English translation

March 28, 2019

Annual Report(January 1, 2018 through December 31, 2018)

1. Business Performance of SymBio Pharmaceuticals Limited(1) Business conditions and operating results
Progress in the Company’s business for the fiscal year under review is as follows.
(i) Domestic[Start of preparations for the establishment of the Company’s own salesforce]
On October 16, 2018, the Company announced the start of preparations to establish its
own salesforce for the sale of TREAKISYM® in Japan. The Company has in place abusiness partnership agreement with Eisai Co., Ltd. (“Eisai”) signed in August 2008 andexpiring in December 2020. The Company considered a number of options for developing
the business after December 2020, including business partnerships with other companies.
However, the Company has now concluded that transitioning to its own salesforce will
best serve the interest of patients and maximize business value. Ahead of the transition tosuch a salesforce in early 2021, the Company will consider the personnel required for an
ideal organizational structure and formulate a detailed investment plan for system
configuration and preparation of a logistics and distribution infrastructure. In this way, we
aim to engage in activities to provide high-quality information and realize a system forproviding products, as well as moving toward our topmost management objective ofachieving profitability in the fiscal year ending December 31, 2021 and achieving
sustainable growth thereafter.
[Anticancer agents: SyB L-0501 (lyophilized powder formulation), SyB L-1701 (readyto-dilute (“RTD”) formulation), SyB L-1702 (rapid infusion (“RI”) formulation), and SyB
C-0501 (oral formulation) (generic name: bendamustine hydrochloride, trade name:TREAKISYM®)]
The Company markets TREAKISYM® in Japan through its business partner, Eisai. The
Company obtained manufacturing and marketing approval for first-line treatment of low-1-

grade non-Hodgkin’s lymphoma (low-grade NHL) and mantle cell lymphoma (MCL) in
December 2016, for recurrent/refractory low-grade NHL (Note 1) and MCL in October
2010, and for chronic lymphocytic leukemia (CLL) in August 2016.
Following this indication expansion, TREAKISYM® is steadily increasing its market
share in the area of first-line treatment by replacing R-CHOP, the conventional standard
treatment, at medical clinics and hospitals. Further, the combination treatment (BRtherapy) of TREAKISYM® and rituximab was newly included in the Guidelines for
Tumors of Hematopoietic and Lymphoid Tissues 2018 edited and published by theJapanese Society of Hematology in July 2018, becoming recommended as a choice forstandard treatment. With this development, TREAKISYM® has been effectively
establishing its foothold as the standard treatment for malignant lymphoma. In-market
sales at NHI price basis for the fiscal year under review posted an increase of 11.6% year
on year.
In addition to the three already-approved indications, the Company has started a Phase
III clinical trial for TREAKISYM® targeting recurrent/refractory diffuse large B-cell
lymphoma (r/r DLBCL) and is currently working on patient enrollment toward obtaining
approval. The trial is in response to serious need at clinics and hospitals as there iscurrently no reliable standard treatment. Patient groups have petitioned to the regulatory
authorities for the approval of BR therapy. With a view to providing new therapeutic
alternatives and maximizing product value, the Company began the Phase III clinical trial
in August 2017 and is diligently working to accumulate cases after completing enrollmentof the first patient in January 2018.
In addition to these initiatives toward the approval of additional indications, theCompany moved forward to further promote the product life cycle management of
TREAKISYM®. In September 2017, it entered into an exclusive license agreement with
Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.) (“Eagle”), under which Eagle
licensed to the Company rights under Eagle’s intellectual property to develop, market, andsell Eagle’s TREAKISYM® liquid formulation (RTD and RI liquid formulations) (Note 2) inJapan. This will further enable the Company to extend the product life until 2031 throughpatent protection and maximize the value of TREAKISYM®, while bringing significant
benefits to patients and healthcare providers by easing their burdens. The Company has
already consulted with the Pharmaceutical and Medical Devices Agency regarding
approval for the RTD formulation and is currently preparing an application. Clinical trials
primarily aimed at confirming the safety of the RI formulation began in November 2018.
Further, the Company acquired approval for the partial revision to the manufacturingand marketing authorization in July 2018. As a result, TREAKISYM® can now be used in
combination with not only rituximab but also obinutuzumab (Note 3) (launched in August-2-

2018) for the treatment of CD20 positive follicular lymphoma (FL), a common histologic
type of low-grade NHL, allowing the Company to provide patients with a new treatment
therapy. In September 2018, the Company applied for the approval of partial revision to
the manufacturing and marketing authorization of TREAKISYM® regarding its use as a
pre-treatment for regenerative medicine products.
In addition to the intravenous formulation currently under development and on sale, theCompany is exploring the potential of TREAKISYM® through the development of an oral
formulation as the treatment for solid tumors and autoimmune diseases, with an aim tosolidify its business through a platform of TREAKISYM® products. Amid suchinitiatives, the Company commenced a Phase I clinical trial for progressive solid tumors
in January 2018, with the aims of examining the recommended dosage and administration
schedule as well as tolerability and safety of the oral formulation of TREAKISYM®, andidentifying potential target tumor types. After completing enrollment of the first patient in
May 2018, the Company is currently working to accumulate cases. Meanwhile, with aview to evaluating the effect of oral administration of TREAKISYM® on the immune
system, the Company concluded a joint research agreement with Keio University in May
2018 to conduct a pre-clinical trial to verify the therapeutic effect of this product in thetreatment of systemic lupus erythematosus (SLE), a form of autoimmune disease withextremely high medical need. The pre-clinical trial is currently underway.
(Note 1) Non-Hodgkin’s lymphoma (NHL) refers to malignant lymphoma other than Hodgkin’s lymphoma.
Malignant lymphoma is a cancer of the lymphatic system in which lymphocytes develop malignant growths.
The majority of Japanese malignant lymphoma patients are suffering from NHL.
(Note 2) RTD and RI are pre-dissolved liquid formulations that differ from currently available freeze-dried (“FD”)
powder injection. RTD (ready-to-dilute) will significantly reduce the preparation time and labor cost for
healthcare providers, and RI (rapid infusion) will reduce infusion duration to 10 minutes from the current
60 minutes, providing significant benefit and value to both patients and healthcare providers.
(Note 3) Obinutuzumab (Gazyva®, marketed by Chugai Pharmaceutical Co., Ltd.): Like rituximab recommended
by treatment guidelines for non-Hodgkin’s lymphoma in Japan and overseas, obinutuzumab is a
glycoengineered type II anti-20 monoclonal antibody that directly binds to CD20 (a protein expressed on
B-cells other than stem cells or plasma cells) on target B-cells to attack and destroy them along with the
body’s immune system.

[Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oralformulation), generic name: rigosertib sodium]
U.S. licensor Onconova Therapeutics, Inc. (head office: Pennsylvania, U.S.)(“Onconova”) is conducting a global Phase III clinical trial (with trial sites in more than
20 countries) of the intravenous formulation of rigosertib for higher-risk myelodysplastic-3-

syndromes (HR-MDS) which do not respond to the current standard treatment withhypomethylating agents, which relapse after treatment under the current standard of care,or which are intolerant to hypomethylating agents. The Company is responsible forclinical development in Japan and in December 2015 began the trial. Forty patients wereenrolled as of December 31, 2018, and patient enrollment is proceeding. Based on the
results of the interim analysis completed in January 2018, the independent Data
Monitoring Committee (DMC) recommended that Onconova continues the trial withpatient enrollment increased in accordance with statistical criteria in an adaptive designpreviously agreed upon with the U.S. Food and Drug Administration (FDA). Based on the
results of the trial, the Company is planning to apply for approval in Japan at the sametime as in the U.S. and Europe.
As for the oral formulation of rigosertib, Onconova has completed Phase I/II clinical
trials in the U.S. for the target indication of first-line HR-MDS (in combination withazacitidine (Note 4)) and has been conducting a Phase II clinical trial for the target indicationof transfusion-dependent lower-risk MDS. The Company started a domestic Phase I
clinical trial in June 2017 to confirm the tolerability and safety of the oral formulation ofrigosertib for Japanese patients. The first patient was enrolled in October 2017 and patient
enrollment is proceeding favorably. After completion of this trial, the Company plans topromptly conduct a Phase I clinical trial for combination therapy with azacitidine and to
take part in a global Phase III clinical trial for combination therapy with azacitidine forthe first-line treatment of patients with higher-risk MDS, which Onconova currently plans
to conduct. The Company also plans and prepares to apply for approval of the oral
formulation of rigosertib in Japan in timing alignment with the U.S. and Europe. With
respect to the development for the indication of transfusion-dependent lower-risk MDS,
the Company will continue to consider participating from Japan in view of the status ofdevelopment by Onconova.
(Note 4) About azacitidine (Vidaza®, marketed by Nippon Shinyaku Co., Ltd.): This hypomethylating agent (forinjection) was approved in 2011 upon successful confirmation of extended overall survival for the first timein the Phase III clinical trial for the indication of MDS, and is currently used as a first-line drug for MDS
patients who have difficulties in hematopoietic stem cell transplantation. MDS is a preleukemic state, anddecrease in tumor suppressor gene due to excessive methylation of DNA is thought to be related to thedisease. Hypomethylating agents such as azacitidine are thought to suppress progress to leukemia byrestoring tumor suppressor gene with a deterrent effect against methylation of DNA.

[Patient-controlled pain management drug: SyB P-1501]
In October 2015, the Company entered into an agreement with Incline Therapeutics,
Inc., a wholly owned subsidiary of US-based The Medicines Company (head office: New-4-

Jersey, U.S.) for an exclusive license to develop and commercialize SyB
P-1501 in Japan. The Company, acting in the best interest of patients, resolved totemporarily suspend new patient enrollment for SyB P-1501 from April 21, 2017 due toits concern as to the continuity of The Medicines Company’s business regarding the
product.
The Company later initiated arbitration against The Medicines Company on October
11, 2017 under the rules of the International Chamber of Commerce, seeking damages of
82 million U.S. dollars (approximately 9.0 billion yen) arising from The Medicines
Company’s repudiation of the license agreement. The Company claims that The
Medicines Company failed to provide the Company with adequate assurance ofperformance of its contractual obligations under the license agreement in light of its
decision to discontinue commercialization activities regarding the product and withdraw
from markets in the U.S. and Europe, and that such failure by The Medicines Company isa material breach of the license agreement. Furthermore, the Company terminated thelicense agreement on November 30, 2017, based on the fact that breach of the license
agreement by The Medicines Company was not remedied within the stipulated time, andterminated the development of SyB P-1501 on February 9, 2018.
Arbitration proceedings against The Medicines Company are still ongoing.
[New drug candidates]
The Company continues to actively seek new drug candidates and in-licensing
opportunities globally, aiming to expand both profitability and growth potential over the
medium- to long-term, and discussions with multiple potential licensors are ongoing.
In May 2016, the Company established a wholly owned subsidiary, SymBio Pharma
USA, Inc. (head office: Menlo Park, California, U.S., “SymBio Pharma USA”), as theCompany’s planned strategic base for overseas business development. Acquiring rights to
new drug candidates through SymBio Pharma USA as the base of global business will bepart of the Company’s continued transformation into a global specialty pharmaceuticalcompany with capability to develop and commercialize new drugs in the U.S., Japan,
Europe, and other major global markets.
(ii) Markets outside Japan
SyB L-0501 is also marketed in South Korea, Taiwan, and Singapore, and product salesof SyB L-0501 in these countries progressed favorably at a level exceeding theCompany’s forecasts.
(iii) Business results-5-

As a result of the above, net sales totaled 3,835,530 thousand yen for the fiscal year
under review, primarily reflecting product sales of TREAKISYM®. Product sales showeda year-on-year increase of 10.6%. Accordingly, net sales rose 11.4% year on year.
Selling, general and administrative expenses totaled 3,828,941 thousand yen (a yearon-year decrease of 23.1%), including research and development (“R&D”) expenses of
1,832,746 thousand yen (a year-on-year decrease of 39.3%) primarily due to such factors
as expenses related to intravenous and oral formulations of TREAKISYM®, and expenses
associated with clinical trials on the intravenous and oral formulations of rigosertib, andother selling, general and administrative expenses of 1,996,195 thousand yen (a year-onyear increase of 1.8%).
As a result, an operating loss of 2,656,072 thousand yen was recognized for the fiscal
year under review (an operating loss of 3,947,061 thousand yen for the previous fiscal
year). In addition, the Company recorded non-operating expenses totaling 94,854
thousand yen, primarily comprising foreign exchange losses of 54,103 thousand yen,share issuance cost of 29,650 thousand yen, and commission fee of 11,100 thousand yen,and non-operating income totaling 2,196 thousand yen primarily due to dividend incomeof insurance of 1,501 thousand yen and interest income of 525 thousand yen. This resulted
in an ordinary loss of 2,748,730 thousand yen (an ordinary loss of 3,976,784 thousand yen
for the previous fiscal year) and a loss of 2,752,533 thousand yen (a loss of 3,977,862
thousand yen for the previous fiscal year).
Segment information has been omitted since the Company operates within a single
segment, which includes the research and development, manufacturing, and marketing ofpharmaceutical drugs and other related activities.
(iv) Capital investment
The total amount of capital expenditures during the fiscal year under review was 57,459
thousand yen, mainly consisting of office investments and the purchase of appliances,
network devices and business software.
(2) Status of fund procurement
In order to secure the funds necessary for its research and development activities, theestablishment of its own salesforce, and the in-licensing of new drug candidates, the Company
made a resolution at the Board of Directors meeting held on April 9, 2018 to issue the 45th
through 47th warrants (with Exercise Price Revision Clauses) to the EVO FUND. As of the endof the fiscal year under review, a payment of 2,611,800 thousand yen had been completed inconnection with the issue of these warrants.
As for the 42nd warrant issued to SBI SECURITIES Co., Ltd. on August 25, 2017, all rights-6-have been exercised and paid for in full as of January 2018.
In addition, exercise of all rights and associated payments related to the 39th warrant issued
to Whiz Healthcare Japan 2.0 Investment Limited Partnership on April 22, 2016 were completed
as of December 2018.

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(3) Status of assets and profit and loss
(Unit: thousands of yen)
Fiscal year
Classification
Net sales
Operating profit (loss)
Ordinary profit (loss)
Profit (loss)
Loss per share (yen)Total assets
Net assets
Net assets per share (yen)FY 2015
The 11th Term

FY 2016
The 12th Term

FY 2017
The 13th Term

1,933,241(2,551,662)(2,630,386)(2,632,095)(81.26)
4,984,289
4,431,811
127.562,368,112(2,127,049)(2,316,806)(2,313,233)(58.82)
6,878,384
5,484,870
108.61

3,444,206(3,947,061)(3,976,784)(3,977,862)(79.78)4,252,284
3,239,402
50.00

FY 2018
The 14th Term(current)
3,835,530(2,656,072)(2,748,730)(2,752,533)(41.38)6,239,423
4,901,799
53.06(4) Issues to be addressed by the Company
The Company is committed to making improvements in the following areas.
(i) Further expansion of the pipeline
In order to enhance the enterprise value as a specialty pharmaceutical company, weneed to expand the pipeline through ongoing in-licensing of new drug candidates fordevelopment.
The Company is conducting or planning development of the following anticancer
agents: SyB L-0501, SyB C-0501, SyB L-1101, SyB C-1101, SyB L-1701, and SyB L1702. Currently we are in discussion with counterparties regarding the in-licensing ofseveral new drug candidates, and will continue with active efforts to in-license new drugcandidates for development in order to further expand our pipeline.
(ii) Life cycle management of products in the existing pipeline
In order to enhance the enterprise value, not only in-licensing new drug candidates but
also promoting product life cycle management is important. Therefore, it is critical tomaximize returns from each drug under development through indication expansion after
the in-licensed drugs’ initial approval.
TREAKISYM® is approved for manufacturing and marketing in Japan for theindications of recurrent/refractory low-grade non-Hodgkin’s lymphoma and mantle cell
lymphoma, chronic lymphocytic leukemia, and first-line treatment of low-grade nonHodgkin’s lymphoma and mantle cell lymphoma. The Company has completed a Phase II
clinical trial for recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL), and a
Phase III clinical trial is currently underway. In addition, the Company intends tomaximize business value of TREAKISYM® by promoting the product life cycle
management of the product, and pursue the development of TREAKISYM® liquid-8-formulation (RTD and RI liquid formulations) in-licensed from Eagle Pharmaceuticals,Inc. (head office: New Jersey, U.S.). In addition to the intravenous formulation, theCompany is also exploring the development of an oral formulation of TREAKISYM®
with a focus on the treatment of solid tumors and autoimmune diseases, further expanding
the business potential. To this end, the Company has commenced a Phase I clinical trial
for progressive solid tumors with the aim of examining the recommended dosage andschedule as well as tolerability and safety of the oral formulation of TREAKISYM®, andnarrowing down the types of target tumors.
The development of intravenous and oral formulations of rigosertib for the indication of
myelodysplastic syndromes (MDS) is currently progressing. Few useful therapeutic
agents are currently available for MDS, so it is an area with very high unmet medical
need. With respect to the global Phase III clinical trial of the intravenous formulation for
the target indication of recurrent/refractory higher-risk MDS conducted by Onconova, theCompany is conducting its clinical trial in Japan. As for the oral formulation, theCompany has completed a domestic Phase I clinical trial as a monotherapy for the target
indication of lower-risk MDS, and is currently conducting a domestic Phase I clinical trial
to confirm the safety of high-dose as a monotherapy, in order to conduct a Phase I clinical
trial in combination with azacitidine for the target indication of first-line higher-risk
MDS. The Company is considering participating in global clinical trials after completing
the Phase I clinical trial. The development for the target indication of transfusiondependent lower-risk MDS will be considered based on the status of development by
Onconova.
The Company is focused on maximizing the business value of TREAKISYM® andrigosertib by promoting product life cycle management through further indication
expansion.
(iii) Preparation for the establishment of the Company’s own salesforce
Domestic sales of TREAKISYM® are currently handled through Eisai, in accordancewith the business partnership agreement the Company concluded in August 2008. Thisagreement is set to expire in December 2020 and, looking ahead to the fiscal year ending
December 31, 2021, the Company is planning to transition to its own salesforce.
Providing specialized technical information will enable the Company to moreaccurately understand the needs of the market and respond more swiftly, allowing it tocontribute to the benefit of patients while aiming to maximize the business value of
TREAKISYM®. Furthermore, the Company strives to build a consistent salesorganization with a high level of specialization in the field of hematological diseases.
Through this effort, the Company aims to achieve high business efficiency, ensure-9-sustainable earnings growth, and maximize shareholder gains once the intravenous andoral formulations of rigosertib, which are currently under development to treat
myelodysplastic syndromes (MDS), join TREAKISYM® in the product lineup.
(iv) Global expansion for further growth
In addition to Japan, the Company identifies China, South Korea, Taiwan, andSingapore as strategic regions and has moved forward with business development in Asia.
However, with expanding medical expenditures due to the aging population in Japan,
and the advent of the “era of generic drugs comprising 80% of all drugs dispensed” as agovernmental policy of Japan, the business environment for innovative drug developers is
expected to remain extremely challenging. Such a policy may also be implemented byother Asian countries.
Under these circumstances, the Company will promote global expansion aiming for
further growth. The Company will carry out the search, evaluation, and negotiation
activities for new drug candidates, in order to acquire global rights on such candidates,
utilizing its experience fostered through its business in Asia.
(v) Securing personnel
The Company places the highest priority on personnel as the Company’s principal
management resource. We cannot make superior achievements in exploring anddeveloping new drugs without talent. We have been continually recruiting talented
people; especially after being listed, we have recruited the best and brightest people inorder to strengthen the management organization. Going forward, we plan to continue tofurther strengthen our human resources by providing on-the-job training and employee
development programs.
(vi) Financial issue
It is necessary for the Company to raise funds required for business activities such as
R&D expenditures as the pipeline development progresses and the number of drugcandidates increases.
Therefore, we make every effort to further strengthen the financial base by continually
diversifying the method of fund raising and curtailing costs through tight budget control.

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(5) Major business activities (as of December 31, 2018)
The Company regards underserved therapeutic areas that lack the development of new drugs,
despite significant unmet medical needs, as business opportunities. We engage in thedevelopment of new drugs with a primary focus on the treatment of rare diseases, mainly in theareas of oncology and hematology; search and evaluation, development and manufacturing tosales are the main activities of our business.
(6) Main office and employees(i) Main office (as of December 31, 2018)
Name

Location

Main office

Minato-ku, Tokyo(ii) Employees (as of December 31, 2018)

Male

65

Increase or
decrease fromprevious fiscal
year end
9 (increase)

Female25

Total or average

90

Classification

Number of
employees

Average age(years)Average numberof years of service

49.9

3.6

3 (increase)

46.3

4.4

12 (increase)

48.9

3.8

(Notes) 1. Number of employees refers to full time employees.
2. The above number of employees does not include 12 temporary staff.

(7) Status of parent company and significant subsidiaries
Not applicable.
(8) Status of main lenders (as of December 31, 2018)
Not applicable.

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2. Matters Related to Stock (as of December 31, 2018)(1) Total number of authorized shares
Common stock: 167,000,000 shares(2) Total number of shares outstanding
Common stock: 82,398,849 shares (excluding 75 shares of treasury stock)(3) Number of shareholders
31,858(4) Major shareholders (10 largest)
Name of shareholder

Number of shares held

Shareholding ratio

Fuminori Yoshida

3,451,000

4.2%

Cephalon, Inc.

2,589,000

3.1%

Matsui Securities Co., Ltd.

1,238,100

1.5%Japan Securities Finance Co., Ltd.

1,224,700

1.5%

Eisai Co., Ltd.

833,400

1.0%

J.P. Morgan Securities Plc

695,158

0.8%

Waseda No.1 Investment LP

684,000

0.8%

Aizawa Securities Co., Ltd.

606,200

0.7%

BNY GCM CLIENT ACCOUNT JPRD AC
ISG (FE-AC)

599,876

0.7%

BNP PARIBAS LONDON BRANCH FOR
PRIME BROKERAGE CLEARANCE ACC
FOR THIRD PARTY

599,876

0.7%(Note) Shareholding ratio (%) indicates the percentage of shares outstanding held. Shares outstanding isequal to the number of shares issued minus treasury shares.

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3. Matters Related to Share Acquisition Rights(1) Share acquisition rights held by the Company’s Officers that were issued ascompensation for services (as of December 31, 2018)
The 20th warrant
The 22nd warrant
The 24th warrant
by resolution of theby resolution of theby resolution of theOrdinary General Meeting Ordinary General Meeting Ordinary General Meetingof Shareholdersof Shareholdersof Shareholders
on March 30, 2010
on March 30, 2010
on March 30, 2011
Number of shareacquisition rights

3,445 units

1,530 units

1,920 units

Number of shares to beissued upon the exerciseof share acquisitionrights344,500 shares

153,000 shares

192,000 shares

Amount paid for shareacquisition rights

None

None

None

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)

585 yen per share

585 yen per share

682 yen per share

Period in which exerciseof share acquisitionrights is possible

From: April 1, 2012
To: March 31, 2020

From: April 1, 2012
To: March 31, 2020

From: March 31, 2013
To: March 30, 2021

Status of possession by
Directors (excluding
Outside Directors)

1,800 units (1 holder)
180,000 shares—

1,200 units (1 holder)
120,000 shares

Status of possession by
Outside Directors

300 units (1 holder)
30,000 shares

200 units (1 holder)
20,000 shares

150 units (1 holder)
15,000 shares- 13 -

The 26th warrant
The 30th warrant
The 32nd warrant
by resolution of the Board by resolution of the Board by resolution of the Boardof Directors meetingof Directors meetingof Directors meetingon April 17, 2012
on May 14, 2013
on April 15, 2014
Number of shareacquisition rights

3,625 units

1,160 units

2,520 units

Number of shares to beissued upon the exerciseof share acquisitionrights362,500 shares

116,000 shares

252,000 shares

Amount paid for shareacquisition rights

None

None

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)

555 yen per share

799 yen per share

1 yen per share

Period in which exerciseof share acquisitionrights is possible

From: April 18, 2014
To: April 17, 2022

From: May 15, 2015
To: May 14, 2023

From: April 16, 2017
To: April 15, 2024

Status of possession by
Directors (excluding
Outside Directors)

2,600 units (1 holder)
260,000 shares

645 units (1 holder)
64,500 shares—

Status of possession by
Outside Directors

324 units (1 holder)
32,400 shares

205 units (2 holders)
20,500 shares

350 units (2 holders)
35,000 shares- 14 -

22,900 yen per unit
(Note 2)

The 35th warrant
The 37th warrant
The 40th warrant
by resolution of the Board by resolution of the Board by resolution of the Boardof Directors meetingof Directors meetingof Directors meetingon March 26, 2015
on March 30, 2016
on March 29, 2017
Number of shareacquisition rights

2,042 units

2,365 units

2,800 units

204,200 shares

236,500 shares

280,000 shares

30,600 yen per unit

27,200 yen per unit

20,300 yen per unit

(Note 2)

(Note 2)

(Note 2)

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)

1 yen per share

1 yen per share

1 yen per share

Period in which exerciseof share acquisitionrights is possible

From: March 27, 2018
To: March 26, 2025

From: March 31, 2019
To: March 30, 2026

From: March 30, 2020
To: March 29, 2027

Status of possession by
Directors (excluding
Outside Directors)—

1,490 units (1 holder)
149,000 shares

1,950 units (2 holders)
195,000 shares

Status of possession by
Outside Directors

253 units (2 holders)
25,300 shares

545 units (3 holders)
54,500 shares

450 units (2 holders)
45,000 shares

Number of shares to beissued upon the exerciseof share acquisitionrightsAmount paid for shareacquisition rights- 15 -

The 43rd warrant
by resolution of the Boardof Directors meeting on
March 29, 2018
Number of shareacquisition rights
Number of shares to beissued upon the exerciseof share acquisitionrightsAmount paid for stock
share rights

3,050 units

305,000 shares

19,800 yen per unit
(Note 2)

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)

1 yen per share

Period in which exerciseof share acquisitionrights is possible

From: March 30, 2021
To: March 29, 2028

Status of possession by
Directors (excluding
Outside Directors)

1,950 units (2 holders)
195,000 shares

Status of possession by
Outside Directors

1,100 units (4 holders)
110,000 shares(Notes) 1. New shares were issued through the public offering on December 4, 2013, and third-party
allotment on December 25, 2013, at the paid-in amount less than the value of property to becontributed upon the exercise of each share acquisition right. Therefore, the stated value of
property to be contributed upon the exercise of each share acquisition right excluding thoseissued for the 32nd warrant and thereafter is adjusted in accordance with the adjustment
provision.
2. The person who receives the allotment of share acquisition rights shall offset the amount to be
paid for the relevant share acquisition rights against cash compensation equivalent to theamount.
3. There are no share acquisition rights held by Audit & Supervisory Board Members.

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(2) Share acquisition rights distributed to the Company’s employees as compensation forservices during the fiscal year under review (as of December 31, 2018)

Number of share acquisition rights

The 44th warrant
by resolution of the Board of Directors
meeting on March 29, 2018
4,648 units

Number of shares to be issued upon theexercise of share acquisition rights

464,800 shares

Amount paid for share acquisition rights

19,800 yen per unit
(Note 2)

Value of property to be contributed
upon the exercise of each shareacquisition right1 yen per share

Period in which exercise of shareacquisition rights is possible

From: March 30, 2021
To: March 29, 2028

Status of allotment to the Company’s
employees

4,043 units (83 holders)
404,300 shares(Notes) 1. Of the share acquisition rights mentioned above, 605 units (60,500 shares) havebeen forfeited due to the retirement of employees.
2. The person who receives the allotment of share acquisition rights shall offset theamount to be paid for the relevant share acquisition rights against cash
compensation equivalent to the amount.

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(3) Other important matters concerning share acquisition rights (as of December 31,
2018)
Details of the share acquisition rights issued by resolution of the Board of Directors
meeting held on April 9, 2018 are as follows:
The 45th warrant
by resolution of theBoard of Directors
meeting
on April 9, 2018

The 46th warrant
by resolution of theBoard of Directors
meeting
on April 9, 2018

The 47th warrant
by resolution of theBoard of Directors
meeting
on April 9, 2018

Number of shareacquisition rights

20,000,000 units

15,000,000 units

15,000,000 units

Number of shares to beissued upon the exerciseof share acquisitionrights

20,000,000 shares

15,000,000 shares

15,000,000 shares

Amount paid for shareacquisition rights

10,800,000 yen

6,600,000 yen

5,700,000 yen

207 yen per unit

209 yen per unit

211 yen per unit

(Note 2)

(Note 2)

(Note 2)

From: April 26, 2018
To: April 26, 2021

From: April 26, 2018
To: April 26, 2021

From: April 26, 2018
To: April 26,2021

Value of property to becontributed upon theexercise of each shareacquisition right
Period in which exerciseof share acquisitionrights is possible(Notes) 1. All share acquisition rights issued in the 45th warrant have been exercised as of October
1, 2018.
2. Figures are calculated using the initial exercise price.

- 18 -

4. The Company’s Officers (as of December 31, 2018)(1) Names of Directors and Audit & Supervisory Board Members
Company position

Responsibility and significant concurrent
position

Name

Representative Director

Fuminori Yoshida

Chief Executive Officer

Representative Director

Kazuo Asakawa

Corporate Officer, Executive Vice
President (CCO) and Head of the Japan
Business Unit

Director

Shigetoshi Matsumoto

Director

George Morstyn

Director

Milton Grannatt

Director

Robin Campbell

Full-time Audit &Kiyoshi Watanabe
Supervisory Board Member
Audit & Supervisory Board
Saneaki Ichijo
MemberCEO of G&R Morstyn Pty Ltd.
Director, Arkay Therapeutics
Director, Myostin Therapeutics
Chairman of the Board of Aptitude
Medical Systems Inc.
Director, Chairman of theCompensation Committee, Member ofthe Audit Committee of Pfenex Inc.

Lawyer at Anderson Mori & Tomotsune
Representative of the Endo C.P.A. Firm
Outside Director at Careerlink Co., Ltd.
Representative partner at the ABS Audit
Corporation

Audit & Supervisory Board
Kesao Endo
Member(Notes) 1. Of the Directors, Shigetoshi Matsumoto, George Morstyn, Milton Grannatt, and Robin Campbell
are Outside Directors.
2. Kiyoshi Watanabe, Saneaki Ichijo, and Kesao Endo are outside members of the Audit & Supervisory
Board.
3. Shigetoshi Matsumoto, Kiyoshi Watanabe, and Kesao Endo have been designated as independent
officers pursuant to the provisions of the Tokyo Stock Exchange and registered as such with theTokyo Stock Exchange.
4. Kesao Endo possesses deep insight in finance and accounting, which he gained through his
profession as a certified public accountant.
5. Changes in Directors and Audit & Supervisory Board Members during the fiscal year under review
are as follows:- Directors Sumio Ariyoshi and Naoko Iino resigned upon expiration of their terms of office at theclosing of the 13th Ordinary General Meeting of Shareholders held on March 29, 2018.
- Audit & Supervisory Board Member Shigetoshi Matsumoto resigned at the closing of the 13th
Ordinary General Meeting of Shareholders held on March 29, 2018.
- Shigetoshi Matsumoto and Robin Campbell were newly appointed as Directors at the 13th Ordinary
General Meeting of Shareholders held on March 29, 2018.
- Kesao Endo was newly appointed as an Audit & Supervisory Board Member at the 13th Ordinary
General Meeting of Shareholders held on March 29, 2018.

- 19 -

6. The Company has adopted the Corporate Officer System. The Corporate Officers who do not holdconcurrent positions as Directors are as follows:
Corporate Officer
Kenji Murata
Corporate Officer
Nobuo Ishida(2) Summary of the contents of the liability limitation agreement
The Company has executed an agreement with each Director (excluding those who engage
in business execution) and each member of the Audit & Supervisory Board with respect to theliability in Article 423, Paragraph 1 of the Companies Act, setting forth that director liability will
be limited to the higher of 1,000,000 yen or the maximum liability amount set forth in laws andregulations in cases where the Director or member of the Audit & Supervisory Board has
performed their duties in good faith and without gross negligence.
(3) Compensation of members of the Board of Directors and the Audit & Supervisory
Board
Number of Directors or
Total Amount ofCompany Board
Audit & Supervisory
Compensation
Board Members Paid
(thousands of yen)
8
144,150
Board of Directors(Outside: 6)(Outside: 43,455)
4
19,821
Audit & Supervisory Board(Outside: 4)(Outside: 19,821)
12
163,971
Total(Outside: 10)(Outside: 63,277)(Notes) 1. Salary in the event of a Director doubling as an employee is not included in the above compensation for
Directors.
2. The maximum amount of compensation for Directors was resolved as an annual amount of 130 million
yen at the Extraordinary General Meeting of Shareholders held on August 3, 2005. In addition to theaforementioned compensation, it was resolved that compensation for Directors in the form of shareacquisition rights as stock options be granted up to a maximum annual amount of 80 million yen at the
9th Ordinary General Meeting of Shareholders held on March 27, 2014. (Of 80 million yen, 30 million
yen was granted for Outside Directors, which was resolved at the 11th Ordinary General Meeting of
Shareholders held on March 30, 2016.)
3. The maximum amount of compensation for Audit & Supervisory Board Members was resolved as anannual amount of 30 million yen at the Extraordinary General Meeting of Shareholders held on June 30,
2011.
4. The number of Directors or Audit & Supervisory Board Members paid as stated above includes two (2)Directors and one (1) Audit & Supervisory Board Member who resigned at the closing of the 13th
Ordinary General Meeting of Shareholders held on March 29, 2018.
5. The total compensation paid includes expenses (for eight (8) Directors, a total of 61,144 thousand yen)in connection with share acquisition rights as stock options for the fiscal year under review.

- 20 -

(4) Matters Concerning Outside Directors and outside members of the Audit &Supervisory Board
Status of main activities during the fiscal year under review
Position

Name

Status of
Status ofattendance at the attendance at theOpinions at the Board of Directors
Board ofAudit &
meetings and the Audit & Supervisory
Directors
Supervisory Board
Board meetings
meetings
meetings

Director

Shigetoshi
Matsumoto11 out of 11(100%)—Mr. Matsumoto expressed opinionsfrom an objective perspective
independent from the Company’s
management engaged in business
operations, leveraging his extensive
knowledge and experience with thebusiness practices of companies inthe same industry and with auditingwork.

Director

GeorgeMorstyn

16 out of 16(100%)—

Dr. Morstyn expressed opinions froman objective perspective independent
from the Company’s management
engaged in business operations,leveraging his extensive knowledge
and experience as a physician.

Director

MiltonGrannatt

16 out of 16(100%)—

Dr. Grannatt expressed opinions froman objective perspective independent
from the Company’s management
engaged in business operations,leveraging his extensive experienceand knowledge regarding healthcarecompanies.

Director

Robin
Campbell

11 out of 11(100%)—

Dr. Campbell expressed opinionsfrom an objective perspective
independent from the Company’s
management engaged in business
operations, leveraging his extensive
experience and knowledge regarding
healthcare companies.

Full-time
Audit &
Supervisory
Board
MemberKiyoshiWatanabe

16 out of 16(100%)

17 out of 17(100%)

Mr. Watanabe actively expressed
opinions from an objective and fair
perspective based on his extensive
experience and knowledge as an audit& supervisory board member at listedcompanies in order to achieve highly
effective managerial surveillance.

- 21 -

Status of
Status ofattendance at the attendance at theOpinions at the Board of Directors
Board ofAudit &
meetings and the Audit & Supervisory
Directors
Supervisory Board
Board meetings
meetings
meetings

Position

Name

Audit &
Supervisory
Board
MemberSaneaki
Ichijo16 out of 16(100%)

17 out of 17(100%)

Mr. Ichijo actively expressed
opinions from a neutral perspective
based on the specialized knowledge
and extensive experience heaccumulated as an attorney in orderto achieve highly effective
managerial surveillance.

Audit &
Supervisory
Board
MemberKesao Endo

11 out of 11(100%)

11 out of 11(100%)

Mr. Endo actively expressed opinionsfrom a neutral perspective based on
the specialized knowledge andextensive experience he accumulated
as a certified public accountant inorder to achieve highly effective
managerial surveillance.

(Note) With regard to Directors Shigetoshi Matsumoto and Robin Campbell and Audit & Supervisory Board
Member Kesao Endo, their status of attendance at the meetings is calculated from the Board of Directors
meetings and the Audit & Supervisory Board meetings held after their appointments on March 29, 2018.

- 22 -

5. Status of Accounting Auditor(1) Name of accounting auditor
Ernst & Young ShinNihon LLC(2) Summary of the contents of the liability limitation agreement
Not applicable.
(3) Amount of compensation
Amount paid
Amount of compensation paid to the accounting auditor
concerning the fiscal year under review
Total amount of monetary and other property benefits to be paidby the Company

15,500 thousand yen
15,500 thousand yen(Notes) 1. Reasons for the Audit & Supervisory Board’s approval of the amount of compensation to be paid to theaccounting auditor
The Audit & Supervisory Board verified the contents of the audit planning by the accounting auditor,
performance of its duties in previous years, and status of planning and actual performance, and as a resultof a careful review on the adequacy of the amount of compensation for the fiscal year under review, hasapproved the amount of compensation to be paid to the accounting auditor, pursuant to the provisions ofArticle 399, Paragraph 1 of the Companies Act.
2. The amounts of compensation for audits paid in accordance with the Companies Act, and the audits
conducted in accordance with the Financial Instruments and Exchange Act, are not distinguished in thecontract agreement between the Company and the accounting auditor. It is not possible to distinguishbetween compensation paid for these two types of audits; therefore the total amount thereof is stated.

(4) Policies for dismissal or non-reappointment of the accounting auditor
When it is deemed necessary to dismiss (or not reappoint) the accounting auditor for reasons
relating to the accounting auditor’s execution of duties, the Audit & Supervisory Board shalldetermine the contents of a proposal to be presented to a General Meeting of Shareholders in
respect of the dismissal (or non-reappointment). In addition, when the accounting auditor falls
under any of the items of Article 340, Paragraph 1 of the Companies Act, the Audit & Supervisory
Board shall dismiss the accounting auditor with the consent of all members of the Audit &Supervisory Board. If this is the case, an Audit & Supervisory Board Member selected by the
Audit & Supervisory Board shall report the dismissal of the accounting auditor and the reasonsfor such dismissal at the first General Meeting of Shareholders convened after the dismissal.

- 23 -

6. System to Ensure the Appropriateness of Operations(1) The corporate system to ensure that Directors, officers, and employees comply withlaws and ordinances, as well as the Articles of Incorporation, in the process of
performing their duties(i) Dissemination and thorough implementation of management philosophy
In order to implement its management philosophy, the Company has established a
Corporate Action Charter and standards of conduct to which all Company members are
expected to adhere. The Company informs all executives and staff regarding these policies
and asks for each member’s understanding regarding the spirit of these regulations and forthorough compliance with the same. All business activities of the Company are based on
the premise of compliance with laws and ordinances and the maintenance of corporate
ethical standards (below, “compliance”).
(ii) Establishment of internal control committee
The Company develops internal control systems and employs other measures to support
thorough compliance, appropriate risk management, and proper financial reporting. In
addition, an internal control committee has been established to ensure complete observanceof laws and ordinances, the Articles of Incorporation, and other internal regulations throughexhaustive surveillance.
(iii) Establishment of internal audit office
The Company has established an internal audit office as an independent organizational
unit which conducts regular audits and acts under the direct authority of the Representative
Director and President. Through such audits, objective assessments are made as to theeffectiveness and efficiency of business, the reliability of various financial reports,
safeguarding of assets, compliance status of operations, and the appropriateness andeffectiveness of corporate risk management policies. When necessary, the Company
ensures the efficacy of internal controls by accepting advice and proposals concerning
recommended improvements to the maintenance and operation of systems.
(iv) Establishment of compliance reporting and consultation hot-lines
The Company has established compliance reporting and consultation hot-lines bothinternal to and outside the Company, and has designated compliance liaisons to respond toreports and requests for consultation from employees and aim to identify and resolve any
compliance issues at the earliest stage possible.
(v) Systems for securing reliable financial reporting
The Company establishes internal control systems and oversees their appropriate
operation in order to ensure reliable financial reporting.

- 24 -

(2) Corporate system for maintenance and control of information regarding theperformance of duties by Directors
The Company appoints an individual to be responsible for the general management ofcorporate documents and to appropriately maintain and otherwise control all important
documents containing information as to the performance by Directors of their duties in
addition to legally required records of proceedings of Shareholders meetings and Board of
Directors meetings, as provided in laws and ordinances as well as in the Company’s own“Rules for the Management of Documents.”(3) Corporate system for control of risk of loss, including in-house rules for such control
The Company practices risk control under its basic risk control policy and related rules.
The Internal Control Committee is responsible for the supervision and promotion of risk
management. Additionally, the Company will swiftly respond to emergency situation by
establishing an emergency response headquarters managed by the Representative Director andPresident.
(4) Corporate system to ensure the efficient performance of duties by Directors(i) Directors, officers, and employees perform their duties in appropriate and efficientaccordance with the “Rules for the Board of Directors” and “Rules for the Internal
Approvals,” as well as other related regulations.
(ii) The Company regularly holds Executive Management Committee meetings pursuant to
the “Rules for the Executive Management Committee” and reviews key proposals for the
purpose of supporting precise and timely decision-making from the Representative
Director and President.
(iii) The Company develops mid- to long-term business plans and operates and expands its
business in accordance with these plans. In addition, the Company establishes numericaltargets within its business plans for each fiscal year and, through monthly closings,
manages progress toward these targets while making relevant reports to Directors.
(5) Basic policy against anti-social forces
The Company resolutely opposes anti-social forces that pose a threat to the order or safetyof society and forbids their participation in any and all business activities.
(6) Assistant to Audit & Supervisory Board Members
Audit & Supervisory Board Members may request that the Representative Director andPresident appoint an employee to act as an assistant to Audit & Supervisory Board Members.
Upon receiving such a request, the Representative Director and President shall make an- 25 -

appropriate appointment.
(7) Ensuring the independence of assistants to Audit & Supervisory Board Members from
Directors and the effectiveness of the Audit & Supervisory Board Members’
instructions to employees(i) Assistants to Audit & Supervisory Board Members shall not receive instructions
concerning their supporting duties from anyone other than Audit & Supervisory Board
Members.
(ii) Matters such as personnel evaluation and transfer and disciplinary actions concerning
employees that assist Audit & Supervisory Board Members shall be subject to the priorconsent of the Audit & Supervisory Board.
(8) Corporate system for Directors and employees to report to the Audit & Supervisory
Board; corporate system for other reports to the Audit & Supervisory Board; andcorporate system to ensure the efficient performance of audits by the Audit &Supervisory Board(i) Any Director or employee shall promptly inform the Audit & Supervisory Board if andwhen he/she becomes aware of any circumstance that threatens to cause any significant
damage to, or could adversely affect, the Company.
(ii) Audit & Supervisory Board Members may participate in all matters that they judge to beimportant in terms of gaining a better understanding of decision-making processes,
conditions, and statuses of the Company’s businesses. Accordingly, they may attend
Board of Directors meetings, Executive Management Committee meetings, and otherimportant meetings and are also permitted to view key decision-making documents
related to these meetings.
(iii) Audit & Supervisory Board Members may individually interview Directors andemployees in key positions of responsibility to obtain information regarding themanagement conditions of the Company’s businesses.
(iv) Audit & Supervisory Board Members will regularly exchange opinions with the
Representative Director and President and the accounting auditor.
(v) The Company will not apply any sort of unfavorable treatment or unjust punishment to
individuals who make reports to the Audit & Supervisory Board.
(9) Matters related to the treatment of expenses or obligations associated with theexecution of duties of Audit & Supervisory Board Members, including the proceduresfor prepayment or reimbursement of such expenses(i) The Company will respond without delay to claims for the prepayment of expenses made- 26 -

by Audit & Supervisory Board Members under Article 388 of the Companies Act,
accepting responsibility for associated expenses and processing related obligations, except
in cases in which these have been determined unnecessary for the execution of the duties
of Audit & Supervisory Board Members.
(ii) The Company authorizes and shoulders expenses incurred when Audit & Supervisory
Board Members seek opinions or advice from external experts, including attorneys andcertified public accountants, if it is found necessary for the execution of their duties.
7. Summary of the Status of System to Ensure the Appropriateness of Operations(1) The Company is striving to instill a culture of compliance across the organization through its
communications with Directors and employees, and through publication of information suchas the corporate compliance conduct principles and the whistleblowing system manual on the
Company’s intranet bulletin board.
(2) The Board of Directors of the Company is composed of six (6) Directors (including four (4)Outside Directors). Outside Directors participate in resolutions from an independent
standpoint and monitor and supervise the management. Each Audit & Supervisory Board
Member carries out management audits as well.
(3) Full-time Audit & Supervisory Board Members attend important meetings such as the Boardof Directors meetings as well as Executive Management Committee meetings, and exchange
views with representative directors monthly.

- 27 -

Balance Sheet(As of December 31, 2018)
Item(Assets)
Current assets
Cash and deposits
Accounts receivable–trade
Merchandise and finishedgoods
Supplies
Prepaid expenses
Advances paid
Consumption taxes receivable

Amount6,038,490
4,821,355
411,720533,824
589
83,372
31,147
124,855(Unit: thousands of yen)
Item
Amount(Liabilities)
Current liabilities
1,336,342
Accounts payable–trade726,100
Accounts payable–other503,637
Income taxes payable
71,249Forward exchange contracts
Other
Non-current liabilities
Provision for retirement
benefits

16,42718,9261,281
1,281

1,337,623

Other31,624Non-current assets
Property, plant and equipment
Buildings
Tools, furniture and fixtures
Accumulated depreciation
Intangible assets
Software
Software in progress
Investments and other assets

200,932
56,951
46,19859,541(48,788)
71,37650,946
20,43072,604

Shares of subsidiaries
Long-term prepaid expenses

0
1,225

Total liabilities(Net assets)
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Retained earnings
Other retained earnings
Retained earnings brought
forwardTreasury shares
Share acquisition rights

71,378

Total net assets

Lease and guarantee deposits
Total assets

6,239,423

Total liabilities and net
assets(Note) Amounts of less than one thousand yen are rounded down.

- 28 -

4,371,902
12,972,579
12,942,579
12,942,579(21,543,238)(21,543,238)(21,543,238)(17)
529,897
4,901,799
6,239,423

Statement of Income
January 1, 2018
( toFrom
December 31, 2018 )Item(Unit: thousands of yen)AmountI. Net sales
II. Cost of goods sold3,835,530
2,662,661

Gross profit
III. Selling, general and administrative
expenses

1,172,869
3,828,941

Operating loss

(2,656,072)

IV. Non-operating income
Interest on refund

116Interest income
Dividend income of insurance

525
1,501

Other

54

V. Non-operating expenses
Commission fee
Share issuance cost

2,196

11,10029,650Foreign exchange losses

54,103

Ordinary loss

94,854(2,748,730)

VI. Extraordinary income
Gain on reversal of share acquisition rights

9,826

VII. Extraordinary losses
Loss on retirement of non-current assets

9,829

9,829

3,800

(2,748,733)
3,800

Loss before income taxes
Income taxes–current
Net loss

9,826(2,752,533)(Note) Amounts of less than one thousand yen are rounded down.

- 29 -

Statement of Changes in Equity
January 1, 2018
( Fromto December 31, 2018 )(Unit: thousands of yen)

Shareholders’ equity
CapitalRetained
surplusearnings
Other retained
earnings
Treasury
Capital stock
sharesLegal capital
Retained
surplusearnings
brought
forwardBalance as of January 1, 2018

10,761,676

10,731,676 (18,790,705)

2,210,903

2,210,903

(17)

Total
shareholders’equity2,702,629

Changes of items during period
Issuance of new shares (exerciseof share acquisition rights)
Net loss
Net changes of items other thanshareholders’ equity
Total changes of items during
periodBalance as of December 31, 2018

Balance as of January 1, 2018

(2,752,533)

2,210,903(2,752,533)—

1,669,273

12,972,579

12,942,579 (21,543,238)(17)

4,371,902

ShareacquisitionrightsTotal net
assets536,772

3,239,402

Issuance of new shares (exerciseof share acquisition rights)

4,421,806

Net loss(2,752,533)

Balance as of December 31, 2018

(2,752,533)

2,210,903

Changes of items during period

Net changes of items other thanshareholders’ equity
Total changes of items during
period4,421,806(6,875)(6,875)(6,875)

1,662,397

529,897

4,901,799(Note) Amounts of less than one thousand yen are rounded down.

- 30 -

Notes on Financial Statements(Significant accounting policies)(1) Valuation basis and method of marketable and investment securities
Marketable and investment securities
Shares of subsidiaries

Shares of subsidiaries are stated at cost determined by themoving-average method.

Other marketable and investment securities
Available-for-sale securities
with determinable market
value

Available-for-sale securities with a determinable market
value are stated at fair value based on marketable valueon the closing date and other premises. Any valuationdifferences are included directly in shareholders’ equity.
Cost of securities sold is calculated by the movingaverage method.

Available-for-sale securities
without determinable market
value

Available-for-sale securities without determinable market
value are stated at cost determined by the movingaverage method.

Derivative transactions

Derivative financial instruments are stated at fair value.

Inventories

Inventories are stated at cost determined by the weightedaverage method. The amount on the balance sheet is
calculated by reducing book value when the contributionof inventories to profitability declines.

(2) Depreciation and amortization of non-current assets
Property, plant and equipment(excluding lease assets)

Depreciation of property, plant and equipment iscomputed by the straight-line method.
The useful lives of major property, plant and equipment
are summarized as follows:
Buildings
3 to 18 years
Tools, furniture and fixtures
5 to 15 years

Intangible assets(excluding lease assets)

Amortization of intangible assets is computed by thestraight-line method.
Capitalized software costs are being amortized over theperiod of the internal use of five years.

Lease assets

Depreciation of lease assets is computed by the straightline method over the lease term with no residual value.

- 31 -

(3) Deferred assets
Share issuance costs and bondissuance costs

Share issuance costs and bond issuance costs are recorded
as expenses in full at the time of expenditure.

(4) Basis for translating assets and liabilities denominated in foreign currencies into Japaneseyen
Monetary assets and liabilities denominated in foreign currencies are translated into
Japanese yen at the spot exchange rates prevailing on the closing date, and resulting gains orlosses are credited or charged to income.
(5) Basis for reserves and provisions
Allowance for doubtful
accounts

The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debt withrespect to ordinary receivables and an estimate of uncollectible
amounts determined by reference to specific doubtfulreceivables from customers which are experiencing financial
difficulties.
For the fiscal year under review, no allowance for doubtful
accounts is provided due to no historical experience of bad debt
and no receivable balances that are deemed uncollectible.

Provision for retirement
benefits

The provision for retirement benefits is provided based on an
estimated amount for retirement benefit obligations at the endof fiscal year under review.
The Company applies the simplified method to calculate
amounts of provision for retirement benefits and retirement
benefit expenses. That is, the amount of retirement benefit
obligations are the payments required for voluntary retirement
as of each fiscal year end.

(6) Accounting for consumption tax
Transactions are recorded at amounts exclusive of consumption tax.

- 32 -

(Notes on Balance sheet)
Monetary assets receivable from subsidiaries are as follows.
Short-term monetary assets receivable:
969 thousand yen(Notes on Statement of income)(1) Inventories at fiscal year-end are stated after writing down based on the decrease inprofitability. The following amount is included within cost of sales as loss on valuation of
inventories.
Cost of sales: 121,317 thousand yen
A certain batch of TREAKISYM® 25mg was determined to be unsalable due to its poor
external appearance, which resulted in an inventory valuation loss.
(2) R&D costs included in general and administrative expenses:

1,832,746 thousand yen(Notes on Statement of changes in equity)(1) Type and number of shares issued and treasury shares(Unit: number of shares)

Commonstock

Sharesoutstanding
Treasury shares

At beginningof current
periodIncrease

54,049,224

28,349,700—

82,398,924

75

—

—

75

At end ofcurrent period

Decrease(Note) Increase of 28,349,700 shares in common stock is due to the exercise of share acquisition rights.

(2) Number of shares to be issued upon exercise of share acquisition rights issued at the endof the fiscal year under review
Common stock

1,999,100 shares(Note) Excludes share acquisition rights for which the commencement date of the exercise period has
not yet arrived.

- 33 -

(Notes on Deferred tax accounting)Significant components of deferred tax assets and liabilities
Deferred tax assets:
Depreciation for lump-sum depreciable assets
Amortization for deferred assets
Research and development expenses
Accounts payable–other
Provision for retirement benefits
Enterprise tax payable
Asset retirement obligations
Share-based compensation expenses
Loss on valuation of inventories
Loss carried forward
Subtotal
Valuation allowance(Unit: thousands of yen)
2,631
799,994
1,286,703
1,755
392
28,516
1,188
130,759
37,4383,487,365
5,776,745(5,776,745)

Total deferred tax assets—- 34 -

(Notes on Financial instruments)(1) Financial instruments(i) Policies for financial instruments
The Company procures the funds necessary in light of the pipeline development plan
(primarily by third-party allotment and offering by new share issuance). A temporary
surplus fund is invested in financial instruments which are highly safe and liquid.
As a principle, the Company does not enter into derivative transactions for speculative
trading purposes but uses them within the scope prescribed in the Company’s internal rules.
(ii) Types of financial instruments and related risks
Operating receivables such as accounts receivable–trade and advances paid inconnection with joint development are exposed to the credit risk of customers and joint
development partners. Operating receivables denominated in foreign currencies are
exposed to foreign exchange fluctuation risk.
The Company intends to invest in marketable and investment securities which have arelatively low risk of falling below initial investments, however, it might entail a finite risk.
Operating payables such as accounts payable–trade and accounts payable–other are
mostly due within 75 days. Operating payables denominated in foreign currencies are
exposed to foreign exchange fluctuation risk.
The Company uses derivative transactions to avoid foreign exchange fluctuation risks
and enters into forward exchange contracts within the scope prescribed in the internal rules
based on balances of receivables and payables denominated in foreign currencies as wellas the actual volume of export and import transactions denominated in foreign currencies.
Lease and guarantee deposits are mostly security deposits related to leased officepremises and their refunds are subject to the credit risk of the lessor.
(iii) Risk management for financial instruments
1. Monitoring of credit risks (the risk that customers or counterparties may default on
obligations)
In accordance with the Company’s internal credit policies for managing credit risk
arising from operating receivables, the Company’s marketing department periodicallymonitors the creditworthiness of major customers and monitors due dates and outstandingbalances by individual customers. In addition, the Company is making efforts to promptly
identify and mitigate risks of bad debts from customers who are having financial
difficulties.

- 35 -

The Company enters into derivative transactions only with financial institutions whichhave a sound credit profile in order to mitigate the counterparty risk.
2. Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates,interest rates, and others)
The Company deposits cash primarily with financial institutions with high credit ratings.
For marketable and investment securities, the Company intends to avoid risks of falling
below initial investments by investing in securities with a satisfactory credit rating andinvestment period in accordance with the Company’s internal investment policies.
The Company enters into forward exchange contracts in order to avoid foreign exchange
fluctuation risks in connection with receivables and payables denominated in foreign
currencies.
Followed by appropriate authorization procedures prescribed in the Company’s internal
rules, the Finance & Accounting department executes and monitors derivative transactions.
Monthly transaction performances are reported to the Executive Management Committee.
3. Monitoring of liquidity risks (the risk that the Company may not be able to meet its
obligations on the scheduled due date)
Based on the report from each department, the responsible department of the Company
prepares and updates its cash flow plans on a timely basis and ensures to maintain theliquidity on hand to manage liquidity risk.
(iv) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value.
(v) Concentration of credit risk
As of the end of fiscal year under review, all operating receivables are from one
particular major customer.

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(2) Fair value of financial instruments
The carrying value on the balance sheet, fair values, and their differences are as follows.
(Unit: thousands of yen)
Carrying value on
Fair value
Difference
the balance sheet(1) Cash and deposits
4,821,355
4,821,355—(2) Accounts receivable–trade411,720
411,720—(3) Advances paid
31,14731,147—
Assets, total
5,264,223
5,264,223—(1) Accounts payable–trade(2) Accounts payable–other(3) Income taxes payable
Liabilities, total

726,100
503,637
71,2491,300,988

726,100
503,637
71,2491,300,988————

Derivative transactions, total (*)(16,427)(16,427)—(*) Receivables and liabilities arising from derivative transactions are presented on a net basis
and net liabilities are shown in parentheses.
(Note) 1. Fair value measurement of financial instruments and other matters related tosecurities and derivative transactions
Assets(1) Cash and deposits, (2) Accounts receivable–trade, and (3) Advances paid
The carrying value is deemed as the fair value since these are scheduled to besettled in a short period of time.
Liabilities(1) Accounts payable–trade, (2) Accounts payable–other, and (3) Income taxes
payableThe carrying value is deemed as the fair value since these are scheduled to besettled in a short period of time.
Derivative transactions
Forward exchange contracts
The fair value of forward exchange contracts is measured based on market quotes
obtained from financial institutions.
(Note) 2. Financial instruments whose fair value is extremely difficult to determine
Lease and guarantee deposits (carrying value of 71,378 thousand yen) are notincluded in the above table since no market quote is available and their fair value isextremely difficult to determine.

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(Note) 3. The redemption schedule for monetary assets and securities with maturities after theclosing date
(Unit: thousands of yen)
Due after
Due after
Due in one
one yearfive years
Due after
year or lessthrough fivethrough ten
ten years
years
years
—
—
—
Deposits
4,821,265
Accounts receivable–trade411,720———

Advances paid

31,147———

5,264,133

—

—

—

Total

(Notes on Transactions with affiliated parties)
Officer(s) and major individual shareholder(s) of the Company
Capital or
Name ofBusiness
investment
Category company or Location
details or(thousands
personprofessionof yen)Executive

Fuminori
Yoshida——Ratio of voting
rights and other Relationships
Transaction
Year-end
Transaction amount Account balance
forms ofwithownership
affiliateddetails (thousands
title (thousands(ownership)partiesof yen)of yen)(%)

Representative
Director,
President and(Ownership)
Chief
Direct: 4.18
Executive
Officer of theCompany—

Exerciseof shareacquisitionrights87,526(331
thousandshares)(Note) This information describes the exercise during the fiscal year under review of shareacquisition rights granted based on resolutions at Board of Directors meetings on April
15, 2014 and March 26, 2015.
(Notes on Per-share information)(1) Net assets per share(2) Net loss per share
Average number of shares outstanding during the year

- 38 -

53.06 yen
(41.38) yen
66,511,113 shares——

(Notes on Other notes)
The Company has overdraft and commitment line contracts with three banks in a business
relationship to efficiently procure working capital. The status of the bank overdraft and loan
commitments based on these contracts at the end of the fiscal year under review is as follows:(Unit: thousands of yen)
1,350,000
Total amounts of bank overdraft limit and loan commitment line
Balance of borrowing outstanding—
Unused balance

1,350,000(Notes on Significant subsequent events)
None to be reported.

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Independent Auditor’s ReportFebruary 21, 2019
The Board of Directors
SymBio Pharmaceuticals Limited
Ernst & Young ShinNihon LLC

Hironao Yazaki
Certified Public Accountant
Designated and Engagement Partner

Kazuto Shiratori
Certified Public Accountant
Designated and Engagement Partner
Pursuant to Article 436, Section 2, Paragraph 1 of the Companies Act, we have audited theaccompanying financial statements, which comprise the balance sheet, the statement of income,the statement of changes in equity, the notes on financial statements and the related
supplementary schedules of SymBio Pharmaceuticals Limited (the “Company”) applicable to the
14th fiscal year from January 1, 2018 through December 31, 2018.
Management’s Responsibility for the Financial Statements and the Related Supplementary
Schedules
Management is responsible for the preparation and fair presentation of these financial
statements and the related supplementary schedules in accordance with accounting principles
generally accepted in Japan, and for designing and operating such internal control as management
determines is necessary to enable the preparation and fair presentation of the financial statements
and the related supplementary schedules that are free from material misstatement, whether due
to fraud or error.

- 40 -

Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements and the related
supplementary schedules based on our audit. 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 and the related
supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements and the related supplementary schedules. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements and the related supplementary schedules, whether due
to fraud or error. The purpose of an audit of the financial statements is not to express an opinion
on the effectiveness of the entity’s internal control, but in making these risk assessments theauditor considers internal controls relevant to the entity’s preparation and fair presentation of thefinancial statements and the related supplementary schedules in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements and the related
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
OpinionIn our opinion, the financial statements and the related supplementary schedules referred toabove present fairly, in all material respects, the financial position and results of operations of
SymBio Pharmaceuticals Limited applicable to the 14th fiscal year ended December 31, 2018 inconformity with accounting principles generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with theCertified Public Accountants Act.

- 41 -

Report of the Audit & Supervisory Board
We, Audit & Supervisory Board Members, prepare this report of audit with regard to the
execution of Directors’ duties during the 14th Term of the Company from January 1, 2018 to
December 31, 2018, as the unanimous opinion of all the Audit & Supervisory Board Members
after careful discussion based on the audit reports prepared by respective Audit & Supervisory
Board Members, and report as follows.
1. Method and Contents of the Audit by the Audit & Supervisory Board Members and the Audit& Supervisory Board
The Audit & Supervisory Board formulated the audit policy and plan for the Term reported,
and received reports from the respective Audit & Supervisory Board Members with regard to thestate of implementation and results of audits as well as received the reporting from Directors andthe accounting auditor with regard to the state of execution of their duties, and requested
additional explanations as deemed necessary.
The respective Audit & Supervisory Board Members, in conformity with the standards foraudits by Audit & Supervisory Board Members that the Audit & Supervisory Board set forth andin accordance with the audit policy and plan for the Term, strove to collect information andimprove audit environments by communicating with Directors, the internal audit section, andother employees. We also attended Board of Directors meetings and other important meetings,
received the reporting from Directors and employees with regard to the state of execution of theirduties, requesting additional explanations as deemed necessary, reviewed documents forimportant settlements, and researched the situation of operations and assets. Moreover, withregard to the system to ensure that the execution of Directors’ duties described in the business
report was compliant with laws and ordinances and the Company’s Articles of Incorporation andother systems required to secure the appropriateness of operations as a stock company maintained
based on the contents of resolution by the Board of Directors with regard to the maintenance ofsystems stipulated by the Ordinance for Enforcement of Article 100, Paragraph 1 and 3 of theCompanies Act (hereinafter the “Internal Control System”), we received reporting on the statusof their establishment and operation from Directors and employees, requested additional
explanation as deemed necessary, and expressed our opinion. Based on the method describedabove, we reviewed the business report and supplementary schedules with regard to the Term
reported.

- 42 -

In addition, we monitored and inspected the independent position of the accounting auditor
and the execution of appropriate audits by the accounting auditor, and also received the reportingfrom the accounting auditor with regard to the state of execution of its duties, requesting
additional explanation as deemed necessary. Furthermore, we received the notification from theaccounting auditor that “the system to ensure that its duties are executed as appropriate (the items
listed by the respective paragraphs of Article 131 of the Ordinance on the Accounting ofCompanies)” is maintained in accordance with “the standards for quality control of audits(Business Accounting Council, October 28, 2005),” requesting additional explanation as deemednecessary. Based on the method described above, we reviewed the financial report (includingbalance sheet, statement of income, statement of changes in equity, and notes to non-consolidated
financial statements) and related supplementary schedules for the Term reported.

2. Results of audit(1) Results of the audit of the business reporta. The business report and supplementary schedules fairly present the Company’s situation inaccordance with laws and ordinances and the Company’s Articles of Incorporation.
b. No misconduct in the execution of Directors’ duties or any material facts in violation oflaws or ordinances or the Company’s Articles of Incorporation was observed.
c. The contents of resolution by the Board of Directors with regard to the Internal Control
System are appropriate. Also, there is no matter to be noted as for the descriptions in thebusiness report regarding such Internal Control System and the execution of Directors’
duties.
(2) Results of the audit of the financial statements and related supplementary schedules
Both the method used for and the result of the audit conducted by the accounting auditor,
Ernst & Young ShinNihon LLC, are appropriate.

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February 21, 2019
Audit & Supervisory Board,
SymBio Pharmaceuticals Limited
Kiyoshi Watanabe, (seal)
Full-time Audit & Supervisory Board Member (Outside)
Saneaki Ichijo, (seal)
Audit & Supervisory Board Member (Outside)
Kesao Endo, (seal)
Audit & Supervisory Board Member (Outside)

End of Report

End of Document- 44 -