Business Report(From January 1, 2014 to December 31, 2014)
1.

Status of Nobelpharma

1.1.

Progress and Results of Operations

Since its foundation in 2003, Nobelpharma has developed, manufactured and sold drugs satisfying
unmet medical needs with its mission to “Contribute to medical care by developing, manufacturing
and delivering necessary medicines that other company do not pursue”.
In January 2015, the Company revised its company mission, management policy and action
criteria.
For this revision, the Company focused on four points: (1) internationalization, (2) work-lifebalance, (3) prevention of “Large Corporation Disease” that is easy to spread if we are not careful and(4) sending a message to outside the Company, not only within the Company. The Company’s new
mission is to “Contribute to society by providing necessary but neglected pharmaceuticals and medical
devices” while maintaining the basic principles of the Company. The Company is committed tocontinue its business activities based on this corporate mission. Sales and profits are importantmanagement indicators we should pursue but they may be realized as a result of execution of thecorporate mission and thus, they are positioned as means for achieving the corporate mission. The
revised management policy and action criteria are detailed as follows:
Policy1. General
1) Share Mission, Policy and Action Criteria among all concerned (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 into overseas
2. Personnel
1) Value employees and families, respecting self-development
2) Value "Selected Few" and create environment for "Selected Few" to enjoy working* "Selected Few" = experienced experts passionately devoted to working, irrespective ofgender, 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 seeds externally14.

Capital1) Profits as a result/means of achieving 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 benefit 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 loss
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 feasible5) If failed/troubled, prevent expansion first, then recurrence* Pursuit of responsibilities unnecessary6) Fast decision for < X mil yen by responsible person* 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 whenpursuing 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 never leave unmanaged3) Hear anyone out, never interrupt in the middle
4) Start with conclusion when explaining/responding5) Merely greetings, yet surely significant

2

As of March 2015, the Company is selling the following 13 new pharmaceutical products.
Brand Name
1

LaunchNobelzin® capsules Apr 2008
Nobelzin® tablets Feb 2015

Sales in FY2014(NHI price basis)
Yen in millions

Indications

Route ofadministration

Licensor

Wilson’s disease

Oral
Administration

Teva

201

Own

Distributor

2

Lunabell® LD
Lunabell® ULD

Jul 2008
Sep 2013

dysmenorrhea

Oral
Administration

Janssen

11,800

NipponShinyaku
Fuji Pharma

3

Nobelbar®

Dec 2008

neonatal seizures,status epilepticus

Intravenous
injection

In-house

138

Own

4

Fostoin®

Jan 2012

status epilepticus,
prevention of
postoperative
seizures, etc.

Intravenous
injection

Pfizer

1,296

Eisai

5

Gliadel®

Jan 2013

malignant glioma

Interstitialchemotherapy

Eisai

MSA
1,270 transferred to
Eisai

6

Alabel®

Sep 2013

7

Foscavir®

cytomegalovirus
Feb 2012 retinopathy, viremia
and infection

8

Indacin®

9

Cosmegen®

®

diagnosis ofmalignant glioma

patent ductus
Jan 2013 arteriosus ofprematurity
Wilms’tumor,
choriocarcinoma,
Jan 2013
pediatric solid
malignant tumor, etc

SBI
Oral
Pharmaceuti
Administration
cals (medac)

233

Own

Intravenous
injection

Clinigen415

Own

Intravenous
injection

Lundbeck85

Own

Intravenous
injection

Lundbeck

15

Own

48

Own

7

Own

5

Own

Suspension
agent forNovatechintrapleuraladministration
Intravenous
NipponDec 2014 apnea of prematurity injection/oral
Boehringer
liquidprevention of
Dec 2013 recurrent malignant
pleural effusion

10

Unitalc

11

Respia®

12

Rapalimus®

Dec 2014

13

Zanosar®

gastroenteropancreatFeb 2015 ic neuroendocrine
tumor

lymphangioleiomyo
OralmatosisAdministration
Intravenous
injection

Total

Pfizer
KeocytRemarks

Distributed
parallelly by
two companies.

Co-promotion

Co-promotion

MSA*
transferredfrom
AstraZeneca
MSA*
transferredfrom MSD
MSA*
transferredfrom MSD

Own
15,507* MSA: Manufacture and Sales Approval

As shown in the above table, total sales of 12 products in FY2014, excluding Zanosar® from a totalof 13 products available for sale, were 15,507 million yen on the NHI price basis for delivery to
medical institutions and 5,902 million yen on the Company’s shipping sales basis. Sales of Lunabell®
family were 4,683 million yen in the Company’s shipping sales basis and accounted for 79.3% of thetotal shipping sales. By adding loyalty revenue of 726 million yen, total sales in FY2014 were 6,628
million yen, up 1.3% Y-on-Y.
Cost of goods sold was 1,212 million yen, down 40.2% Y-on-Y and accounted for 18.3% (2013:
31.0%) of total sales. Selling, general and administrative expenses were 5,153 million yen, up 25.8%
Y-on-Y, and accounted for 77.7% (2013: 62.6%) of total sales, mainly including personnel costs of
1,508 million yen, up 27.6% Y-on-Y, with a ratio to total sales of 22.8% (2013: 18.1%), R&D
expenses of 1,398 million yen, a rise of 52.1% Y-on-Y, with a ratio to total sales of 21.1% (2013:3

14.1%), a commission fee of 553 million yen and loyalty expenses of 819 million yen. The
commission fee mainly included 37 million yen of a business management service outsourcing fee to
Hisanaga & Company, 43 million yen of temporary staffing expenses to Recruit Staffing, 41 million
yen and 30 million yen of system development outsourcing expenses to Application Software
Development Co., Ltd. and Perspective Co., Ltd., respectively, and 58 million yen, 29 million yen and
14 million yen of PMS-related outsourcing expenses to CAC Excia, CMIC PMS and Alfresa Pharma,
respectively. Royalty expenses were running royalties of 689 million yen, 111 million yen and 16
million yen to Jansen Pharma, Pfizer and Teva, respectively.
As a result, operating income decreased by 37.5% Y-on-Y to 262 million yen, with a ratio to total
sales of 4.0% (2013: 6.4%).
Ordinary income was 577 million yen, an increase of 24.9% Y-on-Y, and accounted for 8.7% (2013:7.1%) of total sales. This increase was due to non-operating income of 401 million yen including
subsidy revenue of 399 million yen, partly offset by non-operating expenses of 87 million yen,consisting of interest paid of 59 million yen, bond issue cost of 20 million yen and exchange loss of 7
million yen (loss arising from changes in the foreign exchange rate between the record date andpayment/receipt date of a foreign transaction such as importing raw materials and loyalty payment).
Settlement money associated with termination of the marketing alliance with Alfresa Pharma of 185
million yen was recognized as an extraordinary loss.
Net income after income taxes of 151 million yen was 240 million yen, down 29.0% Y-on-Y, with aratio to total sales of 3.6% (2013: 5.2%) and net income per employee was 1,021,000 yen (2013:
1,550,000 yen).
Retained earnings brought forward as of December 31, 2014 were 667 million yen, by adding a net
profit to the beginning balance of retained earnings brought forward of 513 million yen, including aprior period adjustment of 97 million, minus a dividend payment of 89 million yen.

Item

Yen in millions
2013

2014

Sales

6,542

6,628

Product sales

5,990
552

Cost of goods soldY-on-Y% to total sales
2013

2014

101.3%

100.0%

100.0%

5,902

98.5%

91.6%

89.0%

726

131.5%

8.4%

11.0%

2,026

1,212

59.8%

31.0%

18.3%

Gross profit

4,516

5,415

119.9%

69.0%

81.7%

SG&A expense

4,095

5,153

125.8%

62.6%

77.7%

* Personnel cost

1,182

1,508

127.6%

18.1%

22.8%

* R&D expenses

921

1,401

152.1%

14.1%

21.1%

* Commission fee

386

553

143.3%

5.9%

8.3%* Loyalty expenses

700

819

117.0%

10.7%

12.4%

Operating income

419

262

62.5%

6.4%

4.0%

Non-operating income

163

401

246.0%

2.5%

6.1%

Non-operating expenses

119

87

73.1%

1.8%

1.3%

Ordinary income

462

577

124.9%

7.1%

8.7%

Extraordinary loss

-

185

-

0.0%

2.8%

Net income before tax

462

391

84.6%

7.1%

5.9%

Income taxes

124

151

121.8%

1.9%

2.3%

Other

4

Yen in millions

Item

Y-on-Y% to total sales

2013

2014

2013

2014

338

240

71.0%

5.2%

3.6%

Ordinary income per employee (‘000 yen)

2,119

2,455

115.9%--Net income per employee (‘000 yen)

1,550

1,022

65.9%

-

-

Beginning balance

205

416

-

-

-

Dividend payment

83

89

-

-

-

97

-

-

-

665

-

-

-

Net income

Retained earnings brought forward

Prior period adjustment
Ending balance* Major items included in SG&A expense.

△44
416

1.2. Status of Sales
The status of sales of 12 products available for sale in December 2014 is summarized as follows:
Brand Name
Nobelzin®
Lunabell® (LD), ULD
Nobelbar®
Fostoin®
Foscavir®
Gliadel®
Alabel®
Indacin®
Cosmegen®
Unitalc®
Respia®
Rapalimus®
Total

Delivery amount to medical institutions(NHI price basis, yen in millions)Year 2013 [1]Year 2014 [2]
181
201
9,691
11,800
144
138
946
1,296
429
415
1,338
1,270
45
233
69
85
10
15
1
48
2
5
12,855
15,507

Y-on-Y([2]/[1])
111%
122%
95%
137%
97%
95%
519%
124%
142%
4,926%
121%

In 2014, the Company pursued sales activities with two objectives. One was to achieve the sales
program of Lunabell® through complete consignment sales and the other was that Marketing & Sales
started to move into the black by achieving the sales program of direct sales and co-promotion
products. The Company has sold Lunabell® on commission to Nippon Shinyaku and Fuji Pharma, andsales showed steady growth in the first half of 2014, but after September when Lunabell® ULD wasreleased for a longer-term prescription, sales slowed down and fell short of the forecasts by 4% (up
19% Y-on-Y). For direct sales and co-promotion products, Marketing & Sales made a concerted effort
to sell mainly Fostoin®, a core product; however, due to the impact of unstable supply, sales fell shortof the forecasts by 6% though it showed double-digit growth of 19% Y-on-Y. Total sales of direct sales
and co-promotion products were 3.38 billion yen against the sales program of 3.89 billion yen (up
15% Y-on-Y and fell short of the forecast by 13%).
As for the sales structure, as of March 1, 2015, the Company has 85 MRs with 13 sales offices
nationwide. 33 of 85 MRs are seconded from the Medipal Holdings Group.

5

As for a sales alliance with Alfresa Pharma, the Company determined to terminate consignment
sales of Noberzin® and Nobelbar® to Alfresa on March 31, 2015 and directly sell them from April 1.
As for wholesalors, in principle, the Medipal Group has wholesaled the Company's own distributing
products exclusively.
1.3. Status of Manufacturing and Capital Expenditure
The Company outsources manufacturing of both drug substances and drug products and aims at
ensuring multiple supply sources and outsourcing channels in order to strengthen cooperation withoutsourcees and avoid risk as well as holds excess inventories of drug products, drug substances andmain auxiliary materials.
As for Rapalimus®, the first lot imported from Pfizer could not be shipped because of defects and theCompany decided to delay the release until December 2014 though the initial schedule of launching
was November. As a result, we were very sorry to have caused trouble to all of our customers. This is
the second manufacturing problem of Pfizer following the problem of Fostoin® in 2013, and we madea serious protest against Pfizer and have strengthened our inspections, but supply has not become
stable yet.
From the viewpoint of the BCP (business continuity plan), the Company has promoted having morethan one place of stock and arranged to secure certain space in the distribution warehouse of Mediceo
Corporation as the West Japan Distribution Center in Kato City, Hyogo, in addition to the East Japan
Distribution Center in Kazo City, Saitama, and as a result, it can also stock a certain volume of
products in the West Japan Distribution Center.
The result of preservation stability of the initial lot of Lunabell® ULD indicated that the quantitativevalue of ethinylestradiol, its active ingredient, might be below the approval value of the standard by
the expiration date. Therefore, the Company recalled nine lots that had shipped so far. This was
because the amount of moisture contained in paper used for packing mat board of Lunabell® ULD
tablet was higher than the design, which accelerated decomposition of ethinylestradiol faster than theestimation when it was developed. The Company implemented adequate measures for this problem
and believes there is no recurrence.
For the current period, there is no material capital expenditure.
1.4. Status of Research and Development
As for the development pipeline as of March 1, 2015, the table below summarizes the development
stage and expected NDA for new drugs and life cycle management (LCM) products. All development
products under Phase II were approved, except for NPC-04 (under review).
Currently, Phase III development has gained momentum. Many development products have entirely
new concepts. The Company brings overseas development of NPC-12 (external application), 17, 18
and NPC-x4 in view, and NPC-x6 has been developed in foreign countries ahead of Japan. The
Company has utilized public funds for development to mitigate relevant risk.
NPC-16 and NPC-02 (LCM, additional efficacy) are considered to have a significant impact on thepresent business conditions.
All development products, except for NPC-04, 15 and 16, are joint developments with academia
and were developed through open innovation. The Company's strategy is to seek product seeds outside
the company without having our own laboratory and thus Business Development & IP Management is
responsible for playing the role of laboratory for the Company.

6

Development products are classified into the following six categories:
I:
Product for primary sources of revenue following Lunabell® (sales of more than 3 billion
yen)
II:
Product that will be approved in the short term and that is expected to produce marginal profit
though it may not become a primary source of revenue
III: Product with a theme from academia such as a university and will be approved in the shortterm. Development cost is low as the Company expects to get public subsidies. Product has
an innovative concept and it is difficult to estimate sales.
IV: Product with the same characteristics as III but it takes some time to be approved.
V:
LCM of the existing commercialized products. Product with a low development cost and thatis expected to increase marginal profit.
VI: Theme that is under research (No applicable item in the table below )(New pharmaceutical products)
CompoundIndication1

NPC-11
Caffeine citrate

Apnea of prematurity2

NPC-12Sirolimus

3

PartnerDevelopment
Estimated approval Classification
stage

Nippon Boehringer Ingerheim

Approved

March 1, 2014

II

Lymphangioleiomyomatosis (LAM)

PfizerApproved

July 1, 2014

II

NPC-10Streptozocin

Gastro entero pancreatic
neuro endocrine tumor

KeocytApproved

September 1, 2014

II4

NPC-04
Oxcarbazepine

Partial epilepsy

Novartis

Under review

June 1, 2015

II

5

NPC-09N-acetylneuraminic acid

Distal myopathy

In-housePI

December 1, 2017

IV

6

NPC-14
Arbekacin

Duchenne muscular
dystrophy

Undisclosed

PII

September 1, 2019

IV

7

NPC-18bF, GF

Myringa regeneration

Foundation of Biomedical
Research and Innovation (Kobe)

PIII

December 1, 2017

III

8

NPC-17
Titanium bridge

Spasmodic dysphonia

Foundation of Biomedical
Research and Innovation (Kobe)

P III inpreparation

October 1, 2017

III

9

NPC-x3Pyruvic acid

Hyperuricemia due tomitochondrial disorders

Kurume University

PⅠ

TBD

IV

Gynecological diseases

In-house

PIII

June 1, 2018

I

In-house

PII

September 1, 2018

I

10 NPC-16

11

NPC-15
Melatonin

Sleep disorders in children
with neurodevelopmental
disabilities

12

NPC-x4
P092

Prion disease

Gifu University

Non-clinical

TBD

IV

13

NPC-x5
Transdermal scopolamine

Salivation

TokuhonNon-clinical

TBD

IV

7

(LCM products)
Compound
1
2
3
4
5
6

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

Description of LCM

Development stage

Estimated approval

Classification

Add dosage form (tablet)

Approved

September 1, 2014

V

Diagnosis of bladder cancer

PIII (addition)

TBD

V

PI/II

March 1, 2018

V

Prevention of GVHD after hematopoietic stem celltransplantation

PII in preparation

TBD

V

New indication (intractable pneumothorax),changes in dosage and administration (spray)

Prior to start of theclinical trial

TBD

V

PIII

December 1, 2016

V

External preparation, new indication

New indication

1.5. Status of Business Development/Strategic Planning
Business development and strategic planning are responsible for playing core roles for theCompany’s open innovation and specifically these are largely classified into five categories: (1)planning and research for new themes, (2) negotiation of in-licensing with a potential business partner
for a new development theme, (3) negotiation of follow-up with the existing business partners, (4)negotiation of transfer of approval for pharmaceutical products of other companies and (5) intellectual
property management such as patents.
With regard to (2), in 2013, the Company entered into a license agreement with Osaka University
for Sirolimus® external preparation, an mTOR inhibitor, as cooperation with academia. In 2014, theCompany entered into an agreement for development cooperation for myringa regeneration with theFoundation for Biomedical Research and Innovation and began to work on obtaining manufacturing
approval for a treatment for myringa regeneration. For the in-licensing project from other companies,
the Company negotiated with Novartis AG to in-license oxcarbazepine and entered into a license
agreement in January 2014 and in addition, in June 2014, it entered into a license agreement for
SR16234 with US-based SRI International.
Meanwhile, transfer of Manufacture and Sales Approval for an additional item that was expected in
April 2015 was postponed for certain reasons.
1.6. Status of Safety Assurance of Pharmaceutical Products
Safety assurance of pharmaceutical products is largely classified into three categories: (1) quality
assurance of manufacturing, (2) safety control for side effects and adverse event vigilance and (3)Post-marketing Surveillance (PMS) for postmarketing safety research.
Although the Company believed that it had recognized and taken adequate care of the importance ofsafety assurance of pharmaceutical products, it was pointed out by the authority that reliability of
application for re-examination of Lunabell® Combination Tablet LD filed in July 2012 was insufficientso that it ceased a paper survey at the end of March 2014 and resubmitted application materials forre-examination in August 2014 after reviewing various data. However, materials resubmitted were also
pointed out as having insufficient reliability by the authority and thus, under the authority’s instruction,
the Company is working on resubmitting it again in March 2015. In addition, Nobelbar® intravenous
injection that was applied for re-examination in January 2015 was also found to contain a problem

8related to reliability like Lunabell® and the Company has consulted on how to address it with theauthority.
In the regular camp meeting by Executive Officers and Executive Directors in November 2014,
these problems were deliberated on again with the cooperation of an external consultant to identify thefacts and investigate the cause, and a corrective strategy to be taken was thoroughly discussed.
Accordingly, a project team was established for these two products to implement adequate measures.
1.7. Status of Funding and Major Lenders
In October 2014, the Bank of Japan announced it was launching "a new phase of monetary easing
both in terms of quantity and quality" by increasing the JGB purchase to 80 trillion yen annually. As aresult, the yen has rapidly weakened and long-term interest rates hit a historical record low. Some said
that it might bring economic growth but others said it might give rise to large instability in thefinancial market. The Company has started the 3rd round development that is expected to be approved
between 2016 and 2018, and sometime in the near future the possibility of beginning overseas
development is being considered. Therefore, funding needs are expected to rise toward 2020, andusing the current economic situation with a low interest rate and sufficient funds in the market, theCompany is financed through long-term (five to ten years) fixed rate borrowing from financial
institutions and business companies. As a result, the balance of loans payable and bonds as of February
28, 2015 was 6,002 million yen. The Company has cash and deposits corresponding to theseborrowings and thus, it has no debt in fact.
In 2014, the Company obtained new borrowing of 2,806 million yen including bonds from financial
institutions and repaid 2,314 million yen to financial institutions. In 2015, repayment is expected to be
994 million yen.
As of March 1, 2015, major lenders are as follows:
Short-term loans payable
Current portion of long-term loans payable

843 million yen

Long-term loans payable
Inabata & Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd., Odenmacho Branch
Mizuho Bank, Ltd., Yokoyamacho Branch
The Shoko Chukin Bank, Ltd., Kanda Branch
The Tokyo Shinkin Bank, Nihonbashi BranchJapan Finance Corporation
Resona Bank, Akihabara Branch
Sumitomo Mitsui Banking Corporation, Kandaekimae Branch
Total

387 million yen
221 million yen
280 million yen
318 million yen
252 million yen
265 million yen
173 million yen
760 million yen
2,652 million yen

Balance of bonds
Current portion of bonds
1st straight bondMedipal Holdings Corporation*

91,000 million yen

Straight bond2nd straight bond Daiso Industries Co., Ltd.
500 million yen
3rd straight bondMedipal Holdings Corporation*
1,500 million yen
4th straight bondMizuho Bank, Ltd.
500 million yen* On February 2, 2015, the Company redeemed the 1st straight bond before maturity and completed
the issue and underwrite of the 3rd straight bond on the same day.
1.8. Financial Results, Financial Position and 2015 Forecast
The Company's financial results, financial position and 2015 forecasts are as follows:
2011

2012

2013

9th period
4,170
67
32
24,000 yen
3,910
277
5.4%
212,000 yen

10th period
5,056
660
279
212,000 yen
5,598
517
9.2%
393,000 yen

11th period
6,542
463
339
258,000 yen
6,098
728
11.9%
554,000 yen

Yen in millions, except for*
Sales
Ordinary income
Net income* Net income per share
Total assets
Net assets* Equity ratio* Net asset per share

2014
2014
(Forecasts) (Actual results)
12th period
12th period
6,954
6,628
387
577
232
240
177,000 yen
182,000 yen
5,376
9,367
872
1,238
16.2%
13.2%
663,000 yen
941,000 yen

2015(Forecasts)
13th period
7,630
309
185
141,000 yen
9,395
1,212
12.1%
921,000 yen

1.9. Status of Employees
As of March 1, 2015, the number of employees is 235 (including 37 seconded employees, 8 temp
staffs, 30 contract employees, and an advisor (total 76) but excluding directors) with an average age of
52.5. The number of employees increased by 17 compared with 218 (including seconded employees)
as of March 1, 2014.
In 2014, the Company issued informal job offers to a postdoc and two graduates of career colleges,
and they will join in April 2015. The Company has recruited two postdocs and four graduates of careercolleges (excluding the above prospective employees), and the postdocs have displayed their highabilities to become useful additions to their departments. Of the graduates of the career colleges, three
are MRs and they all passed the MR certification exam.
In terms of overwork, chronic prolonged work is seen in a part of Pharmacovigilance & Quality
Assurance in particular.
1.10. Issues to Be Addressed
For pharmaceutical companies, sales, research (business development), development, safetyassurance of pharmaceutical products, manufacturing, regulatory compliance and business
management are the seven pillars of business and each of them are equally important.
Sales & Marketing's mission is to "Deliver the Company's products to patient as soon as possible"
and its corresponding motto is "Stick to sales figures". Sales & Marketing aims at achieving a sales
target of 16.8 billion yen (12.3 billion of Lunabell® and 4.5 billion yen of direct sales andco-promotion products) in the NHI price basis for delivery to medical institutions. All measures for
Lunabell® focus on generic products. Using Lunabell® ULD as a weapon, the Company plans tocooperate with the distributor to work on raising the share of Lunabell® ULD to 70% of the total
Lunabell® family for minimizing the impact of generics, which has been reflected in the 2015 businessplan. Next, the Company has established four sales policies to achieve the plan of direct sales andco-promotion products. First is promotion of changes in the consciousness for increasing productivity

10

of MRs. Aiming at average sales of MRs of 47 million yen, the Company sets bottom line targets (30million yen per MR for direct sales and co-promotion products and 12 million yen per MR for
Fostoin®). Secondly, product managers in the Head Office will cooperate with product promoters inbranches to implement the PDCA cycle on a quarterly basis. Thirdly, branch managers try to display
their leadership to suggest the branch policy to MRs on a quarterly basis so as to face in the same
direction for increasing their motivation. Fourth, the Company endeavors to foster three products of
Respia®, Rapalimus® and Zanosar® and asks hospitals to adopt them early.
As for the issue of research (business development & strategic planning), the Company continues tosearch seeds through open innovation. The Company has a project under negotiation with the existing
business partner and expects to resolve the problem to gain profit. It will also keep applying public
development funds.
As for the development issue, as described in "1.4 Status of Development", the Company seems tohave a sufficient pipeline, considering its scale. Phase III clinical trials are expected to start on a fullscale for many themes and the Company will proceed steadily according to the development scheduleestablished and in particular, aims at applying NPC-02 (additional indication) in 2015.
For NPC-12 (external application), 17, 18 and NPC-x4, the Company plans to gain a foothold foroverseas development.
As for issues of safety assurance of pharmaceutical products, under the conditions described in 1.6,
the Company intends to significantly review and reinforce a structure of Pharmacovigilance & Quality
Assurance.
In March 2015, as a new organizational structure, the department engaged in Post-marketing
Surveillance became independent from Pharmacovigilance & Quality Assurance as Peri-Approval
Science & Operations for completely enhancing PMS. The new department is completely responsible
for applying re-examination of Lunabell®, Nobelbar® and Nobelzin® approved in 2008. In addition, theCompany will take all possible measures to ensure safety assurance of pharmaceutical products
available for sale. The Pharmaceutical Affairs Act revised in 2013 requires companies to accept larger
liability for safety assurance of pharmaceutical products. As the Company obtained an NDA for three
products in 2013 and three products in 2014, it expects to increase operations related to post-marketing
safety assurance further and considers it necessary to seek a different method than before.
As for production issues, Quality Assurance and Good Supplying Practice are important
responsibilities that the Company has to fulfill as a pharmaceutical company. In 2014, the Company
faced the supply problem of Fostoin® and Rapamulis® supplied by Pfizer. Pfizer's supply problem has
been repeated so that the Company plans to inspect Pfizer's manufacturing site more frequently than
before. The Company has tried to secure more than one supplier, not only Pfizer, and plans to start
specific regulatory procedures for certain products this year.
As an issue of ensuring regulatory compliance and regulatory negotiation, the Company plans
steadily to negotiate an NHI price for NPC-04 and renew the first-class license for manufacturer ofdrugs. In addition, through activities of Samurai Biotech Association of which the Company is a board
member, we intend to continue working on the Government concerning various issues.
As an issue of corporate planning and management, the Company's first care is to obtain real-time
accounting information to achieve the budgets, especially ordinary income. Secondly, for financial
affairs, the Company currently has sufficient funds in hand and does not consider the necessity ofadditional finance in principle, but it intends to maintain good relationships with financial institutions.
Financing from Medipal Holdings Corporation, a business partner, using the project finance results in11

diversifying development risk and the Company will examine using it for each development theme.
Thirdly, the Company determined to purchase Class A preferred stocks held by Development Bank ofJapan by initial terms and conditions of the contract as these stocks were deemed to fulfill the role
after a period of time. Fourth, as for accounting standards, the Company's policy is not to be listed on
the stock market but it believes that it is important to adopt accounting standards similar to listedcompanies, and thus, the Company used Deloitte Touche Tohmatsu LLC to provide audit services in2011 and it intends to continue accounting audits.
As for an issue of HR & General Affair, the Company has hired experienced workers midway inprinciple but it has many aged employees and needs to refresh personnel organization. Therefore, theCompany started to recruit postdocs and graduates of career colleges in 2013 and plans to continue tohire some young employees. The Company sets a time limit to resolve chronic prolonged work in
Pharmacovigilance & Quality Assurance at July 2015.
Comparing its ideal image of sales and profit for the mid- and long-term to the North Star as an
immovable high goal, the Company sets the following numerical targets:North Star
Sales
Ordinary income
Net income

2020
20 billion yen
5 billion yen
3 billion yen

1.11. Other Important Matters
As for the accounting standards, as described in 1.10, the Company hired Deloitte Touche Tohmatsu
LLC from 2011 for arranging the accounting standards. Considering Tohmatsu's opinions, theCompany slightly changed the accounting standards for the term ending December 31, 2013. Thesechanges are summarized as follows: The license fee related to in-licensed development products isamortized over (1) 10 years from the release of the products that have a low risk of commercialization(those that have been approved in Europe and the US), (2) the period of development (from thecontract date to application) of the products that have a high risk of commercialization (those that are
not approved in Europe and the US) and that POC (proof of concept) is produced, or (3) the estimatedperiod of the development stage (from the contract date to the next scheduled date to determine
whether development is continued) of the products for which POC is not produced.
2.

Current Status of the Company

2.1.

Status of Shares(1) Number of shares authorized As of December 31, 2014

5,000 shares(2) Number of shares issued

1,165 shares

As of December 31, 2014 Ordinary share
Class A preferred share(3) Number of shareholders

150 shares

As of December 31, 20143(4) Status of Major Shareholders (as of December 31, 2014)
Hisanaga & Company (ordinary share)

1,000 shares (76.0%)

12Inabata & Co., Ltd. (ordinary share)
165 shares (12.5%)
Development Bank of Japan Inc. (Class A preferred share)
150 shares (11.4%)
For Class A preferred shares described in (2), all shares are planned to be purchased as treasury
stock.
2.2.

Status of Share Warrant

2.2.1. Status of 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. Status of 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
Share warrant in issue is as follows: Inabata & Co., Ltd. can, by its discretion, execute the right andwhen executed, Inabata would have 499 ordinary shares.
Resolution date for issuance
Maturity date
Number of share warrant
Class of share subject to share warrant
Number of shares subject to share warrant
Issuance price of share warrant
Balance of share warrant

2.3.

Status of Corporate Executives

2.3.1

Management Reshuffle

March 29, 2012
August 23, 2016334
Ordinary share
334 shares
1,160,000 yen
387,440,000 yen(1) Scheduled directors (scheduled on March 26, 2015)
Nobukazu Kuboi (General Manager, Financial Management Office and General Manager,
Accounting Dept., Inabata & Co., Ltd.)(2) Director to resign (scheduled on March 26, 2015)
Yoshiyuki Moriyama (Senior Manager, Affiliate Management Dept., Financial Management
Office, Inabata & Co., Ltd.)(3) Scheduled company auditor (scheduled on March 26, 2015)
Yasurou Kumanaka (Accounting Dept., Financial Management Office, Inabata & Co., Ltd.)(4) Company auditor to resign (scheduled on March 26, 2015)
Nobukazu Kuboi (General Manager, Financial Management Office and General Manager,
Accounting Dept., Inabata & Co., Ltd.)(5) Status of Directors and Company Auditors
As of March 31, 2015, the status of full-time and part-time directors is as follows:
CEO and President:
Jin Shiomura

13

Directors (part-time):
Directors (part-time):

Eiji Suzuki (corporate advisor)
Isamu Sojyo(former Executive Managing Director of Japan Intellectual
Property Association, former General Manager of Intellectual
Property Department at Mitsubishi Chemical Corporation)
Directors (part-time): Yasuyuki Fujimoto(General Manager, Life Industry Division, Inabata & Co., Ltd.)
Directors (part-time): Nobukazu Kuboi(General Manager, Financial Management Office and General
Manager, Accounting Dept., Inabata & Co., Ltd.)
Company Auditor (part-time): Yasurou Kumanaka(Accounting Dept., Financial Management Office, Inabata &Co., Ltd.)(6) Status of Executive Officers
As of March 26, 2015, the status of executive officers and directors is as follows:
Senior Executive Officer:
Shigeki Shimasaki(Head of Peri-Approval Science & Operations)
Senior Executive Officer:
Tsutomu Sugaya(Head of Corporate Planning & Administration)
Executive Officer:
Hiroomi Kudo
(Head of Marketing & Sales)
Executive Officer:
Tetsuo Hayase(Head of Supply Chain & Manufacturing)
Executive Officer:
Soichi Ikegaya(Head of Pharmacovigilance & Quality Assurance, Regulatory
Affairs & Compliance and General Marketing Compliance
Officer)
Executive Director:
Masanobu Murakami(General Manager of R&D Department 1)
Executive Director:
Kenji Shimizu(General Manager of R&D Department 2)
Executive Director:
Akira Ikeda(Head of HR & General Affairs)
Executive Director:
Masato Iwamoto(General Manager of Supply Chain Management)
Executive Director:
Yoshinobu Takahashi(General Manager of Sales Strategic Planning)
Executive Director:
Osamu Kato
(General Manager of Regulatory Affairs)
Executive Director:
Masafumi Mimura(Head of R&D Planning)
Executive Director:
Arata Tabata(Head of Business Development & IP Management)

14

Executive Director:

Yoshihide Yamamoto(Deputy Head of Corporate Planning & Administration)

Hidenobu Ikoma resigned (Executive Officer, Head of Pharmacovigilance & Quality Assurance)
and Shun Aruga resigned (Executive Director, General Manager of R&D Department 4), but they
continue to work in the Company.
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 document15