roche (Switzerland)

Sanofi (France)

The Takeda Fiscal Year 2024 Peer Group will remain the same as the Takeda Fiscal Year 2023 Peer Group.
Key Performance Indicator Determination
Each year, the Committee and the Board review and establish the annual Key Performance Indicators(“KPI”) used for the STI plan and for the LTI PSU awards. The KPIs included in the STI and LTI PSU
awards were carefully evaluated by the Committee before being approved by the Board. Each KPI has been
set in order to align the short- and long-term strategies with shareholder returns, while also promoting theretention of critical global executive talent. Takeda believes these KPIs enable the organization to focus on
growth, profitability, pipeline performance, expense management and shareholder value creation.
Furthermore, consistent with Takeda’s peer group practices, the Committee and the Board may select KPIs
based on certain financial measures that are adjusted from Takeda’s reported, IFRS financial measures tofocus on Takeda’s core business strategies and operations. Additional information about Takeda’s non-IFRS
measures, including Core financial measures, is set forth in the ﬁnancial appendix at the end of Takeda's
fourth quarter FY2023 investor presentation (available on Takeda’s website at:https://www.takeda.com/investors/financial-results/quarterly-results/).
The Committee and the Board reference Takeda’s annual operating plan to establish performance targets andto assess the relative weighting for each KPI.
Both the STI and the LTI plans are designed in a way that allows participants to be rewarded for deliveringstrong results for shareholders if Takeda exceeds the plan targets. Conversely, if Takeda does not achievetargets, participants will receive a below target payout. If performance is below a pre-designated threshold,participants receive a 0% payout for that KPI. The maximum payout participants can receive under the plans
is 200% of target.
Consistent with Takeda’s peer group practices, the Committee has authority to adjust KPI results upon which
incentive compensation payouts are determined to eliminate the distorting effect of unusual income or
expense items. The adjustments are intended to:5

TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW•align award payments with the underlying performance of the core business;•

avoid volatile, artificial inflation or deflation of awards due to unusual items in the award year, and,
where relevant, the previous (comparator) year;•

eliminate certain counterproductive short-term incentives; and•facilitate comparisons with peer companies.

The Committee reviews and approves adjustments, including but not limited to, the impact of significant
acquisitions or divestitures, the impact of share repurchases that differ significantly from business plan, andthe impacts of hyperinflation and large swings in foreign exchange rates. Amounts listed below for “Target”
and “Results” incorporate these adjustments, to the extent applicable, with adjustments having a significant
impact on results separately identified.

FY2023 SHORT- AND LONG-TERM INCENTIVE COMPENSATION
Short-Term Incentive Plan
Takeda’s STI framework aligns cash rewards with key measures of success over a one-year period. For theCEO, Fiscal Year 2023 performance was based 100% on corporate KPIs. The STI for other TET members,
was based on 75% corporate KPIs and 25% division KPIs.
The annual STI cash payout is calculated as follows:
Annual STI Payout Calculation for CEO
Base SalaryX

STI Target %X

STI Payout Multiple(based on Corporate KPI
performance)=

STI Payout

Annual STI Payout Calculation for other TET members
Base SalaryX

STI Target %X

STI Payout Multiple（ based on 75% Corporate KPI performance+ 25% Division KPI performance）＝

STI Payout

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Fiscal Year 2023 Short-Term Incentive Results
The chart below summarizes the Fiscal Year 2023 KPIs and performance ranges approved by the Committee
and the Board for the STI plan:
KPI

Rationale

Total Core
Revenue• Key indicator of growth,
including pipeline delivery• Important measure of
success within the industry

Growth andLaunch
Product
Incremental
Core
Revenue

Total Core
Operating
Profit• Growth Products: Emphasis
on subset of revenue that isa key driver of future
revenue growth• Launch Products: Key
indicator of driving pipeline
growth and commercial
revenue success• Measure of marginachievement while ensuring
expense discipline• Reflects synergy capture• Communicated toshareholders as a key
measure of Takeda successpost Shire acquisition

WeightMeasurement

ThresholdTargetMaximum

97%

100%

105%

45%

Performance
Goal as a % ofTargetSTI Payout as
a % of Target

40%

100%

200%

Performance
Goal as a % ofTarget

80%

100%

120%

STI Payout as
a % of Target

40%

100%

200%

Performance
Goal as a % ofTarget

95%

100%

115%

STI Payout as
a % of Target

50%

100%

200%

15%

40%

The Committee approved the Corporate KPI Payout Multiple for Fiscal Year 2023 of 127.7% for the TET
members as shown in the following chart which details target performance levels, performance outcomes,
and performance outcome scores:
Weight(A)

TargetResultPerformance
Achievement(% of Target)

Total Core Revenue2

45%

4,021.7
billion JPY

4,153.2
billion JPY

103.3%

165.4%

74.4%

Growth and Launch ProductIncremental Core Revenue

15%

245.1
billion JPY

194.8
billion JPY

79.5%

0%

0%

Total Core Operating Profit

40%

1,073.5billion JPY

1,127.2
billion JPY

105.0%

133.3%

53.3%

Corporate KPI Payout Multiple

127.7%KPI1

1

PayoutWeighted
Score Payout Score(B)(A)X(B)KPI metrics for STI purposes are based on FX rates used for internal budgetary planning to neutralize currency exchange rate
fluctuations.

2

The payout score was reduced by an adjustment made to remove the effect of hyperinflation in certain countries.

In the Notice of Convocation of the 148th Ordinary Meeting of Shareholders, Takeda proposes to pay
bonuses up to 500 million JPY (excluding bonuses paid to the relevant Directors for their work as
employees) to Christophe Weber and Costa Saroukos based upon the STI plan performance summarized

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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

above. At the previous 147th Ordinary Meeting of Shareholders, the amount of bonuses of up to 400 million
JPY was approved by shareholders.
Long-Term Incentive Plan
The LTI framework aligns the TET with the long-term strategy and shareholder returns while promoting theretention of critical global executive talent. In Fiscal Year 2023, as in Fiscal Year 2022, 60% of the LTI programis delivered in PSU awards and 40% in RSU awards.
Fiscal Year 2023-2025 PSU Awards
PSU awards will be earned based on financial performance, strategic pipeline objectives and stock priceperformance relative to peers. For Fiscal Year 2023, the Committee and Board approved the following KPIs
for the Fiscal Year 2023-2025 PSU awards:
KPI

Weight3-year Accumulated Core
Revenue30%• Aligns with investor expectations• Focuses participants on continued growth and pipeline delivery• Important measure of success within the industry

3-year Accumulated Core
Operating Profit

30%• Measures quality of the earnings over the performance period• High shareholder expectation for strong earnings growth40%• Reflects future strength of Takeda’s overall performance throughdelivery of innovative research and development programs.
• Underscores our commitment to patients.
• Reflects our objective of driving commercial revenue success, driving
innovation and ultimate replenishment of pipeline.
• Ultimately drives revenue growth from new products.

R&D: Approvals, Pivotal
Study Start, and other key
events1

3-year Relative TSR
1

Modifier+/-30%
pointsRationale• Aligns payout from our Performance Share Unit awards with theshareholder experience• Only applies if absolute TSR is positive

R&D KPIs were changed from “Pivotal Study Start and Approvals” to “Approvals, Pivotal Study Start, and other key events” toinclude other key events such as critical pipeline milestones (filing in major regions, pivotal study or other key study readouts, etc.)that have significant importance to Takeda’s portfolio and business.

From the Fiscal Year 2023-2025 PSU awards, the R&D KPIs were updated from Approvals and Pivotal Study
Starts to include other key events such as critical pipeline milestones to drive pipeline progression and longterm business success.
After measuring performance under the financial and non-financial metrics outlined above, Takeda will assessthe 3-Year Total Shareholder Return (“TSR”) performance relative to our Fiscal Year 2023 Takeda Peer Group.
From the Fiscal Year 2023-2025 PSU awards, Relative TSR modifier has been increased to 30 percentage
points from previous 20 percentage points to further align with shareholder interests. This means the relative
TSR performance can modify the final LTI PSU awards payout (up or down) by 30 percentage points. If
absolute TSR performance is negative but Takeda outperforms our peers, a positive adjustment would not bemade to the PSU awards payout factor. The chart below is the TSR goal for the Fiscal Year 2023-2025
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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

performance cycle:(

Ranking

Percentile Rank

Modifier

1

100+30% points

2

93+25% points

3

86+20% points

479+15% points

571+10% points

664+5% points

7-9

57 to 43 (median)

No adjustment

1036-5% points

1129-10% points

12

21-15% points

13

14-20% points

14

7-25% points

15

0-30% points

3-year
AccumulatedCore Revenue (30%)

R&D:
3-yearApprovals, Pivotal+
Accumulated Core+
Study Start, and other
Operating Profit (30%)
key events (40%))＋/－

3-yearRelative
TSR Modifier(+/-30% points)

Fiscal Year 2021-2023 PSU Awards Targets and Outcomes/Results
The chart below summarizes Takeda’s KPIs, weightings, and performance ranges for the Fiscal Year 20212023 PSU awards. In order to reflect our performance on approvals as well, the R&D KPI was approved by
the Committee and the Board to include both Pivotal Study Starts and Approvals. This is because approvals
link more closely to new product launches and therefore future cash generation for shareholders.
KPI

Weight3-year Accumulated
Underlying Revenue

25%

ThresholdTargetMaximum

Performance Goal as a % of Target

96%

100%

105%

PSU awards Payout as a % ofTarget

50%

100%

200%

Performance Goal as a % of Target

94%

100%

109%

Measurement

Aggregated FY21-23
Underlying Core
Operating Profit
Margin25%

PSU awards Payout as a % ofTarget

50%

100%

200%

3-year AccumulatedFree Cash Flow25%

Performance Goal as a % of Target

90%

100%

115%

PSU awards Payout as a % ofTarget

50%

100%

200%

R&D: Pivotal Study
Start & Approvals

25%

PSU awards Payout as a % ofTarget

50%

100%

200%

3-year Relative TSR

Modifier+/-20%
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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

The number of units earned by the participant is calculated as follows:
Target PSU Awards

×

PSU Payout Multiple(based on KPI performance)＝

PSUs earned

The Committee approved a PSU Multiple for Fiscal Year 2021-2023 PSU awards of 89.1% for the TET
members as shown in the following chart which details target performance levels, performance outcomes,
and performance outcome scores:
KPI

Weight(A)

TargetResultPerformance

PayoutAchievement

Score(% of Target)(B)

Weighted
PayoutScore(A)x(B)

3-year Accumulated Underlying
Revenue1

25%

10,854.3
billion
JPY

10,900.4
billionJPY

100.4%

108.5%

27.1%

Aggregated FY21-23 Underlying Core
Operating Profit Margin

25%

32.0%

28.0%

87.5%

0%

0%

3-year Accumulated Free Cash Flow2

25%

2,100.9billionJPY

2,212.7
billionJPY

105.3%

135.5%

33.9%

R&D: Pivotal Study Start & Approvals

25%

-

-

105.7%

112.6%

28.1%

PSU Payout Multiple (Before 3-Year

89.1%

Relative TSR Modifier)
3-Year Relative TSR Modifier3

0% point

PSU Payout Multiple

89.1%

1

The payout score was reduced by an adjustment made to remove the effect of hyperinflation in certain countries.

2

Free cash flows excluding upfront payment related to the acquisition of TAK-279 were used for FY2022 and FY2023 to exclude
the impact of a significant one-time event which was not predicted in the initial target from a consistent performance evaluation
standpoint.

3

Takeda’s 3-year relative TSR ranked at the 47th percentile of the peer group, resulting in 0% point modifier to the total results.

FISCAL YEAR 2024 SHORT-TERM INCENTIVE AND LONG-TERM INCENTIVECOMPENSATION PLANSIn Fiscal Year 2023, similar to prior years, the Committee engaged its independent compensation consultant
to conduct an annual review of Takeda’s STI and LTI plan practices, including plan constructs, mix andweights, KPIs used, and typical adjustments, as compared to its peer group companies Based on the review,
Takeda’s STI and LTI plans continue to align with the company’s business strategy and peer group practices.
As a result, the Committee and the Board reviewed and approved the following STI and PSU awards KPIs
for Fiscal Year 2024:

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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEWThe Fiscal Year 2024 STI KPIs and respective weightings are as follows:•

Total Core Revenue (45%)•

Growth and Launch Products Incremental Core Revenue (15%)•

Total Core Operating Profit (40%)

The Fiscal Year 2024-2026 PSU awards KPIs and respective weightings are as follows:•

Total 3 year Accumulated Core Revenue (30%)•

Total 3 year Accumulated Core Operating Profit (30%)•

R&D: Approvals, Pivotal Study Start, and other key events (40%)•

3-year Relative TSR Modifier (+/-30% points)

SHAREHOLDING REQUIREMENT
Takeda’s shareholding requirement is designed to further promote sustained shareholder return and to ensure
the company's senior executives remain focused on both short- and long-term objectives. Beginning with LTI
grants in 2019 and continuing in subsequent years, PSU awards (not including the one-time Special
Integration PSU awards) and RSU awards granted to the TET are subject to a two-year holding period after
vesting.
LTI Vesting Schedule and Holding Requirement
Grant Year

Year 1
1/3 vest after
1-yearOne-time special PSU
awards1
1

Year 3

Year 4

Year 5Required to hold the sharesfor 2 years after vesting
1/3 vest after
2-years

RSU awards

PSU awards

Year 2Required to hold the sharesfor 2 years after vesting
1/3 vest after
3-years

Required to hold the sharesfor 2 years after vesting

Vest at the end of 3-year performance period based onachievement of KPI targets
Vest after
Vest after
Vest after
1-year based on 2-years based on 3-year based onachievement ofachievement of achievement of
KPI targets
KPI targets
KPI targets

Required to hold the sharesfor 2 years after vestingNo holding requirement

No one-time special PSU awards have been granted since FY2020.

RECOUPMENT POLICYThe Committee and the Board adopted a clawback policy in 2020 and amended that policy in 2023. The
amended policy provides that, in the event of a restatement of financial results, Takeda will, in accordance with
SEC and NYSE rules, recover from its executive officers any erroneously paid incentive compensation, which
consists of incentive-based compensation for the applicable recovery period that would not have been granted
absent the restatement (i.e., mandatory clawbacks). In addition, in the event of a restatement and/or significant
misconduct, the independent External Directors may require Takeda to recoup additional incentive and othercontingent compensation. This would include all or a portion of the incentive and other contingent
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TAKEDA’S EXECUTIVE COMPENSATION OVERVIEW

compensation received by any Internal Director, any other member of the TET, and any other individual
designated by the independent External Directors within the fiscal year, and the three (3) prior fiscal years
preceding the date of the Board’s determination of the restatement or the date that Independent External
Directors determines that significant misconduct occurred, as applicable.
The amended policy became effective on October 2, 2023 and, with respect to mandatory clawbacks in theevent of a restatement, applies to incentive compensation beginning in Fiscal Year 2023.
SHAREHOLDER ENGAGEMENT
Takeda is committed to regular, ongoing engagement with shareholders to make sure that we continue tounderstand shareholder feedback and deepen shareholders’ understanding about topics including thecompany’s management policy, corporate governance, compensation, measures addressing environmental
and social issues, strategies and current business status. In FY2023, as in previous years, Takeda held many
meetings with shareholders, investors and analysts. Their feedback helped inform the Compensation
Committee’s continuous assessment of the compensation program design and ongoing discussions withshareholders.

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