Annual Report 2016 For the year ended December 31, 2016 Leaping Forward Contents Review of Operations Editorial Policy 02 (Contents/Editorial Policy) 18 (Pharmaceuticals Business/Bio-chemicals Business) This is our Annual Report for 2016. The environment surrounding the pharmaceuticals industry is rapidly changing, and there Our Philosophy Corporate Governance is a movement to dramatically revise the framework that has (Management Philosophy/Core Values) (Board of Directors/Corporate Governance) 03 31 underpinned the industry thus far. Despite this environment, “human resources” and “technology” will continue to be the Who we are Compliance baseline for innovation at Kyowa Hakko Kirin Group, which 04 (Group Structure/Business Model) 35 (Compliance/Risk Management) aspires to realize health and well-being. In the special features, we describe our human resource development that is promoting our globalization and our production technology for biopharmaceuticals. Niro Sakamoto, Executive Officer, Director of What we do Dialogue Please deepen your understanding of our group, which is taking Corporate Communications 06 (FY2016-2020 Mid-term Business Plan) 38 (Vice President × Outside Directors) initiatives to make the leap forward to become a Global Specialty Department Pharmaceutical Company (GSP). High Top Message Financial Information 07 41 Importance to Stakeholders Annual Report (PDF version) http://ir.kyowa-kirin.com/en/library/annual_report.html Special Feature Kyowa Hakko Kirin Website Special Feature 1: Human Resource Development Investor Information 11 55 Reported http://www.kyowa-kirin.com/ Special Feature 2: Production Technology on the book Financial Information http://ir.kyowa-kirin.com/en/finance.html Topics Network 15 (Important Topics of FY 2016) 56 Responsibility http://www.kyowa-kirin.com/responsibility/ Reported through the website ESG Data Collection Financial & ESG Highlights Corporate Data http://www.kyowa-kirin.com/responsibility/esg_data/ 16 57 Importance to Management High Concerning the Scope of This Report Company Names This report covers Kyowa Hakko Kirin Co., Ltd. and its consolidated subsidiaries in Japan and overseas, In this report, group companies are abbreviated as follows: Kyowa Hakko Kirin Co., Ltd. (Kyowa Hakko as well as certain non-consolidated subsidiaries and affiliates. Environmental data is annotated for the Kirin); KYOWA HAKKO BIO CO., LTD. (Kyowa Hakko Bio); FUJIFILM KYOWA KIRIN BIOLOGICS Co., convenience of readers. The reporting period includes calendar year 2016 and part of 2017. Ltd. (Fujifilm Kyowa Kirin Biologics); Kyowa Medex Co., Ltd. (Kyowa Medex); Kyowa Pharma Chemical Co., Ltd. (Kyowa Pharma Chemical). Performance Forecasts Forecasts contained in Annual Report 2016 are assumptions based on reasonable judgments and Numerical Data information available at the time. Actual results may differ significantly due to a variety of factors. Amounts in this report are rounded down. As a result, the sum and breakdown of data may not equal the totals. About Kyowa Hakko Kirin Group Top Message Special Feature Important Topics of FY 2016 Financial and ESG Highlights Review of Operations Corporate Governance Compliance Vice President × Outside Directors Financial and Corporate Information 02 KYOWA KIRIN ANNUAL REPORT 2016 Management Philosophy / Core Values Management Philosophy The Kyowa Hakko Kirin Group companies strive to contribute to the health and well- being of people around the world by creating new value through the pursuit of advances Core Values in life sciences and technologies. Commitment to Life Work for the most precious presence on this planet. Create value for patients, caregivers, healthcare professionals, and customer. Integrity Do the right things. Be sincere and ethical consistently. Make a better world through good business practices. Innovation Transform lives with passion and excitement. Challenge the status quo in all of our work. Teamwork/Wa* One for all, all for one. Work in diverse teams and respect each other. Go beyond boundaries and collaborate with stakeholders. * harmony and loop among people “Core Values” are a way of thinking and attitude that supports the activity of each officer and employee belonging to the Kyowa Hakko Kirin Group. It consists of core concept “Commitment to Life” and three key words. About Kyowa Hakko Kirin Group Top Message Special Feature Important Topics of FY 2016 Financial and ESG Highlights Review of Operations Corporate Governance Compliance Vice President × Outside Directors Financial and Corporate Information 03 Management Philosophy/Core Values > Group Structure > Business Model > FY2016-2020 Mid-Term Business Plan KYOWA KIRIN ANNUAL REPORT 2016 Group Structure A Pharmaceutical Company with a Globally Unique Business Structure The drug discovery business for pharmaceuticals is at the core of Kyowa Hakko Kirin Kyowa Hakko Kirin Group. Our unique business structure, which Focusing on the four categories of nephrology, oncology, incorporates biosimilars, diagnostics, and bio-chemicals, provides immunology/allergy, and the central nervous system, we are enhancing cooperation from research and development to Kyowa Hakko Bio us with many business opportunities, and enables us to offset production, sales and marketing to rapidly evolve into a Kyowa Hakko Bio supplies a range of the high-risk drug discovery business. Few companies are like global specialty pharmaceutical company. We will steadily products in Japan and overseas, launch products from our well-stocked pipeline of including amino acids, nucleotides, Kyowa Hakko Kirin, and the possibilities from synergies among our development candidates while creating an effective, highly vitamins, peptides, and synthetic specialized sales and marketing organization with the businesses are great advantages of Kyowa Hakko Kirin Group. compounds. We will be a biochemical objective of earning the trust of healthcare providers. innovator which provide people in the world with products and services to fulfill their healthcare needs, using deep and wide knowledge of fermentation and synthesis. Ethical Pharmaceuticals Kyowa Hakko Kirin Group Diagnostics The Kyowa Hakko Kirin Group has advanced Bio-chemicals unique research with its sophisticated technology Biosimilars in the business fields of “pharmaceuticals” and “bio-chemicals” while developing and providing various high-quality products. The field of biotechnology offers immense possibilities. As Kyowa Medex a representative life science company of Japan, In cooperation with Kyowa Hakko Kirin’s R&D operations, Kyowa Medex seeks to generate we strive to realize new possibilities and continue synergies with the pharmaceuticals business to contribute to the health and lives of people and enhance added value through the Fujifilm Kyowa Kirin Biologics development and launch of diagnostic reagents, The mission of Fujifilm Kyowa Kirin Biologics is to deliver reliable, high-quality around the world. analyzers, and companion diagnostics that and cost-competitive biosimilars by using new technologies that merge Kyowa contribute to personalized cares. Hakko Kirin’s strength in biopharmaceutical manufacturing technologies with engineering technologies for manufacturing, quality control, and analysis developed by FUJIFILM Corporation through its various businesses. About Kyowa Hakko Kirin Group Top Message Special Feature Important Topics of FY 2016 Financial and ESG Highlights Review of Operations Corporate Governance Compliance Vice President × Outside Directors Financial and Corporate Information 04 Management Philosophy/Core Values > Group Structure > Business Model > FY2016-2020 Mid-Term Business Plan KYOWA KIRIN ANNUAL REPORT 2016 Business Model ●Providing products and services Outcome that meet customer needs Contributing to the Health and Contribution to Health ●Creating new value that is Well-being of People Through and Well-being of People focused on health Leveraging new value from innovation in Innovation Value each function Utilizing Highly Unique Value The Kyowa Hakko Kirin Group will continue to ●Responding to diversified health and medical needs ●Creation of reliable quality and processes contribute strongly to the health and well-being of ●Maximizing profitability through improved internal ●International growth people around the world by constantly relying on and external group cooperation ●Reinforcing organizational ●Improvement of technology and productivity competitiveness innovation as our foundation and utilizing state-of- the-art biotechnology to respond to changes and Taking advantage of our wide variety of business rolling out products and services that meet true Innovation bases and creating new value from new ideas in Responding to Changes through Innovation our core competence customer needs and have unique high value. Improvement of Continuous Improvement Creating Innovation Global Competitiveness for Operational Excellence Sales and Marketing Production Research / Development Pharmacovigilance and Quality Assurance Seeds Technology Human Resources Source of Innovation Needs ●Specialization of medical care ●Reinforced measures for ●Increasing consciousness of Environmental Changes ●Fragmentation of medical needs medical cost containment healthy life expectancy Surrounding Medical Treatment ●Promotion of open innovation About Kyowa Hakko Kirin Group Top Message Special Feature Important Topics of FY 2016 Financial and ESG Highlights Review of Operations Corporate Governance Compliance Vice President × Outside Directors Financial