Business Report(From January 1, 2016 to December 31, 2016)
1. Nobelpharma
1.1. Progress and Results of Operations
The Company’s mission is to “Contribute to society by providing necessary but neglectedpharmaceuticals and medical devices.”
Sales and profits are important management indicators that should be pursued; however, we regard
these to be the result of carrying out the mission, as well as a means to accomplish the mission. The
management policy and action criteria are as cited below:
Policy1. General
1) Share Mission, Policy and Action Criteria among all stakeholders (employees, shareholders,
officers)*Unable to share without routine review
2) Pursue evolution, yet upsizing is not our goal3) Comply with regulations and ethical codes
4) Ensure transparency and disclosure5) Launch out overseas
2. Personnel
1) Value employees and families, respecting self-development
2) Value "Selected Few" and create an environment for the "Selected Few" to enjoy working*"Selected Few" = experienced experts passionately devoted to working, irrespective of gender,
age, nationality, religion or preference
3) Value suggestions and opinions from employees
3. Products
1) Pursue high quality in products and data
2) Ensure post-marketing safety
3) Search for seeds externally
4. Capital
1) Profits as a result/means of achieving the Mission2) Focus on higher return on sales/profits per employee3) Investment decision by observing damage of failure, not unreliable counts of success4) Profits distribution to shareholders (dividends)/employees/internal reserve*Dividends: 1/3 of profits after tax*Employees: Up to dividends5) Asset management only with principal guarantee
Action Criteria
1. Principle: Give priority to patient benefits if inconclusive:
2. Challenge:
1) YMWS: "Yatte Minakucha Wakaranai, shikashi Songiri wo tamerauna"= You never know unless
you try, but do not hesitate to cut losses
1/172) ZY: "Zenrei ga nainara Yattemiru"= If no precedence, try first
3. Speed:
1) Never forget patients are waiting
2) Never fear to buy time with money
3) Set a deadline first (specific date) regardless of possible delay*Off Limits = "about - ," "early/late - ," etc.
4) Start from whatever is feasible5) If there is a failure/trouble, prevent expansion first, then recurrence*Pursuit of responsibilities is unnecessary6) Fast decisions for < X mil yen by the person responsible*X = 3 for Div Mngr; 1 for Dept Mngr/Branch Mngr/PM/PL
4. Cost/Efficiency:
1) Never carry/purchase deadwood, never take/cause wasteful actions
2) No overtime work considered good3) Consider patient needs, scientific rationality and nature of laws/regulations when pursuing
higher quality in products/data
4) Pursue cost reduction with the principle of multiple sourcing, while regarding providers as
partners
5. Communication/Relationship:
1) Never prioritize loyalty to company over morals
2) Superiors to confidingly entrust tasks to subordinates, but to never leave them unmanaged3) Hear anyone out and never interrupt them4) Start with a conclusion when explaining/responding5) Mere greetings are significant

2/17

As of March 2017, the Company is marketing the 13 new ethical drugs listed below. As the agreementwith Clinigen expired at the end of 2016, Foscavir® was transferred to the licensor, Clinigen, and theCompany discontinued marketing of the product. On March 2, 2017, the First Committee on Drugs
deliberated and agreed on a new indication of Nobelzin® (hypozincemia), which is expected to beapproved in March. The drug has been registered in the NHI price list and will be available for thisindication on the same day of approval. As Nobelzin® tablets were launched in February 2015,
Nobelzin® capsules will be deleted from the NHI price at the end of March 2017, accordingly we will
make a cancellation for its approval later.

Brand Name

LaunchIndication

Route of
Administration

Licensor

2016 Sales(NHI price basis)
Yen in millions

Sales Channel

1Nobelzin® capsules
Nobelzin® tablets

Apr 2008
Feb 2015

Wilson’s diseaseHypozincemia (Scheduled
to be approved in March
2017)

Oral
Administration

Teva (Wilson’s
disease only)

230

Direct2

Lunabell® LD
Lunabell® ULD

Jul 2008
Sep 2013

Dysmenorrhea

Oral
Administration

Janssen

10,122

Nippon Shinyaku
Fuji Pharma

3

Nobelbar®

Dec 2008

Neonatal seizures, statusepilepticus

Intravenous
injection

In-house

124

Direct4

Fostoin®

Jan 2012

Status epilepticus,
prevention of postoperative
seizures, etc.

Intravenous
injection

Pfizer

1,390

Eisai

Co-promotion

5

Gliadel®

Jan 2013

malignant glioma

Interstitialchemotherapy

Eisai

1,077

Marketing Approval(MA) transferred to
Eisai

Co-promotion(Contracted
product)

6

Alabel®

Sep 2013

diagnosis of malignant
gliomaOral
Administration

SBI Pharmaceuticals(medac)287

Direct7

Foscavir®

Feb 2012

cytomegalovirus retinitis,
viremia and infection

Intravenous
injection

Clinigen421

Direct

MA transferredfrom MSD

8

Indacin®

Jan 2013

patent ductus arteriosus ofprematurity

Intravenous
injection

Lundbeck75

Direct

MA transferredfrom MSD

9

Cosmegen®

Jan 2013

Wilms’ tumor,
choriocarcinoma, pediatricsolid malignant tumor, etc.

Intravenous
injection

Lundbeck18

Direct

MA transferredfrom MSD

10Unitalc®

Dec 2013

prevention of recurrent
malignant pleural effusion

Intrapleural

Novatech

67

Direct11

Respia®

Dec 2014

apnea of prematurity

Intravenous
injection/oral
liquidNippon Boehringer

193

Direct12

Rapalimus®

Dec 2014

lymphangioleiomyomatosis

Oral
Administration

Pfizer

182

Direct13

Zanosar®

Feb 2015

gastroenteropancreatic
neuroendocrine tumor

Intravenous
injection

Keocyt276

DirectTotal

Remarks

Both products
distributed by
two companies

14,463

Sales decreased more than anticipated due to generic competition for Lunabell® LD and the launch of
a competitive drug for Fostoin®. Our sales forecast for Zanosar® was excessive and we could not achieve
it, and sales of Gliadel® were sluggish. In terms of profit, net income before tax was close to the forecast
without reducing R&D as we posted gains on sales of stocks, received public subsidies for R&D, andreduced expenses. As shown in the above table, the total sales from the 13 products in 2016 were 14,463
million yen on a wholesale price (NHI price) basis and 6,004 million yen on the Company price basis.
Sales of the Company from the Lunabell® family were 3,889 million yen, accounting for 64.8% of total
sales. Adding royalty revenue of 787 million yen, total sales in 2016 were 6,791 million yen, down 8.7%
year-on-year.
The cost of goods sold was 1,617 million yen, down 5.4% year-on-year, and accounting for 23.8% of

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total sales (23.0% in 2015). Sales, general and administrative expenses totaled 5,407 million yen, adecline of 12.8% year-on-year, and accounting for 79.6% (83.4% in 2015), mainly including personnel
expenses of 1,917 million yen, down 8.1% year-on-year, and 28.2% (28.1% in 2015), R&D expenses of
1,603 million yen, down 1.9% year-on-year, and 23.6% (22.0% in 2015), outsourcing expenses of 714
million yen and royalty expenses of 701 million yen. The outsourcing expenses mainly included 126
million yen for safety database construction and operation by CMIC, 70 million yen for PMS-related
services by CMIC PMS, 42 million yen for call center operation by EP-PharmaLine, 41 million yen foroutsourcing expense of drug use investigation by A2 Healthcare Corp., 37 million yen for business
management service by Hisanaga & Company, and 29 million yen and 21 million yen respectively forsystem development by Application Software Development Co., Ltd. and Perspective Co., Ltd. Royalty
expenses were running royalties of 564 million yen and 130 million yen, respectively, to Jansen Pharma
and Pfizer.
The resulting operating loss was 233 million yen (476 million yen in 2015), accounting for 3.4% of
total sales (6.4% in 2015).
Ordinary loss was 56 million yen (270 million yen in 2015) accounting for 0.8% (3.6% in 2015) of
total sales, after recording non-operating income of 242 million yen including subsidy revenue of 230
million yen partly offset by non-operating expenses of 65 million yen including interest expenses of 39
million yen and bond interest expenses of 22 million yen.
Gains on sale of stocks of 243 million were recorded as extraordinary income.
Extraordinary loss included lump-sum write-off of impairment for license fee of Ocnobel® of 49
million yen.
With the income taxes of 38 million yen and income taxes-deferred of 5 million yen, the net income
was 93 million yen, down 40.3% year-on-year, and accounting for 1.4% of total sales (2015: 2.1%), andnet income per employee was 399,000 yen (2015: 649,000 yen).
Retained earnings brought forward as of December 31, 2016 were 679 million yen, with the beginningbalance of retained earnings brought forward of 637 million yen and a dividend payment of 52 million
yen.

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Item
Sales
Product sales
Other
Cost of goods sold
Gross profit
SG&A expense* Personnel cost
* R&D expenses* Commission fee* Loyalty expenses
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary income
Extraordinary loss
Net income before tax
Income taxes
Net income
Ordinary income per
employee (‘000 yen)
Net income per employee(‘000 yen)mil yenYear-on-year% to total sales
2015
2016
100.0%
100.0%
92.2%
88.4%
7.8%
11.6%
23.0%
23.8%
77.0%
76.2%
83.4%
79.6%
28.1%
28.2%
22.0%
23.6%
10.7%
10.5%
12.4%
10.3%
△6.4%
△3.4%
3.8%
3.6%
1.0%
1.0%
△3.6%
△0.8%
6.0%
3.6%
0.3%
0.7%
2.1%
2.0%
△0.0%
0.6%
2.1%
1.4%

2015
7,435
6,854
580
1,709
5,725
6,201
2,085
1,635
794
923
△476
282
76
△270
448
22
155
△1
157

2016
6,791
6,004
787
1,617
5,174
5,407
1,917
1,603
714
701
△233
242
65
△56
243
49
137
43
93

△1,116

△239

21.4%

-

-

399

61.5%

-

-

637
-

-

-

-

52
93
679

-

-

-

649

Retained earnings brought
forward
Beginning balance
665
Prior period adjustment△17
Retirement of treasury
△90
stock
Dividend76
Net income
157
Ending balance637* Major items included in SG&A expenses

5/17

91.3%
87.6%
135.6%
94.6%
90.4%
87.2%
91.9%
98.1%
89.9%
75.9%
48.9%
85.8%
85.7%
20.8%
54.3%
219.6%
88.5%
59.7%

1.2. Sales
Sales of the 13 products on market as of December 2016 are summarized as follows:
Brand Name
Nobelzin®
Lunabell® (LD), ULD
Nobelbar®
Fostoin®
Foscavir®
Gliadel®
Alabel®
Indacin®
Cosmegen®
Unitalc®
Respia®
Rapalimus®
Zanosar®
Total

Wholesale sales (NHI price basis, mil yen)2015 [1]2016 [2]207
230
13,14910,122
133
124
1,617
1,390
449
421
1,179
1,077
243
287
78
75
17
18
63
67
124
193
138
182
165
276
17,563
14,463Year-on-year([2]/[1])
111%
77%
93%
86%
94%
91%
118%
96%
106%
106%
156%
132%
167%
82%

To accomplish the Sales & Marketing mission to “Deliver the Company’s products to patients as soon
as possible,” and its corresponding motto of “Change activities” to achieve the mission, in 2016, Sales &Marketing aimed at achieving a sales target of 17 billion yen (11.9 billion for Lunabell® and 5.1 billion
yen for direct sales and co-promotion products) on the NHI price (wholesale price) basis. Actual sales in2016 were 14.5 billion (10.1 billion for Lunabell® and 4.4 billion yen for direct sales and co-promotion
products), showing very poor results.
Lunabell®, our core product, is marketed on complete consignment basis by Nippon Shinyaku andFuji Pharma. As a generic competitor of Lunabell® LD was launched in December 2015, sales of thetotal Lunabell® family fell short of the forecast by 1.8 billion yen (down 15% compared with the budget
and a fall of 23% year-on-year). Although we had focused on transferring to Lunabell® ULD from LD,
certain patients preferred to use LD, which was significantly affected by the generic. Sales of anothercore product of Fostoin® fell short of the forecast by 400 million yen (down 22% compared with thebudget and a fall of 14% year-on-year) due to the launch of a competitive product. Sales of Gliadel® fell
short of the forecast by 140 million yen (down 11% compared with the budget and a decline of 9%
year-on-year) as a clinical test of a competitive drug limited its indication cases. For Zanosar®, a new
product launched in February 2015 and our most prioritized product in 2016, as we used a wrong andexcessive sales forecast that was created before its launch, actual sales fell short of the forecast by 260
million yen (down 48% compared with the budget and up 67% year-on-year). We postponed procedures
for registering Ocnobel® approved in July 2016 in the NHI price list due to various reasons.
As of March 1, 2017, 74 MRs cover the entire country, of which 29 MRs are sent by the Medipal
Holdings Group. For one of our issues of “Change activities” for MRs, considering the characteristics of
our products, we have worked on making appointments and interviewing healthcare professionals
preferentially. As a result, in the second half of 2016, the number of interviews per MR per month was
14 on average (8 times per month in the first half).
For the logistics of the direct-sales products, the Medipal Holdings Group has, in principle,
exclusively taken over the distribution.
6/17

1.3. Manufacturing and Capital Expenditure
The Company has no manufacturing facilities of its own, and outsources manufacturing of both APIs
and products to domestic and overseas manufacturers, so the stabilization of the drug supply has been a
big challenge. We are working on building a stable supply system for product outsourcing to overseas
manufacturers, and to add domestic manufacturers to ensure multiple suppliers.
We applied for additional domestic API and product manufacturers for Fostoin®, a product imported
from overseas and which had manufacturing problems in the past, and that was approved in February
2017. However, Rapalimus®, which is primarily packaged overseas, is facing some concerns overdefects including spots on tablets caused by packaging, for which a fundamental solution has yet to befound. Thus, we are working on outsourcing its primary packaging to domestic manufacturers fromMarch 2017. For other products, we are trying to add outsourcees for manufacturing products.
In view of the expansion of demand for Nobelzin® arising from a new indication scheduled in 2017,
we are significantly increasing our supply of Nobelzin® tablets. We have developed a production planfor outsourcees for increasing production volume of both API and products in 2017 and 2018, andinventories to meet demand in 2017 have been produced.
For this period, there is no material capital investment.
1.4. Research and Development
In the past the Company mainly developed drugs that had already been approved in Europe and US
but were not approved in Japan (“unapproved drugs”), and smoothly obtained approvals. Recently, thelong-lasting social issue of unapproved drugs has been largely solved and the Company is shifting its
target seeds to more difficult drugs that originated in Japan.
The table below summarizes the development stage, expected NDA and market size classification inthree categories of New Drugs and Medical Devices, Life Cycle Management (LCM) and Overseas
Development as of March 1, 2017. Many are drugs based on new concepts that originated in Japan. Of
these products, those under development with our own funds without any public subsidies are NPC-16,
NPC-15 and NPC-04 under New Drugs, and NPC-02 (hypozincemia) under LCM. In 2016, NPC-04(Ocnobel®) was approved and NPC-02, a treatment for hypozincemia, on which we are now focusing, is
expected to be approved in March 2017. Following these products, we are preparing for filing NDA for
four items (NPC-12G, NPC-16, NPC-17 and NPC-18) in 2017.
As for the financing method for development funds including Overseas Development, we areconsidering obtaining pubic funds in addition to operating income and intend to introduce risk money
according to the degree of risk of the theme.
Development items are classified into the following six classifications:
I:
Potential primary sources of revenue following Lunabell® (sales of over 3 billion yen)II:
Short term approval and marginal profit are expected; however, they are not likely to be a
primary source of revenue
III: Short term approval expected with a theme from academia such as a university. Lower
development cost with promising public subsidies. Difficult to estimate sales due to innovative
concepts.
IV: Similar to III but relatively long time required for approval.
V:
LCM of the existing commercialized products. Lower development cost and increased marginal
profit expected.
VI: Theme under research (No applicable item in the table below)

7/17

(New Drugs and Medical Devices)
CompoundIndication1

NPC-17
Titanium bridge

Adductor spasmodic
dysphonia

2

NPC-18
S-bFGF, etc.

Myringa regeneration

3

NPC-16
LEP combination drug
NPC-09N-acetylneuraminic
acid

Licensor
Foundation of
Biomedical
Research andInnovation (Kobe)
Wakayoshi
Seisakusho
Foundation of
Biomedical
Research andInnovation (Kobe)
Kaken
Pharmaceutical

Development
stage

Estimated
approval

Classification

Clinical trial in
preparation

Dec 2017

III

Clinical trial in
preparation

Jun 2018

III

Gynecological diseases

In-housePIII

Jun 2018

I

Distal myopathy

In-house

PIII

Dec 2018

III

5

NPC-15
Melatonin

Sleep disorders inchildren withneurodevelopmental
disabilities

In-housePIII

Jun 2019

I

6

GM-CSF
Molgramostim

Pulmonary proteinosis

Savara Inc.

PIII(Global clinical
trial)

Dec 2019

II

Duchenne muscular
dystrophy

Undisclosed

PII

TBD

IV

Mitochondrial disorders

KurumeUniversity

PII

TBD

IV

Partial epilepsy

Novartis

Approved

Jul 2016

II

Salivation

Kitasato
University

Non-clinical

TBD

IV

Prion disease

Gifu University

Non-clinical

TBD

IV

Indication

Development
stage

Estimated
approval

Classification

Hypozincemia (new indication)

Under review

Mar 2017

I

External preparation (new drug form),
angiofibroma (new indication)

PIII

Mar 2018

III

Child's preparation (new drug form)

PIII

TBD

III

Refractory pneumothorax (new indication)

PII

TBD

III

PIII(Addition)

TBD

V

PIII inpreparation

TBD

III

PII in preparation

TBD

III

PII in preparation

TBD

IV

PI/II

TBD

III

4

NPC-14
Arbekacin
NPC-x3Pyruvic acid
NPC-04
Oxcarbazepine
NPC-x5
Skopolamin
NPC-x4
P092

7
8
9
10
11

(LCM)
Compound
1
2
3
4
5
6
7
8
9

NPC-02
Nobelzin®
NPC-12G
Sirolimus® external
preparation
NPC-02
Nobelzin®
NPC-05
Unitalc®
NPC-07
Alabel®
NPC-12
Rapalimus®
NPC-12
Rapalimus®
NPC-12
Rapalimus®
NPC-12G
Sirolimus® external
preparation

Diagnosis of bladder cancer (newindication)
Refractory blood/lymph vessel disease (newindication)
Fbrodysplasia ossificans progressiva (newindication)
Prevention of GVHD after hematopoietic
stem cell transplantation (new indication)
Severe hyperhidrosis, neurofibromatosis
type 1 (new indication)

8/17

(Overseas Development)

1

CompoundIndication

Licensor

Development
stage

Estimated
approval

Classification

BK-SE36
Malaria vaccine

Prevention of
falciparum malaria

Osaka University

PIb

TBD

I

PII

TBD

III

Clinical trial in
preparation

TBD

III

Clinical trial in
preparation

TBD

III

2

NPC-18
S-bFGF, etc.

3

NPC-17
Titanium bridge

4

NPC-12G
Sirolimus® external
preparation

Myringa regeneration

Adductor spasmodic
dysphonia

Hemangiofibroma

Foundation of
Biomedical
Research andInnovation (Kobe)
Kaken
Pharmaceutical
Foundation of
Biomedical
Research andInnovation (Kobe)
Wakayoshi
Seisakusho
Osaka University

NPC-12G (Hemangiofibroma) and NPC-17 (Adductor spasmodic dysphonia) deserve special mention,
as they are orphan drugs that were designated under the “Sakigake” fast-track review system anddemonstrated positive outcomes in their clinical tests. Comprehensive evaluation under the Sakigake
system is progressing as planned, with the aim of submitting the NDA in 2017.
1.5. Business Development & Strategy
Business Development & Strategy is responsible for core roles for the Company’s open innovationand contacts for business negotiations, specifically (1) Planning and research for new themes, (2)In/out-licensing negotiations with a potential business partner for a new development theme, (3)Follow-up negotiations with the existing business partners, (4) Preparation for overseas expansion, (5)Intellectual property management such as patents and technology-related contracts, and (6) procurement
negotiations.
Regarding (1), the Company is cultivating new seeds including some projects from domestic
universities and public research institutions, actively researching and evaluating them, and considering
suitability with the Company’s mission and for potential commercialization. As a part of such activities,
we entered into an umbrella agreement with Foundation for Biomedical Research and Innovations inMarch 2016, under which we have access to seeds of national academia managed by the Foundation.
Accordingly, the Company entered into a joint research agreement with a university in March 2017, and
we also entered into a partnership agreement with a public research institute in January 2017. We will beable to disclose more detailed information at a later date.
For (2), the Company signed a license agreement on commercialization of Molgradex, a treatment for
pulmonary proteinosis, in Japan with Danish Serendex Pharmaceuticals (currently, Savara in the U.S.) in
May 2016. In November 2016, the Company entered a comprehensive business tie-up with ASKA
Pharmaceutical Co., Ltd. with the aim of co-promotion in the field of obstetrics and gynecology,
including NPC-16, a treatment for dysmenorrhea.
For (3), the Company transferred (returned) marketing authorization for Foscavir®, cytomegalovirus
retinopathy agent, to Clinigen KK in November 2016.
For (4), the Company had investigated to develop and sell NPC-17 and other products in East Asia,
North America and Europe, and in March 2017, it established the Global Business department,
independent from Business Development & Strategy.
For (5), in line with an increase in employee invention, the Company established “Regulations on
Handling of Inventions” in August 2016. The Company took patent-related procedures to the Japanese
9/17

Patent Agency and submitted international applications by itself, which we had previously requested of apatent office, and reduced related costs by approximately 2 million yen, even though applications
increased from 2015, with three new registrations of trademark and registration of company names in
Europe, U.S. and China while the number of basic patent applications remained unchanged from 2015.
For (6), the Company engaged in more than 30 purchase negotiations to reduce costs by approximately
18 million yen annually.
1.6. Pharmacovigilance & Quality Assurance
Pharmacovigilance & Quality Assurance is largely responsible for three areas: (1) quality assurance
for manufacturing, (2) safety control for the vigilance of side effects and adverse events and (3)Post-marketing Surveillance (PMS) for pharmacovigilance. The objectives of (2) and (3) are to avoid
causing drug-induced diseases and to pass re-examinations, and it is important to achieve theseobjectives efficiently within pertinent laws and regulations.
We completed re-examination of Lunabell® LD in September 2016. For Nobelbar®, a treatment for
status epilepticus, the Company worked on responding to inquiries from the compliance inspection andcompleted that ispection process in February 2017. Currently, the authorities are reviewing its
re-examination application documents.
In terms of quality related matters, in January 2016 the Japanese Ministry of Health, Labour andWelfare (MHLW) requested all pharmaceutical companies in Japan to inspect any difference between
certificates of approval for manufacture and sale and the actual status of manufacturing simultaneously.
The Company confirmed any differences between them for our 16 products. In March 2016, theCompany reported to the MHLW that of 16 products, there is no difference only for Respia® and we
found differences for the other 15 items. We completed revision of details of certificates of approval for
all differences found by the end of May and cooperated with outsourcees to build regular check systems
as recurrence preventive measures.
In 2016, the number of domestic adverse event reports was 5,100, up 25% from 4,055 in 2015, andoverseas reports were 1,865, up 117% from 859 in 2015.
The table below shows the comparison of personnel cost and general and administrative expenses inPharmacovigilance & Quality Assurance in 2015 and 2016.
2015 (‘000 yen)2016 (‘000 yen)
Personnel cost
351,210
314,981
General and562,579
administrative(including IT system introduction
449,336
expenses
expenses)
Total
913,789
764,317
In 2016, personnel costs were reduced approximately 10% year-on-year due to the introduction of an
IT system related to the above (2) and (3), which resulted in the enhancement of data quality andimprovement of resources and operation processes, while we handled re-examination of two products,
and MHLW’s request for checking certificates of approval for our 16 products, as well as increasing
domestic and overseas adverse event reports.
1.7. Regulatory Affairs
Regulatory Affairs is responsible for administrative procedures related to the PMD Act and for NHI
price negotiations.
Special mentions related to regulatory affairs in the year included (1) NPC-12G and NPC-17 were
designated under the Sakigake fast-track review system, which was recently started as a breakthrough10/17

system. The Company has consulted and received guidance from Pharmaceutical and Medical Devices
Agency (PMDA) regularly about these two items and expects to follow an application schedule asinitially planned, and to obtain approvals in a short time. (2) The Company newly obtained a license forMarketing Class 1 Medical Devices with the aim of obtaining marketing authorization of NPC-17.
The Company increased staff and activated negotiations to reinforce negotiation ability regarding drug
prices.
1.8. Funding and Major Lenders
In 2016, the Company didn’t borrow new funds and repaid 1,165 million yen to financial institutions.
The resulting balance of loans payable and bonds as of December 31, 2016 was 4,519 million yen. As
the Company has cash and deposits of 3,658 million yen, the actual amount of borrowing is 861 million
yen (2015: 578 million yen).
As of December 31, 2016, the status of borrowing is as follows:
Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
The Bank of Tokyo-Mitsubishi UFJ, Ltd., Odenmacho Branch
Mizuho Bank, Ltd., Yokoyamacho Branch
Sumitomo Mitsui Banking Corporation, Kandaekimae BranchJapan Finance Corporation
The Shoko Chukin Bank, Ltd., Kanda Branch
Resona Bank, Akihabara Branch
The Tokyo Shinkin Bank, Nihonbashi Branch
Total
Balance of bonds
Straight bond2nd straight bond -> Osaka Soda Co., Ltd.
3rd straight bond -> Medipal Holdings Corporation
4th straight bond -> Mizuho Bank, Ltd.
5th straight bond -> The Shoko Chukin Bank, Ltd.
Total*

607 million yen
297 million yen
80 million yen
590 million yen
121 million yen
92 million yen
60 million yen
72 million yen
1,312 million yen

500 million yen* 1,500 million yen
500 million yen
100 million yen
2,600 million yen

300 million yen was redeemed before maturity on January 31, 2017, and the remaining balance was 1,200
million yen.

1.9. Financial Results, Assets and 2016 Forecast
The Company’s financial results, assets and 2016 forecasts are as follows:
2013

2014

2015

11th year
6,542
462
338
257,000 yen
6,098
728
11.9%
553,000 yen

12th year
6,628
577
240
182,000 yen
9,291
1,238
13.2%
941,000 yen

13th year
7,435
△270
157
54,000 yen
9,671
984
10.2%
844,000 yen

mil yen except for *Sales
Ordinary income
Net income* Net income per share
Total assets
Net assets* Equity ratio* Net asset per share

11/17

2016
2016
2017
(Forecasts) (Actual results) (Forecasts)
14th year
14th year
15th year
7,456
6,791
7,514
160
△56
233
103
93
113
89,000 yen
80,000 yen
97,000 yen
7,830
7,671
7,260
993
691
832
12.7%
9.0%
11.5%
852,000 yen 593,000 yen 714,000 yen1.10. Employees
As of March 1, 2017, the number of employees is 235 (including a total of 85 including 33 seconded
employees, 6 temp staff, and 46 contract employees but excluding directors) with an average age of 53.0.
The number of employees decreased by 7 compared with 242 (including seconded employees) as ofMarch 1, 2016.
Total personnel costs including expenses for seconded employees and temp staff in 2016 and 2015
were 1,954 million yen, down 7.7% year-on-year, and 2,116 million yen, up 9.9% year-on-year,
respectively. Total personnel cost in 2016 included 37 million yen for temp staff expenses. Of which,personnel cost of employees consisting of full-time and contract employees in 2016 decreased by 3.5%
year-on-year, compared with an increase of 5.7% year-on-year in 2015. Expenses for seconded
employees in 2016 decreased by 20.6% year-on-year, compared with an increase of 29.7% year-on-year
in 2015, due to timing of their replacement. Expenses for temp staff surged by 76.8% year-on-year in
2015. However, due to the completion of large-scale operations related to post-marketing surveillance,
expenses for temp staff in 2016 dropped significantly by 56.3% year-on-year.
In the most recent five years, the Company has recruited six postdoctorals and those with equivalentstatus, who have become key driving forces in their departments, and additionally two will join us thisApril. The Company has been actively promoting excellent temp staff and contracted employees tofull-time positions.
In 2015, monthly average overtime hours per employee exceeded 20 hours. However, after making
related operations such as post-marketing surveillance more efficient and improving working conditions,monthly average overtime hours in 2016 were significantly reduced to approximately 9 hours.
As a part of transformation of working style, the Company has launched various systems focusing on
work-life balance including encouraging taking paid leave all together, teleworking and consecutive
leave system. As a result, the rate of annual paid leave taken by employees in 2016 was nearly 80% on
average.
The Company has adopted personnel exchanges between and within departments.
1.11. Issues
In 2017, company-wide issues are five as follows:① Strengthening sales of Nobelzin® and securing profit② Application and approval of development items as planned and obtaining profitable drug prices③ Full-scale development for overseas marketing authorization and preparation of overseas sales④ Active access to seeds from academia⑤ Optimize cost of related operations such as post-marketing surveillance
The Sales & Marketing mission is to ensure achievement of this year’s sales target of 15.1 billion yen(9 billion with Lunabell®, 2.4 billion yen with Nobelzin® and 3.7 billion yen with other direct sales andco-promotion products) on a NHI price (wholesale price) basis. The most important mission is to achievesales of Nobelzin® that meet or exceed its sales target of 2.4 billion yen. As sales promotion measures,
the Company reorganized its branch network to eight from 11 to ensure closer cooperation between thehead office and branches in January 2017. The Nobelzin® Mobilization Project Division is established in
the head office to ensure that all employees work together to promote sale of Nobelzin®. Regarding thepractitioner market to which the Company does not have access, we entered into a co-promotion
agreement with Medipal Holdings Corporation to outsource full operations from promotion to PMS to its
group companies. The Company also entered into a co-promotion agreement with ASKA
Pharmaceutical Co., Ltd. for outsourcing similar business for certain facilities of obstetrics andgynecology. Sales & Marketing will invest 70% of its operating resources (manpower, goods and12/17

capital) in “hypozincemia” of Nobelzin®.
The tasks of Business Development & Strategy to find new themes continue to include collaboration
with the aim of active introduction and commercialization of academia seeds through open innovation.
The Company will continue to work on obtaining public funds for development individually or incollaboration with academia, to promote development of seeds and maximize business value.
The Company has certain matters under negotiation with existing business partners and will advancenegotiations by resolving the said matters to gain profit. The Company will pursue detailed andexhaustive cost-cutting negotiations pertaining to procurement, including raw material costs and drug
processing expenses, and particularly for Nobelzin®, whose production volume is expected to increase
sharply.
Research & Development will push ahead the development schedule, with the aim of submitting the
NDA for four items (NPC-12G, NPC-16, NPC-17 and NPC-18) in 2017, and obtaining an approval of
NPC-17 in 2017, following NPC-02 (hypozincemia) that is expected to be approved in March 2017.
In view of overseas expansion, the Company will submit the NDA for NPC-17 in Europe and the U.S.
in 2017 and plans to apply for orphan drug designations for BK-SE36, NPC-12G, NPC-17 and NPC-18
in Europe and the U.S., and start to contact the U.S. FDA.
Concerning the safety assurance of pharmaceutical products, an IT system has been put into place in2015. The Company endeavors to streamline organizations and systems within laws and regulations to
reduce costs, while achieving the two objectives of causing no drug-induced diseases and passing
re-examinations.
As for production, the most serious concern is to ensure stable supply of drug products from overseas
manufacturers. As a fundamental resolution, the Company is promoting the shift of manufacturing ofimported drug products to Japan. As a major urgent issue, the Company will carry out an increased
production schedule that has already been started in view of the expansion of demand due to a new
indication of Nobelzin® while reducing costs significantly. We plan to submit the NDA for four items in2017 and are expected to launch new products from the end of 2017 to 2018. We are preparing to
produce these products.
Regulatory Affairs is now required to actively support both Research & Development andPharmacovigilance & Quality Assurance, and to help efficient and speedy response to the authority. It
also utilizes the know-how for NHI price negotiations to involve a development strategy and support
active responses to the authority from the development phase, and it aims to obtain adequate prices for
new drugs and medical devices. In addition, it will scrutinize unprofitable items and request“recalculation for unprofitable items” for certain items that it deems necessary. Through the activities ofSamurai Biotech Association of which the Company is a board member, lobbying and advising theauthorities for NHI price system reform, which is expected to be drastically changed, will be continued.
Administrative Affairs & Corporate Planning (corporate planning and accounting) will primarily
increase the accuracy in obtaining real-time budgetary variance analysis and the forecasts to achievebudgets. It will continue cost control that had considerable achievements in 2016, and build a flexible
management system that enables taking additional measures prospectively if the forecast shows adownward trend. Secondly for financial affairs, the Company intends to raise around 2 billion yen formaintaining sufficient funds in hand as demand for working capital is increasing followed by sales
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expansion of Nobelzin® due to the new indication. Considering risky development themes and full-scale
overseas development, the Company will consider flexible financing and the introduction of risk money.
Thirdly, the Company believes that it is important to adopt accounting standards equivalent to listedcompanies despite its policy to remain unlisted, and thus, the accounting audits by Deloitte Touche
Tohmatsu LLC since 2011 were changed from quasi-Financial Instruments and Exchange Act audits toquasi-Companies Act audits in 2015, which the Company intends to continue using.
As for the issue of Administrative Affairs & Corporate Planning (HR & general affairs), the Company
has been hiring experienced mid-carrier workers in principle but refreshing personnel is inevitableconsidering the currently aging workforce. For fostering successors of important positions, the Company
continues to recruit young employees, including postdoctorals and professional mid-level and young
employees. The Company established the Global Business Department with the aim of future overseas
expansion and will seek personnel who can work globally. In these circumstances, the Company
launched a new personnel system for arranging working conditions under which young employees andhigh performers can work with high motivation. The new system will reduce overtime work andencourage employees to take vacation as in the past, considering a work-life balance. Also, personnel
exchanges between and within departments are promoted actively as in the past.
The Company implemented an internal audit system in November 2015, and regular audits have been
conducted for all departments since January 2016. While the Company endeavors to delegate authority
to each division, it will reinforce business audits. Accordingly, business audits are to be added toCompany Auditor’s responsibility in addition to the current accounting audits (Articles of Incorporation
related to Company Auditor’s responsibility will be revised in the annual meeting of shareholders to beheld on March 28, 2017). For the accounting audits, the Company entrusts quasi-Companies Act audits
to the accounting firm in cooperation with the Company Auditor. We will request the Company Auditor
to focus on business audits.
Overall, in 2016, due to the impact of generics on Lunabell®, the Company entered a phase ofchallenging financial results for the first time since its foundation. However, we believe that financial
results may recover remarkably as sales are expected to increase due to the new indication of Nobelzin®
(hypozincemia), which is expected to be approved in March 2017 and certain items in the final
development stage will be approved after 2018. Nobelpharma is an evolving young company and withthe motto of “YMWS” explained in the beginning of 1.11, we plan to invest profits arising from thesenew products into
③ Full-scale development for overseas marketing authorization and preparation of overseas sales, and④ Actively accessing seeds from academia.
With regard to ③, the Company established Global Business Department in March 2017.

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The following shows the numerical targets for the mid-long term future vision of sales and profit as an
immovable high goal named North Star. We believe that these targets are not necessarily unattainable.
North Star
Sales
Ordinary income
Net income

2020
20 billion yen
5 billion yen
3 billion yen

1.12. Other Important Matters
No matters requiring special attention
2. Current Status of the Company
2.1. Shares① Number of shares authorized As of December 31, 2016
② Number of shares issued
As of December 31, 2016
③ Number of shareholders
As of December 31, 2016
④ Status of Major Shareholders (as of December 31, 2016)
Hisanaga & Company (ordinary share)
Inabata & Co., Ltd. (ordinary share)

Ordinary share

5,000 shares
1,165 shares
2
1,000 shares (85.8%)
165 shares (14.2%)

On February 3, 2017, a portion of ordinary shares held by Inabata & Co., Ltd. was transferred toMedipal Holdings Corporation. As a result, the number of shareholders and status of major shareholders
are changed as follows:
Number of shareholders
3
Status of Major Shareholders
Hisanaga & Company (ordinary share)
1,000 shares (85.8%)
Medipal Holdings Corporation (ordinary share)
83 shares (7.1%)
Inabata & Co., Ltd. (ordinary share)
82 shares (7.0%)
2.2. Share Warrant
2.2.1. Share warrant that is issued to and held by the Company’s executive officers as
consideration for execution of their duties
Not applicable
2.2.2. Share warrant that is issued to and held by the Company’s employees as consideration for
execution of their duties
Not applicable
2.2.3. Share warrant in issue
Not applicable
On August 24, 2016, a share warrant (334 shares) held by Inabata & Co., Ltd. was extinguished due tothe expiration of the exercise period.
2.3. Corporate Executives
2.3.1. Management Reshuffle(1) Scheduled directors (scheduled on March 28, 2017)
Nobukuni Taneya (Part-time company auditor, Arara Inc.)
Takahisa Iizuka (Deputy General Manager, Business Development Division, Medipal Holdings

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Corporation)(2) Director to resign (scheduled on March 28, 2017)
Yasuyuki Fujimoto (General Manager, Life Industry Division, Inabata & Co., Ltd.)(3) Scheduled company auditor (scheduled on March 28, 2017)
Yoshitaka Kishi (Former full-time company auditor, Dia Rix Co., Ltd.)(4) Company auditor to resign (scheduled on March 28, 2017)
Takashi Akiyama (Section Head, Accounting Dept., Accounting, Financial Management Office,Inabata & Co., Ltd.)(5) Directors and Company Auditors
As of March 28, 2017, the status of full-time and part-time directors is as follows:
CEO and President:

Jin Shiomura

Directors (part-time):

Eiji Suzuki(Corporate advisor)

Directors (part-time):

Isamu Sojyo(former Executive Managing Director ofJapan Intellectual Property Association,
former General Manager of Intellectual
Property Department at Mitsubishi
Chemical Corporation)

Directors (part-time):

Nobukuni Taneya(Part-time company auditor of Arara Inc.)

Directors (part-time):

Takahisa Iizuka(Deputy General Manager, Business
Development Division, Medipal Holdings
Corporation)

Directors (part-time):

Nobukazu Kuboi(General Manager, Financial Management
Office and General Manager, Accounting
Dept., Inabata & Co., Ltd.)

Company Auditor(part-time):

Yoshitaka Kishi(Former full-time company auditor, Dia Rix
Co., Ltd.)(6) Executive Officers
As of March 28, 2017, the status of executive officers and directors is as follows:
Chief Operating Officer:

Shigeki Shimasaki(Head of Research & Development)

Chief Operating Officer:

Tsutomu Sugaya(Head of Administrative Affairs &Corporate Planning)

Senior Executive Officer:

Tetsuo Hayase(Head of Supply Chain & Manufacturing)

Senior Executive Officer:

Soichi Ikegaya(General Marketing Compliance Officer,
Head of Pharmacovigilance & Quality
Assurance)

Senior Executive Officer:

Arata Tabata(Head of Business Development &Strategy)

Executive Officer:

Kenji Shimizu(General Manager of R&D Department 2)

Executive Officer:

Akira Ikeda(Deputy Head of Administrative Affairs &Corporate Planning)

Executive Officer:

Masato Iwamoto(General Manager of Supply Chain
Management, Supply Chain &Manufacturing)

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Executive Officer:

Osamu Kato

(Head of Regulatory Affairs)

Executive Director:

Masanobu Murakami(General Manager of R&D Department 1)

Executive Director:

Yoshinobu Takahashi(Head of Marketing & Sales)

Executive Director:

Yoshihide Yamamoto(Deputy Head of Marketing & Sales)

Executive Director:

Masanori Osakabe(Deputy Head of Research & Development)

Executive Director:

Hitoshi Hasegawa(Safety Management Supervisor, Deputy
Head of Pharmacovigilance & Quality
Assurance)

Executive Director:

Yoshiki Yagi

(Deputy Head of Business Development &Strategy)

Executive Director:

Akira Yumoto(Deputy Head of Marketing & Sales)

Executive Director:

Mitsunobu Hara

(Deputy Head of Business Development &Strategy)

2.3.2. Remuneration paid to directors and company auditors
Classification
Directors
Company auditor
Total

Head-count5
1
6

Amount paid
8,880,000 yen
0 yen
8,880,000 yen
End of document

17/17