Chugai Pharmaceutical : All pages, single page [PDF

Annual Report 2023

Fiscal year ended December 31, 2023

Contents

			1	Mission Statement
			2	History of Chugai Pharmaceutical
	1	Introduction	4	Issues to Resolve Going Forward
	8	Targets for Solutions
			10	Pathways for Solutions-Two Pillars of TOP I 2030
			14	Themes of the Year
			16	Message from the CEO
			20	Value Creation Model (Sustainability at Chugai)
			22	Business Environment Recognition
			23	Sources of Shared Value Creation
	15	Initiatives	24	Overview of TOP I 2030
	26	Value Creation Indicators
			28	Focus 1: Approach to and Evaluation of Value Provided
				(Impact on Society)
			30	Focus 2: Demonstrate Leadership to Expand Impact
			32	Material Issues
			34	Executive Officers
			37	Executive Summary
			38	Progress in R&D
			40	Feature: Foundation Enhancement during the RED SHIFT
			42	Strategy Implementation 1 Drug Discovery
	36	Progress	44	Strategy Implementation 2 Development
			46	Strategy Implementation 3 Pharmaceutical Technology
			48	Strategy Implementation 4 Value Delivery
			50	Strategy Implementation 5 Foundation for Growth
			58	Message from the CFO

63 Message from an Outside Director (Chair of the Special Committee)

62 Governance 64 Directors / Audit & Supervisory Board Members

1. Corporate Governance

1. Risk Management

		76	Financial and Pre-Financial Highlights (IFRS)
		80	Review by Product
	75 Performance	82	Development Pipeline
	84	Consolidated Financial Indicators
	Data	86	Management's Discussion and Analysis
		92	Dialogue with Stakeholders and External Evaluations
		94	Shareholder Information
		95	Corporate Profile

Editorial Policy

We have issued this integrated report (annual report) with the aim of communicating to stakeholders, such as our shareholders and investors, our efforts to increase our corporate value, both in financial and non-financial terms, and to create a catalyst for engagement with them. In light of their importance in terms of Chugai's short-,medium-, and long-term value creation and their impact on our stakeholders, in this booklet we have presented Chugai's value creation process for sustainable growth, the specific growth strategies of TOP I 2030 and our progress on them, as well as our initiatives and structures for sustainable value creation.

Scope of This Report

Chugai Pharmaceutical Co., Ltd. and the Chugai Group

Timeframe

January 1, 2023 to December 31, 2023 (The financial reporting period)

Note: In view of the importance of providing the latest information available, some information relating to activities that occurred in 2024

is included, mainly in research and clinical development data.

Reference Guidelines:

• IFRS Foundation "International Integrated Reporting Framework"
• Ministry of Economy, Trade and Industry "Guidance for Integrated Corporate Disclosure and Company- Investor Dialogues for Collaborative Value Creation"

Forward-Looking Statements

This report may include forward-looking statements pertaining to the business and prospects of Chugai Pharmaceutical Co., Ltd. (the "Company"). These statements reflect the Company's current analysis of existing information and trends. Actual results may differ from expectations based on risks and uncertainties that may affect the Company's businesses.

Disclaimer

In this report, information on pharmaceutical products or drug candidates under development may be included, but such information is not intended for promotional or advertising purposes, or as medical advice, etc. The trademarks appearing in the report are protected by trademark rights, copyrights, and other intellectual property (IP) rights.

Mission Statement

Mission

Core Values

Envisioned

Future

Introduction

Dedicate ourselves to adding value by creating and delivering innovative products and services for the medical community and human health around the world

1. Patient Centric

Make each patient's wellbeing our highest priority

2. Pioneering Spirit

Pursue innovation by improving ourselves and thinking differently

3. Integrity

Maintain the highest standards in all we do to create shared value with society

Become a top innovator for advanced and sustainable patient-centric healthcare, powered by our unique strengths in science and technology and the alliance with Roche

At Chugai, our Mission Statement is the basis of everything we do. It is Chugai's most enduring and important concept, and represents our adherence to the Company's founding spirit and our founder's vow to "create drugs that benefit the world" in response to a medicine shortage following a major natural disaster. Our Core Values are the values that employees share and embody. They represent our commitment to maintaining the highest standards in all we do to meet the expectations and requirements of society as we pursue innovation with a pioneering spirit for the benefit of patients. In our Envisioned Future, we have set the goal of becoming a top innovator in the healthcare industry by going beyond the conventional scope of the pharmaceutical business in anticipation of future changes in the healthcare landscape. Chugai's vision of value creation is to fulfill its Mission Statement by creating shared value.

Annual Report 2023

1

History of Chugai Pharmaceutical

Our Accomplishments to Date

From foundation	Since 1980s	Since 2000s
to 1980s
Contribution to resolving	Contribution to the
drug shortages and the	development of	Elimination of drug lag
development of prescription	biopharmaceuticals
pharmaceuticals	in Japan

From foundation to 2000				2000s
		Operating Profit between 2001 and 20231
		(Billions of yen)
1925	500
Founded in response			2001
to shortages of
400		Focused
medicine in Japan
	on PHC

	300
Since 1930s
Import and	200
sales of drugs
Manufacturing and
sales of over-the-	100
counter (OTC) drugs

2002
Embarked on
a strategic	2005	2009
alliance
Launched first therapeutic	Set target of becoming
with Roche
antibody created in Japan	a top pharmaceutical
		company

0
2001	2002	2003	2004	2005	2006	2007	2008	2009

Since 1960s
Shift to prescription			Mid-size molecules
pharmaceuticals			Antibodies
Developed research			Technologies to create
strengths	Evolution of	best-in-class antibodies2
		Discovery Technology
Since 1980s
Stepped up
development and
marketing of drugs
from Chugai research		E•ect of Strategic
Focused on
	Alliance with Roche
research into
biopharmaceuticals

1. The fiscal year ended December 31, 2003 represents financial results for a nine-month period. For 2012 and earlier years, the Company applied JGAAP, and from 2013 onward
   it has applied IFRS on a Core basis.
   For Core basis results, please refer to "Financial and Pre-Financial Highlights (IFRS)" on page 76.
2. With such attributes as improved stability and pharmacokinetics profile, or reduced immunogenicity
3. Such as bispecific antibodies, recycling antibodies, sweeping antibodies, or T-cell redirecting antibodies (TRABs)
4. Such as switch antibodies, next-generation TRABs, LINC-Ig, or PAC-Ig

2	CHUGAI PHARMACEUTICAL CO., LTD.

Introduction

Since 2010s	Since 2010s	Since 2020s
Promotion of personalized	Paradigm shift in treatment	Advances in PHC through
healthcare (PHC) in cancer	of rheumatoid arthritis and
cancer genome profiling
treatment	hemophilia

2010s										2020s
											2021
											Announced
											TOP I 2030	¥450.7 billion
										2020
								Announced CHUGAI
								DIGITAL VISION 2030
			2013
		Achieved first Breakthrough
		Therapy designation
2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023

Technologies to target intracellular tough targets

Technologies to create antibodies with unique modes of action3

Technologies to confer diseased tissue or cell specificity4

Technologies to expand site of action
In-licensing Roche products in Japan (eliminate drug lag and ensure stable revenue source）	〈Compared to before Alliance〉

• Revenue: 6.7 times

Utilization of Roche's network (global growth of in-house products)• Operating profit: 16.9 times

• Market capitalization: 26.7 times

Collaboration on various functions, such as utilization of research infrastructure

Annual Report 2023

3

Issues to Resolve Going Forward

Aiming to overcome unmet medical

At Chugai, our aim is to realize advanced and sustainable patient- centric healthcare.

The world has many unmet medical needs-we believe that innovation backed by science and technology can solve them.

Prime Example - Cancer

When it comes to unmet medical needs, perhaps no example is more fitting than cancer-currently the leading cause of death1 in Japan. Chugai has developed and launched a successive line of highly innovative drugs, including products in-licensed from Roche, that have contributed to improved prognoses for treating a variety of cancers. Take, for example, HER2-positive breast cancer and ALK- positive lung cancer, both of which were previously hard to treat. Chugai's contribution in combatting these cancers includes the anti-HER2 antibodies Herceptin, Perjeta, and Kadcyla, as well as molecular targeted drugs like in-house product Alecensa. Through the evolution of mid-size molecules and other modalities, Chugai will boldly tackle the challenges that previously unaddressed tough targets present, with hopes of growing the therapeutic drugs available for overcoming unmet medical needs.

Cancer

• Leading cause of death in Japan1
• Continued development and launch of innovative drugs by Chugai

Chugai's Hopes

• Take on tough targets and increase therapies for overcoming unmet medical needs
• Target in ways that not only extend life expectancy but cure disease

1. Annual report of monthly demographic data (2022) from the Ministry of Health, Labour and Welfare, Japan

4	CHUGAI PHARMACEUTICAL CO., LTD.

needs, one after another

Prime Example - Celiac Disease

There is currently no effective drug for the treatment of celiac disease, a condition thought to affect roughly 1%2 of the population worldwide. Those suffering from the disease experience a wide array of symptoms, including digestive disorders, diarrhea, and abdominal pain triggered by an abnormal immune response to gluten, a component of wheat. At present, a gluten-free diet is the only option for treatment. For patients, this choice places limits not only on their diets but arguably on their social lives more broadly. At the same time, the need to buy only gluten-free food for life also poses a significant financial burden. At Chugai, we are developing DONQ52, a substance that specifically binds solely with HLA-DQ2.5 (itself bound with a gluten peptide), and is designed to minimize the risk of side effects. In an effort to capture the diverse molecules behind celiac disease, this medicinal compound is a multispecific antibody, enabled by the application of proprietary antibody engineering technology. While the number of celiac disease sufferers in Japan remains modest, we hope to deliver this innovative new medicine to the rest of the world, allowing people everywhere to better enjoy moments with friends and family without the fear of consuming gluten.

Celiac Disease

• Affects 1%2 of the world's population
• No effective drug treatment yet established

Chugai's Hopes

• Shift from treating symptoms to therapy approaching the underlying causes of the illness
• Enable people suffering from celiac disease worldwide to enjoy lives free of fear about consuming gluten

2. Clin Gastroenterol Hepatol. 2018 Jun;16(6):823-836.

Introduction

Annual Report 2023

5

Rare diseases are the very ones we

Every patient with a disease suffers in their own unique way. Our hope is to help each one be healthy.

This commitment is at the heart of all Chugai corporate activities.

Prime Example - Hemophilia

Hemophilia is a condition in which individuals lack or have low functioning blood clotting factors, proteins vital to halt bleeding, which thereby inhibits their blood from clotting. Consequently, if an injury or blow causes bleeding, it takes significant time for it to stop. The extent of difficulty in halting bleeding differs based on the individual. Prior to the debut of Hemlibra, developed by Chugai, the treatment for hemophilia A focused mainly on replacement therapies of coagulation factor concentrate in order to prevent bleeding. Through subcutaneous delivery, given weekly to once every four weeks, Hemlibra achieved bleeding prevention with no effect from inhibitors. But the success of Hemlibra has not satisfied all unmet medical needs when it comes to hemophilia. Our hope is that everyone with hemophilia A will one day enjoy healthy lives without limitations. That's why Chugai is currently developing NXT007,3 an even more highly innovative drug expected to maintain coagulation activities at a level on par with that found in healthy individuals.

Hemophilia

• Subcutaneously deliverable treatment lasting up to four weeks at a time achieved at Chugai
• Needs exist for even more highly innovative therapeutic drugs

Chugai's Hopes

• All individuals with hemophilia A enjoy their lives each day, without bleeding and with no limitations
• Achieve coagulation activities on the same level as healthy individuals, and contribute to long-term quality of life (QoL) by lowering the risk of hemophilic arthropathy

3. A bispecific antibody NXT007 exerts a hemostatic activity in hemophilia A monkeys enough to maintain a nonhemophiliac state (https://doi.org/10.1016/j.jtha.2023.09.034)

6	CHUGAI PHARMACEUTICAL CO., LTD.

should be addressing

See "Focus 1: Approach to and Evaluation of Value Provided (Impact on Society)" on page 28.

Prime Example -

Neuromyelitis Optica Spectrum Disorder(NMOSD)

NMOSD is an autoimmune disease of the central nervous system that triggers inflammation in the brain, spinal cord, and optic nerve; this designated intractable disease also disproportionately strikes women (1:94 men to women). Symptoms vary and can include visual impairment (including blindness), paralysis, pain, and urinary disorders. Because it is a rare condition, with roughly 6,5005 sufferers

in Japan, receiving a firm diagnosis takes time, which can result in appropriate treatment going unreceived at the appropriate timing. Applying Chugai's proprietary Recycling Antibody® technology, Chugai is controlling pathology and contributing to preventing the recurrence of NMOSD through Enspryng, a subcutaneous injection that can be taken once every four weeks.6 However, with few medical specialists who treat rare diseases, there are instances in which patients are not getting ample treatment matched to their individual needs. At Chugai, we consider it our mission to broaden the understanding of medical providers, remaining focused not only on providing therapeutic drugs but putting an environment in place in which patients can rejoice in living life on their own terms.

NMOSD

• Approx. 6,500 sufferers in Japan5
• Appropriate treatment must be administered at the appropriate time

Chugai's Hopes

1. • Control the disease so that each patient can enjoy life on their own terms
   • Contribute to preparing the environment for treatment of rare conditions and diseases
2. Hor, JY, et al. Neurology and Clin. Neuroscience. 2021; 9(4): 274-281.
3. Japan Intractable Diseases Information Center, multiple sclerosis/neuromyelitis optica (designated intractable disease 13)
4. Inject subcutaneously at a time, once every two weeks for three times. Then the fourth time and thereafter, inject subcutaneously once every four weeks

Introduction

Annual Report 2023

7

Targets for Solutions

Top Innovator in the Healthcare Industry

Expectation from Patients All over the World

With world-class drug discovery capabilities, patients around the world expect that "Chugai will surely create new treatments."

Attracting Talent and Players from around the World

Attract passionate talent from all over the world and inspire players globally to think they can create something new by partnering with Chugai

Role Model for the World

Recognized for its ESG initiatives through its business activities, Chugai will become a global role model as a leader in resolving social issues.

There are many diseases and disorders in the world with no established treatment, giving us many important problems to address. In tackling our value creation goal of "realization of advanced and sustainable patient-centric healthcare," our Envisioned Future for 2030 is to become a top innovator in the field of global healthcare. If we can arrive there, we believe that each successive year will see Chugai overcome yet another of the world's many unmet medical needs.

To this end, under TOP I 2030, our growth strategy for becoming a top innovator in the global healthcare industry, we are promoting two primary targets: "double R&D output" and "launch global in-house products every year." Looking at prior releases of global products from Chugai research, since there were three items over the past decade, we need to roughly triple performance in order to launch one each year. While this is an extremely ambitious bar, we intend to double R&D output by further enhancing our drug discovery capabilities and revolutionizing our business model.

• Sum of domestic and overseas sales of Actemra, Alecensa, Hemlibra and Enspryng, and royalty income from initial shipments of Hemlibra

Sales of Global Products*

Mitchga (nemolizuma

Enspryng

Hemlibra

Alecensa

Actemra

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Global product launches (10-yearaverage)	1 product / 3 years

8	CHUGAI PHARMACEUTICAL CO., LTD.