Kaken Pharmaceutical : November 10, 2022 We have posted Corporate Report 2022.

CORPORATE​ REPORT 2022

Bringing Smiles to Everyone

KAKEN helps improve the quality of life of patients by serving as many people as possible to return smiles of happiness to their faces, through supplying superior pharmaceuticals.

In this endeavor, we always strive to be "the best," rather than pursuing the scale of business.

We aspire to be, and to remain, a company that can create "Joys" for patients, society and our employees.

We also hope to contribute to society by demonstrating KAKEN's distinctive and vigorous presence.

Corporate Philosophy

KAKEN helps improve the quality of life of patients by serving as many people as possible to return smiles of happiness to their faces, through supplying superior pharmaceuticals.

Business Philosophy

KAKEN "Three Joys"

Joy for patients	Joy for society	Joy for employees
We strive to create and supply	We recognize our social	Our objective is to become
efficacious drugs that satisfy the	responsibility as a pharmaceutical	a company with vitality and
needs of patients and medical	company, engage in all activities	presence whose employees enjoy
professionals.	with high ethical standards, and	and take pride in their work.
	aspire to earn society's trust.

C O N T E N T S

Value Creation Story

Strategy

Foundation for

Creating Value

Financial and

Corporate Data

Editorial Policy

1. A History of Value Creation

1. Value Creation Process

1. Sources of Value Creation

8 President's Message

12 Priority (Material) Issues

14 Long-Term Business Plan 2031

18 Growth Strategy

1. Sustainability Strategy
2. Engagement with Customers
3. Corporate Governance

28 Management Team

30 Compliance and Risk Management

1. Engagement with Society and Local Communities
2. Environmental Management

35 Human Resource Strategy

38 Financial and Non-Financial Highlights

1. FY2021 Operating Results and Financial Condition

1. Consolidated Balance Sheets

1. Consolidated Statements of Income
2. Consolidated Statements of Comprehensive Income
3. Consolidated Statements of Changes in Net Assets
4. Consolidated Statements of Cash Flows
5. Notes to the Consolidated Financial Statements

1. Corporate and Share Information

This report has been edited with the objective of helping KAKEN's various stakeholders (including shareholders and investors) to understand the Company's management foundation and strengths that it has built to date, as well as the sustainable growth it aspires to achieve through creation of corporate value in the future, using the International Integrated Reporting Framework of the Value Reporting Foundation (now integrated in the IFRS Foundation) and Guidance for Collaborative Value Creation by the Ministry of Economy, Trade and Industry as reference.

Reporting Period

FY2021 (April 1, 2021 to March 31, 2022)

Note: Some information from before and after the period above is included.

Scope of This Report

Kaken Pharmaceutical Co., Ltd. ("the Company") and its consolidated subsidiaries (collectively, "the KAKEN Group" or "the Group")

Cautionary Statement

This report contains forward-looking statements on the Group's business. They are projections based on information available at the time this report was written, and may differ from actual results due to a variety of factors. In addition, although this report includes information related to pharmaceuticals (including those under development), these statements are not intended to be advertisements or medical advice.

KAKEN Corporate Report 2022 1

Value Creation Story

Launched Hernicore

(lumbar disc herniation treatment)

A History of Value Creation Maintaining a deep understanding of patient needs and continuously providing new treatment options

With a deep dedication to meeting the needs of patients, KAKEN conducts collaborative research and development and clinical development with companies in Japan and overseas, in addition to in-house drug discovery, to provide products that are the first of their kind in Japan or the world.

Launched Clenafin

(onychomycosis treatment)

As the first topical treatment for	Background of Development
onychomycosis in Japan, Clenafin	Oral antifungal drugs were the only
provided a new treatment option
onychomycosis treatment available in
without the drug interactions and
Japan, but these drugs were associated
adverse drug reactions, such as	with drug interactions and adverse
liver damage, seen with oral	drug reactions, including liver damage.
antifungal drugs. Global sales	There was a need for a new external
are expanding, partly through	medicine that would be effective against
out-licensing to local companies in	onychomycosis while having fewer
safety concerns.
North America, Asia and Europe.

Hernicore provided a new lumbar hernia treatment option that improves leg pain and other symptoms. Condoliase, the active ingredient, is injected into the intervertebral disc to reduce internal pressure. We are aiming to establish Hernicore as a treatment positioned between conservative therapy and surgery (manufactured and distributed by Seikagaku Corporation).

Background of Development

Previously, lumbar disc herniation treatments were limited to two options- conservative therapy or surgery.

Our Track Record of

Launched Athletan

Launched Artz (anti-osteoarthritis agent) (1987)

Launched Artz Dispo (1993)

2020

Creating New

Value

Founding Ideas

The origin of Kaken Pharmaceutical Co., Ltd. can be traced back to the Institute of Physical and Chemical Research (Riken), which was established in 1917. In 1948, the Company started its business as Kagaku Kenkyusho. The Company's first president, Yoshio Nishina, who was called the father of modern physics in Japan, said that his mission was to apply basic scientific research and its findings to industry, and began

(antifungal agent)

Developed following initial formulation in Japan involving an animal testing method for topical antifungal agents, this product became the foundation for current antifungal agent development.

Hyaluronic acid has been shown to improve symptoms of knee osteoarthritis, shoulder periarthritis and other joint diseases. This led to the launch of Artz, the world's first intra- articular injection solution using hyaluronic acid as the main active ingredient (manufactured and distributed by Seikagaku Corporation).

Background of Development

The conventional treatments for painful joint diseases such as knee osteoarthritis and shoulder periarthritis were orally administered nonsteroidal anti- inflammatory drugs (NSAIDs) and locally administered anesthetics and steroids. However, because of problems such

as gastrointestinal damage caused by NSAIDs and joint disorders caused by steroids, there was a need for a safer, more effective drug.

2014

2001

1993

2018

2016

manufacturing and

Launched Ecclock

selling pharmaceuticals as a way of implementing theoretical research in business.

1948

1971

1953

Launched

Penicillin KAKEN

Using the technology of Riken, from which it originated, the Company began manufacturing and selling penicillin, which was needed by many patients at the time.

1987

Launched Brufen

(anti-inflammatory, analgesic and antipyretic agent)

With ibuprofen as the active ingredient, Brufen has analgesic and anti-inflammatory effects for arthralgia and arthritis, with a wider range of applicable conditions, including acute upper respiratory tract infection and the common cold.

1992

Launched Mentax

(anti-trichophyton agent)

The world's first topical anti- trichophyton agent in the benzylamine class. Won the Okochi Memorial Grand Production Prize for the development of butenafine hydrochloride, the active ingredient.

Launched Fiblast

(wound-healing agent)

Fiblast, the world's first human bFGF (basic fibroblast growth factor) formulation, promotes healing by acting on various cells related to wound healing. It is also the world's first spray-onwound-healing agent, and is easy to use because it can be easily applied without directly touching the affected area. This product was a milestone in regenerative medicine, and is increasingly being used in the treatment of other conditions.

Background of Development

There was a need for a new treatment to address the increasing incidence of bedsores and intractable skin ulcers due to the aging population in Japan. Moreover, external treatment options for wound healing were limited to ointments.

Launched Regroth

(periodontal regenerative agent)

Safe, convenient and covered by national health insurance (NHI-listed) in Japan, Regroth is the world's first periodontal regenerative agent. With its debut, Regroth is expected to increase the value of periodontal regeneration therapy, and has contributed

as a new therapeutic option for periodontal disease.

Background of Development

There were no periodontal regeneration drugs sold elsewhere in the world, and the only material approved in Japan for regenerating periodontal tissue was not NHI-listed, so its use was limited.

(primary axillary hyperhidrosis treatment)

Ecclock was the first NHI-listed external treatment option for primary axillary hyperhidrosis in Japan. Among other factors, we focused on developing a dosage form that would ensure safe use, including an applicator that allows the gel to be applied without directly touching it.

Background of Development

The first-line treatment for primary axillary hyperhidrosis was an aluminum chloride topical; however, it was not NHI-listed in Japan, and there was a need for a new external medicine for this disorder.

		Technologies developed by Riken form	Growth driven by establishment		Provided medicines of excellent
	1940s	1960s of new research facilities and a	1990s
KAKEN's	the roots of Kaken Pharmaceutical	quality in a drive to be "the best"
		strengthened sales structure
Technological
Foundation	With its roots in Riken, which has made many contributions to	Based on ideas from academia, KAKEN developed products	In the 1990s, KAKEN expanded its R&D investment and
	modern science in Japan, KAKEN has provided medicines to	from new viewpoints, including Japan's first digestive enzyme	further improved its technologies. The Company became the
	meet the needs of the times based on its technological	preparation in capsule form and the world's first oral anti-	first in the world to successfully synthesize and develop
	development capabilities. The Company applied Riken's	inflammatory enzyme preparation. The Company also applied	benzylamine-derived butenafine hydrochloride, which had a
	culturing techniques to commercialize penicillin, which had	its technologies to address social problems. In the case of	chemical structure completely different from that of existing
	been attracting interest as a treatment specifically for	Minamata disease for example, it successfully synthesized an	athlete's foot medicines. It grew into strategic global
	pneumonia, an intractable disease at the time. KAKEN took	antifungal agent to replace organic mercury compounds that	product Mentax. For Artz, which had been sold in an ampoule,
	the lead in penicillin production in Japan. Streptomycin, a	were the primary medicines for athlete's foot at the time. In	the Company launched Artz Dispo, a kit product with a
	specific treatment for tuberculosis, led to the development	the 1970s, the Company opened new research facilities, and	disposable pre-filled syringe, to reduce the risk of infection.
	of a variety of fermented products.	built a system capable of adapting to increasingly stringent	Underpinning the Company at this time was its belief, set
			laws and regulations, and enhanced its sales capabilities. The	forth in the late 1980s, in striving to be "the best company,
			Drug Research Center in Kyoto in particular was equipped	even if not the biggest."
			with state-of-the-art equipment and tools, demonstrating
			highly reliable safety testing (preclinical studies).

2 KAKEN Corporate Report 2022

2000s	Advance priority research themes through
organizational improvements and
and onward	concentration of resources

The Drug Research Center and the CMC Center have introduced state-of-the-art equipment and technologies, and cooperate in the advancement of drug discovery research. KAKEN focuses its investments and human resources on R&D themes in fields where its experience, technologies and foundations can best be utilized-the immune system, the nervous system and infectious diseases. In FY2017, the Company entered into

1. collaborative research agreement with Switzerland-based Numab Therapeutics AG- which has a multi-specific antibody technology platform-for the identification of a multi-specific antibody candidate for the treatment of inflammatory diseases.
   Based on KAKEN's belief that the foundation of research and development is people, the Company is promoting human resource development both in-house and externally. As part of that effort, the Company sends researchers to research institutions in Japan and overseas to sharpen their expertise, and strives to introduce the latest technologies and knowledge.

KAKEN Corporate Report 2022 3

Value Creation Story

Value Creation Process

With the aim of fulfilling its corporate philosophy of "help improve the quality of life of patients by serving as many people as possible to return smiles of happiness to their faces, through supplying superior pharmaceuticals," the KAKEN Group provides drugs and information that contribute to the quality of life of patients from a distinctive viewpoint. We will continue striving to create value based on our unique strengths.

Corporate	KAKEN helps improve the quality of life of patients by serving as
many people as possible to return smiles of happiness to their faces,
Philosophy
through supplying superior pharmaceuticals.

INPUT

Financial capital

• Safe and sound financial position

¥137,747 million

BUSINESS MODEL

We leverage our strengths

to provide new treatment options

OUTPUTOUTCOMES

Joy for patients

• Equity

(As of March 31, 2022)

Manufacturing capital

		to patients.				Patients and
							medical
							professionals

Innovative drugs, including products that are the first of

• Longer healthy life expectancy

• Treatments that improve quality

• Capital expenditures in capacity expansion/renovation ¥3,510 million
  (Year ended March 31, 2022)

Intellectual capital

• R&D investment

¥8,420 million

  (Year ended March 31, 2022)

• Drug Research Center
  2 locations (Kyoto and Shizuoka)

Natural capital

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KAKEN's heritage

Sharing joy

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Long-Term Business

Plan 2031

-Kaken Vision for Transformation-

For details, see pages 14-17

their kind in Japan

or the world

Dermatology

ClenafinFiblast

of life of patients and their family

members

• Meeting medical needs for

adequate treatments

• Addressing global needs	Contributing to
• Provision of proper pharmaceutical
people's well-
and related medical information
	being through
Joy for society	better quality

• CO2 emissions 20,282 t-CO2
• Electricity consumption
  25,608 thousand kWh
• Water consumption
  2,674 thousand m3 (Shizuoka Site)

Social capital

• Main offices 8
• Sales offices 34

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Growth Strategy

For details, see pages 18-21

Ecclock

Orthopedics

of life

• Development of sustainable

supply chains

• Consideration for local

communities and the environment

based on high ethical standards

• Stable and continuous returns to

shareholders

Human capital

ArtzHernicore

Joy for employees

• Number of Group employees

1,164

(As of March 31, 2022)

Sources of Value Creation

For details, see pages 6-7

Foundation for Creating Value

Human Resource Strategy	Corporate Governance	Environmental Management
For details, see pages 35-37	For details, see pages 24-29	For details, see pages 33-34

Other Areas

SeprafilmRegroth

First in the world First in Japan

• Job satisfaction as professionals who meet patient needs

4 KAKEN Corporate Report 2022		KAKEN Corporate Report 2022 5

Value Creation Story

Sources of Value Creation

KAKEN focuses on selected therapeutic areas and delivers new treatment options to patients. Here we describe our unique sources of value creation for accomplishing those tasks.

Ability to Perceive Needs (Ability to Identify Issues)

Expertise and Networks from Focusing on

Specific Therapeutic Areas

We focus on dermatology and orthopedics, and have useful, innovative products in each of these areas. By concentrating our efforts in these areas, we have raised the quantity and quality of the specialized knowledge of our medical representatives (MRs), and by assigning them to specific regions they are able to tailor the information they provide to the medical needs of those regions. These actions have helped us build strong relationships of trust with medical professionals. As a result, we are able to reflect the patient feedback that we obtain through the frontlines of medicine in new product development and formulation improvements.

Marketing

& Sales

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Ability to Meet Needs

(Ability to Find Solutions)

Flexible Approach to Finding Solutions

We identify the best solution with a flexible approach by analyzing unmet medical needs using the patient feedback we obtain from medical professionals at the frontlines of medicine. We strive to speed up the R&D process to provide the innovative drugs that patients need as quickly as possible, not only by leveraging our own technologies and experience, but also by using advanced technologies and knowledge from outside the Company. We also apply the information that MRs obtain at the frontlines of medicine to devise product formulation and packaging solutions.

We provide new therapeutic options to help improve the quality

Example of life of patients suffering daily from the symptoms of disease. In addition, we work with doctors to promote patients' disease

Example

We continue to provide products such as the onychomycosis treatment Clenafin and the anti-osteoarthritis agent Artz that have long been appreciated by many patients facing dermatology- and orthopedics-related issues. In earning the

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awareness based on the information we gather and take steps to increase the convenience of drugs by improving formulations and through additional specifications and packaging. We have also introduced a drug discovery platform that uses AI to speed up the research and development of

trust of doctors, our MRs have improved their expertise and built relationships with a wide range of medical professionals, including pharmacists, nurses and rehabilitation staff. We value the information we

get at the frontlines of medicine. For example, having the opportunity to attend surgeries in operating rooms to explain the use of our medical devices such as adhesion barrier materials is an important and rewarding experience as it allows MRs to see our products properly used for the benefit of patients.

• Our MRs emphasize face-to-face communication supplemented by digital technology as a tool for efficiently sharing information.

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innovative drugs by increasing the probability of success in drug discovery. By combining this platform with our drug discovery experience and knowledge, we will shift to a data-driven discovery research process.

Flexible Cooperation

To create advanced drugs that address new needs and make those drugs available to patients as quickly as possible, we assemble cross-departmental project teams for specific objectives. Through free and lively discussion based on their expertise, team members carry out efficient drug discovery. This serious and passionate approach across departmental boundaries is one of KAKEN's strengths. We are striving to create further value through new challenges by increasing cooperation with domestic and overseas biopharmaceutical startups that have innovative technologies, and with companies that have unique technologies in other areas.

KAKEN employees multiply their strengths by working toward a

Example common goal as one team through cross-departmental collaboration. Also, our flexible corporate culture has become a strength by

maximizing our presence, which has led to collaboration with other companies in the areas of dermatology and orthopedics. The acquisition of ARTham, which has expertise in drug repositioning (for details, see page 8), has augmented our R&D capabilities and is expected to broaden the range of solutions we can provide patients and medical professionals at the frontlines of medicine. Furthermore, through our exploration of new modalities, such as the development of therapeutic antibodies in collaboration with Numab Therapeutics AG, we expect more additive and synergistic effects.

6 KAKEN Corporate Report 2022

KAKEN Corporate Report 2022 7