Annual Report 2017 For the year ended December 31, 2017 Leaping Forward Countdown to Takeoff Contents Materiality Editorial Policy 02 Contents/Editorial Policy 20 CSR Material Issues To help investors understand the Kyowa Hakko Kirin Group’s business Our Philosophy Review of Operations model, management strategy, operating conditions, and future picture, we 03 Management Philosophy/Core Values 21 Pharmaceuticals Business/Bio-chemicals have prepared this integrated report, while drawing on the International Business Integrated Reporting Council’s (IIRC’s) International Integrated Reporting Framework as well as the Guidance for Collaborative Value Creation Who we are Interview released by the Ministry of Economy, Trade and Industry. Our overseas 04 Group Structure/Business Model 35 Interview with Outside Company Auditor drug development made significant headway in 2017, and we are finally moving closer to making the leap forward to become a Global Specialty Pharmaceutical Company (GSP), which is our goal. For this reason, the What we do Corporate Governance Niro Sakamoto, FY2016-2020 Mid-term Business Plan Board of Directors/Corporate Governance 06 37 Special Feature section highlights our overseas business strategy, which is Executive Officer, in designed to attain our goal, as well as work style reform, a component of our charge of Corporate human resource strategy that supports the business strategy. Communications CEO Message Compliance Department Message from Chairman & CEO Compliance/Risk Management We would appreciate if you could give your help and support to the 07 41 Kyowa Hakko Kirin Group, an organization pursuing global endeavors. High COO Message Financial Information 11 Message from President & COO 44 Annual Report (PDF version) Importance to Stakeholders http://ir.kyowa-kirin.com/en/library/annual_report.html Special Feature Investor Information 13 1: Overseas Business Strategy 58 Kyowa Hakko Kirin Website 2: Work Style Reform Reported http://www.kyowa-kirin.com/ on the book Financial Information Topics Network 17 Major Topics of FY2017 59 http://ir.kyowa-kirin.com/en/finance.html Sustainability http://www.kyowa-kirin.com/sustainability/ Financial & ESG Highlights Corporate Data 18 60 Reported through the website ESG Data Collection http://www.kyowa-kirin.com/sustainability/esg_data/ Importance to Management High Concerning the Scope of This Report Company Names Scope of this report is Kyowa Hakko Kirin Co., Ltd. and its consolidated subsidiaries in Japan and In this report, group companies are abbreviated as follows: Kyowa Hakko Kirin Co., Ltd. (Kyowa Hakko overseas, and certain non-consolidated subsidiaries and affiliates are mentioned in a part of the report. Kirin); KYOWA HAKKO BIO CO., LTD. (Kyowa Hakko Bio); FUJIFILM KYOWA KIRIN BIOLOGICS Co., Environmental data is annotated for the convenience of readers. The reporting period includes calendar Ltd. (Fujifilm Kyowa Kirin Biologics). year 2017, and 2018 in part. Numerical Data Performance Forecasts Sum of the breakdown may not equal to the total due to rounding. Forecasts contained in this report are assumptions based on reasonable judgments and information available at the time. Actual results may differ significantly due to a variety of factors. About Kyowa Hakko Kirin Group CEO Message COO Message Special Feature Major Topics of FY2017 Financial and ESG Highlights CSR Material Issues Review of Operations Interview Corporate Governance Compliance Financial and Corporate Information 02 KYOWA KIRIN ANNUAL REPORT 2017 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 CEO Message COO Message Special Feature Major Topics of FY2017 Financial and ESG Highlights CSR Material Issues Review of Operations Interview Corporate Governance Compliance Financial and Corporate Information 03 Management Philosophy/Core Values > Group Structure > Business Model > FY2016-2020 Mid-Term Business Plan KYOWA KIRIN ANNUAL REPORT 2017 Group Structure A Pharmaceutical Company with a Globally Unique Business Structure The drug discovery business for pharmaceuticals is at the core Kyowa Hakko Kirin of the Kyowa Hakko Kirin Group. Our unique business structure, Focusing on the four categories of nephrology, oncology, which incorporates biosimilars, diagnostics, and bio-chemicals, immunology/allergy, and the central nervous system, we are enhancing cooperation from research and development to Kyowa Hakko Bio provides us with many business opportunities, and enables us to production, sales and marketing to rapidly evolve into a Kyowa Hakko Bio supplies a range of global specialty pharmaceutical company. We will steadily offset the high-risk drug discovery business. Few companies are products in Japan and overseas, launch products from our well-stocked pipeline of including amino acids, nucleotides, like Kyowa Hakko Kirin, and the possibilities from synergies among development candidates while creating an effective, highly vitamins, peptides, and synthetic specialized sales and marketing organization with the our businesses are great advantages of the 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 synergies we strive to realize new possibilities and continue with the pharmaceuticals business and enhance added to contribute to the health and lives of people value through the development and launch of diagnostic Fujifilm Kyowa Kirin Biologics reagents, analyzers, and companion diagnostics that The mission of Fujifilm Kyowa Kirin Biologics is to deliver reliable, high-quality around the world. contribute to personalized care. and cost-competitive biosimilars by using new technologies that merge Kyowa * As of January 4, 2018, we sold 66.6% of shares in Kyowa Medex to Hakko Kirin’s strength in biopharmaceutical manufacturing technologies with Hitachi Chemical Company, Ltd., making it an equity-method affiliate engineering technologies for manufacturing, quality control, and analysis from a consolidated subsidiary of the Kyowa Hakko Kirin Group. developed by FUJIFILM Corporation through its various businesses. About Kyowa Hakko Kirin Group CEO Message COO Message Special Feature Major Topics of FY2017 Financial and ESG Highlights CSR Material Issues Review of Operations Interview Corporate Governance Compliance Financial and Corporate Information 04 Management Philosophy/Core Values > Group Structure > Business Model > FY2016-2020 Mid-Term Business Plan KYOWA KIRIN ANNUAL REPORT 2017 Business Model ●Providing products and services Outcome that meet customer needs Contribution to Health Contributing to the Health and ●Creating new value that is and Well-being of People focused on health Well-being of People Through 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 and external group cooperation ●Reinforcing organizational people around the world by constantly relying on ●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 Innovation bases and creating new value from new ideas in rolling out products and services that meet true 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