consolidated financial report [ifrs] for fiscal 2015 (year

CONSOLIDATED FINANCIAL REPORT [IFRS] for Fiscal 2015 (Year Ended March 31, 2016)

May 13, 2016

Eisai Co., Ltd.

Stock exchange listing: Tokyo Stock Exchange (TSE)

TSE Code: 4523

URL: http://www.eisai.com

Representative: Haruo Naito, Representative Corporate Officer & CEO

Contact: Sayoko Sasaki, Vice President, Corporate Affairs

Telephone: +81-3-3817-5120

Expected date of ordinary general meeting of shareholders: June 17, 2016

Expected date of annual report submission: June 17, 2016

Expected date of dividend payment commencement: May 23, 2016

Preparation of annual supplementary explanatory material: Yes

Annual results briefing held: Yes

(Figures are rounded to the nearest million yen.)

1. Consolidated Annual Financial Results (April 1, 2015-March 31, 2016)

(1) Consolidated Operating Results

(Percentage figures show year-on-year change.)

Revenue Operating profit Profit before

income taxes Profit for the year

Profit for the year

attributable to

owners of the

parent

Comprehensive

income for the year

(¥ million) (%) (¥ million) (%) (¥ million) (%) (¥ million) (%) (¥ million) (%) (¥ million) (%)

FY 2015 547,922 -0.1 51,935 83.3 50,473 95.1 55,045 26.7 54,933 27.0 16,452 -85.6

FY 2014 548,465 -8.5 28,338 -57.3 25,875 -58.5 43,453 12.9 43,254 13.1 114,230 35.2

Earnings per share

attributable

to owners of the

parent (basic)

Earnings per share

attributable

to owners of the

parent (diluted)

Profit ratio to equity

attributable to

owners of the parent

Profit before income

taxes ratio to total

assets

Operating profit

ratio to revenue

(¥) (¥) (%) (%) (%)

FY 2015 192.23 191.76 9.4 5.0 9.5

FY 2014 151.57 151.37 7.7 2.6 5.2

(Reference) Equity in earnings of affiliates: for FY2015: ¥70 million, for FY2014: ¥75 million

(2) Consolidated Financial Positions

Total assets Total equity Equity attributable to


Ratio of equity

attributable to


Equity per share

attributable to

owners of the

parent

(¥ million) (¥ million) (¥ million) (%) (¥)

March 31, 2016 973,987 576,828 573,661 58.9 2,006.22

March 31, 2015 1,053,818 602,061 598,749 56.8 2,096.39

(3) Consolidated Cash Flows

Operating activities Investing activities Financing activities Cash and cash

equivalents at end of year

(¥ million) (¥ million) (¥ million) (¥ million)

FY2015 95,617 (6,701) (72,944) 179,326

FY2014 76,022 (18,841) (59,742) 173,335

http://www.eisai.com/

2. Dividends

Annual dividend per share

Total

dividends

Dividend payout

ratio

(consolidated)

Dividend on equity

attributable to


ratio (consolidated)

End of

Q1

End of

Q2

End of

Q3

End of

FY

Total

(¥) (¥) (¥) (¥) (¥) (¥ million) (%) (%)

FY2014 — 70.00 — 80.00 150.00 42,837 99.0 7.6

FY2015 — 70.00 — 80.00 150.00 42,890 78.0 7.3

FY2016

(Forecast) — 70.00 — 80.00 150.00 146.9

3. Consolidated Financial Results Forecast for Fiscal 2016 (April 1, 2016-March 31, 2017) (Percentage figures show year-on-year change.)


income taxes

Profit for the

period

Profit for the

period attributable

to owners of the

parent

Earnings per

share

attributable to

owners of the

parent (basic)

(¥ million) (%) (¥ million) (%) (¥ million) (%) (¥ million) (%) (¥ million) (%) (¥)

Q2

(cumulative) 279,800 1.6 19,700 9.0 19,000 9.6 10,000 -10.2 8,200 -25.7 28.54

Fiscal Year 580,000 5.9 53,700 3.4 52,200 3.4 32,400 -41.1 29,200 -46.8 102.12

*Explanatory Notes

(1) Changes in number of significant subsidiaries in the period (changes in specified subsidiaries resulting in a change in scope of consolidation): Yes

Increase: —, Decrease: 1 subsidiary (subsidiary name: EIDIA Co., Ltd.)

(2) Changes in accounting policies, accounting estimates and restatements:

1) Changes in accounting policies required by IFRS: Yes

2) Changes in accounting policies other than 1): None

3) Changes in accounting estimates: Yes

(3) Number of shares issued (common shares):

1) Number of shares issued (including treasury shares)

As of March 31, 2016

296,566,949 As of March 31, 2015

296,566,949

2) Number of treasury shares As of March 31, 2016

10,555,842 As of March 31, 2015

10,869,758

3) Weighted average number of shares outstanding

For FY2015 285,764,248 For FY2014 285,370,874

The Company’s shares held through a trust (70,315 shares) are not included in the number of treasury shares as of the end of the period, but are included in the average number of shares outstanding as treasury shares that are deducted from the basis of the calculation of earnings per share.

* (Reference) Nonconsolidated Annual Financial Results (April 1, 2015-March 31, 2016)

(1) Nonconsolidated Operating Results

(Percentage figures show year-on-year change.)


income taxes Profit for the year

(¥ million) (%) (¥ million) (%) (¥ million) (%) (¥ million) (%)

FY 2015 315,950 1.5 35,181 87.6 36,280 139.7 67,230 218.2

FY 2014 311,160 -9.0 18,756 -48.5 15,136 -52.7 21,128 68.2

Basic earnings

per share

Diluted earnings

per share

(¥) (¥)

FY 2015 235.26 234.69

FY 2014 74.04 73.94

(2) Nonconsolidated Financial Positions

Total assets Equity Shareholders’

equity ratio

Shareholders’ equity

per share

(¥ million) (¥ million) (%) (¥)

FY 2015 736,200 489,949 66.4 1,710.82

FY 2014 765,159 462,790 60.4 1,616.97

(Reference) Shareholders’ equity:

As of March 31, 2016 ¥ 489,195 million As of March 31, 2015 ¥ 461,820 million

* Disclosure concerning the implementation status of audit procedures: This financial report is exempt from audit procedures as stipulated under the Financial Instruments and Exchange Act of Japan. At the date of disclosure, the audit procedures have not been completed as stipulated under the Financial Instruments and Exchange Act of Japan. * Explanation concerning the appropriate use of results forecast and other special instructions: Materials and information provided in this financial disclosure may contain “forward-looking statements” based on expectations, forecasts, estimates, business goals and assumptions that are subject to risks and uncertainties as of the publication date of these materials. Accordingly, actual outcomes and results may differ materially from these statements depending on a number of important factors. Please refer to pages 9-10 and pages 48-50 for details with regard to the assumptions and other related matters concerning consolidated financial results forecasts.

(Methods for obtaining supplementary materials and content of financial results disclosure) Supplementary materials are attached to this financial report. The Company plans to hold a financial results disclosure presentation for institutional investors and securities analysts on Friday, May 13, 2016. The printed materials distributed at the disclosure presentation will be made available on the Company’s website after the event.

1

Supplemental Materials: Table of Contents

1. Analysis Concerning Operating Results and Financial Position (Page)

1) Analysis Concerning Operating Results

(1) Outline of Operating Results ･･････････ 2

(2) Research & Development Pipeline, Alliances and Other Events ････････ 5

(3) Consolidated Financial Results Forecasts for Fiscal 2016 ･･･････････ 9

2) Analysis Concerning Consolidated Financial Position ･･･････････ 11

3) Basic Policy on Profit Appropriation and Dividend for Fiscal 2015/16 ･･････ 12

2. Management Policy

1) Corporate Mission ･･･････････ 13

2) Management Objectives ･･･････････ 13

3) Medium- to Long-Term Corporate Management Strategy

and Issues that Need to Be Addressed ･･･････････ 13

4) Basic Policy for Capital Strategy ･･･････････ 16

5) Corporate Governance ･･･････････ 17

6) Compliance and Risk Management ･･･････････ 18

3. Basic Approach to the Selection of Accounting Standards ･･･････････ 18

4. Consolidated Financial Statements

1) Consolidated Statement of Income ･･･････････ 19

2) Consolidated Statement of Comprehensive Income ･･･････････ 20

3) Consolidated Statement of Financial Position ･･･････････ 21

4) Consolidated Statement of Changes in Equity ･･･････････ 23

5) Consolidated Statement of Cash Flows ･･･････････ 25

6) Notes to Consolidated Financial Statements

(Going Concern) ･･･････････ 26

(Basis of Preparing Consolidated Financial Statements) ･･･････････ 26

(Significant Accounting Policies) ･･･････････ 28

(Significant Accounting Estimates and Judgments) ･･･････････ 36

(Segment Information) ･･･････････ 37

(Consolidated Statement of Income) ･･･････････ 39

(Per Share Information) ･･･････････ 42

(Consolidated Statement of Financial Position) ･･･････････ 43

(Consolidated Statement of Cash Flows) ･･･････････ 44

(Business Combinations) ･･･････････ 44

(Sales of Subsidiaries) ･･･････････ 46

(Significant Subsequent Events) ･･･････････ 46

5. Other

1) Forecasts and Risk Factors ･･･････････ 48

2) Overview of the Eisai Group ･･･････････ 51

3) Proposed Changes in Directors and Corporate Officers ･･･････････ 54

2

1．Analysis Concerning Operating Results and Financial Position

1) Analysis Concerning Operating Results

(1) Outline of Operating Results

[Revenue and Profit]

〇 Eisai Co., Ltd. (“the Company”) and its affiliates (collectively referred to as “the Group”)

recorded the following consolidated financial results for the fiscal year from April 1, 2015 to

March 31, 2016.

Revenue: ¥547,922 million (0.1% decrease year-on-year)

Operating profit: ¥51,935 million (83.3% increase year-on-year)

Profit before income taxes: ¥50,473 million (95.1% increase year-on-year)

Profit for the period: ¥55,045 million (26.7% increase year-on-year)

〇 Revenue for the Group increased due to the growth of anticancer agents Halaven and

Lenvima and antiepileptic agent Fycompa, as well as the high growth recorded by the

Group’s pharmaceutical businesses in China and Asia, but decreased overall owing to

factors such as competition between long-listed products and generic products in the

Japan, finishing at ¥547,922 million (down 0.1% year-on-year).

By therapeutic area, total revenue from oncology-related products increased to ¥118,501

million (up 20.1% year-on-year), reflecting the growth of Halaven and smooth launches of

Lenvima in the U.S., Europe, Japan, and Asia. Meanwhile, overall revenue from epilepsy

products reached ¥37,694 million (up 19.0% year-on-year), reflecting Fycompa’s

expansion in the U.S., Europe, and Asia.

By product, combined revenue from all four global brands totaled ¥63,621 million yen (up

40.1% year-on-year); this included ¥40,168 million from Halaven and ¥11,477 million from

Lenvima in addition to the revenue from Fycompa and antiobesity agent BELVIQ. Aricept,

a treatment for Alzheimer’s disease and dementia with Lewy bodies, recorded revenue of

¥63,349 million (down 3.6% year-on-year). Pariet (U.S. brand name: AcipHex), a proton

pump inhibitor, recorded ¥46,053 million (down 17.7% year-on-year).

By segment, growth was achieved in all overseas segments, highlighted by sustained

growth in the China pharmaceutical business (up 20.2% year-on-year) as well as business

expansion in South Korea, Taiwan, and other key markets for the Asia pharmaceutical

business.

* Revenue for Pariet includes sales in Japan of Rabecure Packs 400/800 and Rabefine Pack, all of which are triple-formulation combination packs

indicated for use in Helicobacter pylori eradication.

〇 Operating profit totaled ¥51,935 million (up 83.3% year-on-year) due to an expansion in

revenue and profit for the pharmaceutical business mainly from high growth in global

brands as well as the China and Asia pharmaceutical businesses. In addition, improved

cost efficiency, sales of non-current assets and investments in subsidiaries and the receipt

of upfront payments under joint development and promotion agreements have also

contributed to the increase in operating profit. Profit for the period increased to ¥55,045

3

million (up 26.7% year-on-year) due to the decreased tax expenses resulted from share

transfer of an U.S. subsidiary and an increase in operating profit.

〇 Basic earnings per share for the period attributable to owners of the parent came to

¥192.23 (up ¥40.66 year-on-year).

〇 Comprehensive income for the period, after adding/deducting other comprehensive

income to/from profit for the period, was ¥16,452 million (down 85.6% year-on-year),

following a reduction in foreign exchange differences due to continuing appreciation of the

yen since the previous fiscal year.

[Performance by Segment]

(Revenue for each segment indicates revenue from external customers)

The Group’s business is comprised of pharmaceutical business and other business. The

pharmaceutical business is organized into the following six reporting segments: Japan

(Prescription medicines, Generics and Diagnostics), Americas (North America, Central, and

South America), China, Asia (primarily South Korea, Taiwan, Hong Kong, India, and ASEAN),

EMEA (Europe, the Middle East, Africa, and Oceania), and Consumer Healthcare

Business―Japan.

<Japan pharmaceutical business>

〇 Revenue totaled ¥266,810 million (down 4.2% year-on-year), with segment profit at

¥111,642 million (down 8.8% year-on-year). Of this amount, revenue totals for Prescription

medicines and Generics were ¥233,921 million (down 4.7% year-on-year) and ¥28,494

(up 6.0% year-on-year) respectively, while revenue for Diagnostics was ¥4,394 million

(down 26.5% year-on-year). The Group’s diagnostics subsidiary EIDIA Co., Ltd. was

transferred to Sekisui Chemical Co., Ltd. as of December 28, 2015.

〇 By product, revenue from Humira, a fully human anti-TNF-alpha monoclonal antibody,

came to ¥32,628 million (up 9.3% year-on-year). Co-promotion revenue for Lyrica, a pain

treatment being co-promoted with Pfizer Japan Inc., came to ¥24,716 million (up 14.7%

year-on-year), while revenue for Lunesta, an anti-insomnia agent, steadily expanded to

¥5,977 million (up 32.0% year-on-year). Regarding oncology-related products, revenue

from Halaven achieved double-digit growth at ¥6,799 million (up 12.1 year-on-year) and

Lenvima reached ¥1,547 million. Revenue for Aricept and Pariet was ¥40,478 million

(down 13.8% year-on-year) and ¥30,428 million (down 18.0% year-on-year) respectively.

〇 Lenvima was launched In May 2015, while in June of the same year, Tambocor Fine

Granules 10% was launched as a new formulation of the anti-tachyarrhythmia agent

Tambocor.

<Americas pharmaceutical business>

〇 Total revenue came to ¥122,246 million (up 2.0% year-on-year). Segment profit increased

59.4% year on year to ¥23,731 million due to reduced marketing costs as a result of

efficient marketing activities.

4

〇 Regarding revenue from oncology-related products, the antiemetic agent Aloxi and

Halaven showed positive growth, recording ¥54,702 million (up 9.8% year-on-year) and

¥18,285 million (up 10.9% year-on-year), respectively, while Lenvima, which was

launched in February 2015, showed signs of a smooth start with revenue of ¥8,800 million.

Regarding epilepsy products, both Banzel and Fycompa achieved high growth, recording

¥13,228 million (up 26.8% year-on-year) and ¥3,840 million (up 106.1% year-on-year),

respectively. BELVIQ recorded ¥4,422 million (down 18.6% year-on-year).

〇 Halaven and anticancer agent Gliadel were launched in Mexico in April 2015.

<China pharmaceutical business>

〇 Revenue totaled ¥49,289 million (up 20.2% year-on-year) with segment profit of ¥12,924

million (up 22.3% year-on-year), indicating sustained high growth for this business

segment.

〇 By product, revenue for major products achieved steady growth; this included the

peripheral neuropathy treatment Methycobal recording ¥18,719 million (up 8.0% year-on

-year), liver disease / anti-allergy agents Stronger Neo-Minophagen C and Glycyron

Tablets recording ¥9,278 million (up 34.4% year-on-year), Aricept recording ¥5,552 million

(up 17.7% year-on-year) and Pariet recording ¥3,265 million (up 14.0% year-on-year).

<Asia pharmaceutical business>

〇 In terms of revenue, with growth in markets such as South Korea, Taiwan, and Thailand,

total revenue for this segment reached ¥34,007 million (up 10.1% year-on-year). Segment

profit was ¥8,314 million (up 12.2% year-on-year).

〇 By product, revenue from Aricept came to ¥9,969 million (up 6.6% year on year), Humira

¥8,981 million (up 11.5% year-on-year) and Methycobal ¥3,087 million (up 18.0%

year-on-year), respectively, with all three products contributing to sustained growth. Pariet

recorded ¥3,518 million (down 4.2% year-on-year).

〇 Lenvima and Fycompa were launched in South Korea in February 2016.

<EMEA pharmaceutical business>

〇 Revenue totaled ¥41,331 million (up 7.3% year-on-year), with both the oncology related

products and epilepsy products recording year-on-year increases. Segment profit was

¥10,330 million (up 56.5% year-on-year).

〇 By product, revenue from oncology-related products saw sustained growth for Halaven at

¥13,166 million (up 13.8% year-on-year) while new product Lenvima reached ¥1,119

million. Regarding revenue for epilepsy products, revenue for Zonegran decreased to

¥7,626 million (down 6.0% year-on-year), while revenue from Zebinix and Fycompa

increased to ¥3,824 million (up 18.2% year-on-year) and ¥3,620 million (up 51.0%

year-on-year), respectively.

〇 Since the launch of Lenvima in the U.K. in June 2015, the product has been launched in

EMEA countries including Austria, Sweden, Germany, Spain, Switzerland and Portugal.

5

<Consumer Healthcare Business—Japan>

〇 Revenue totaled ¥18,077 million (up 6.2% year-on-year), while segment profit was ¥2,696

million (up 104.8% year-on-year).

〇 Revenue from Chocola BB brand products totaled ¥11,052 million (up 6.8% year-on-year).

(2) Research & Development Pipeline, Alliances and Other Events

[Status of Ongoing Research & Development Pipelines]

〇 The anticancer agent Halaven (eribulin) has obtained approval for use in (generally either

second- or third-line) chemotherapy for breast cancer in approximately 60 countries

including Japan, the U.S. and in Europe and Asia. A Phase III study in China to investigate

the agent as a third-line chemotherapy for breast cancer is underway. Applications for the

agent for use in the treatment of soft-tissue sarcoma were submitted in Japan, the U.S. and

Europe in July 2015. The agent was subsequently approved in the U.S. in January 2016

(for use in treatment of liposarcoma) and in Japan in February 2016 (for use in treatment of

soft tissue sarcoma). In Europe, the product was approved for treatment of liposarcoma in

May 2016. Furthermore, a Phase I/II study to investigate the agent in combination with the

anti-PD-1 antibody pembrolizumab from Merck & Co., Inc. (Kenilworth, New Jersey, U.S.)

in metastatic triple-negative breast cancer is underway.

〇 The anticancer agent Lenvima (lenvatinib) has obtained approval for use in the treatment

for thyroid cancer over 40 countries. Following initial approval in the U.S. in February 2015,

the agent received approval in Japan and Europe in March and May respectively in the

same year. In October 2015, the agent was also approved in South Korea as the first

country in Asia outside Japan to receive approval. Furthermore, a Phase II study of the

agent in renal cell carcinoma conducted in the U.S. and Europe met its primary endpoint,

and applications seeking approval for this indication were submitted in the U.S. and Europe

in November 2015 and January 2016, respectively. Moreover, for this potential indication,

the agent received a Breakthrough Therapy Designation as well as Priority Review from

the U.S. FDA, and was granted accelerated review by the European Medicines Agency. In

addition, a Phase III study of the agent in hepatocellular carcinoma is underway in the U.S.

and Europe and Asia, including Japan and China. In Japan, a Phase II study of the agent in

biliary tract cancer is in progress. Additionally, several other Phase II studies of the agent

are underway, including in third-line non–small cell lung cancer (NSCLC) single-agent

treatment, NSCLC with RET translocations and endometrial cancer. A Phase I/II study to

investigate the agent in combination with the anti-PD-1 antibody pembrolizumab from

Merck & Co., Inc. (Kenilworth, New Jersey, U.S.) in select solid tumors is also underway.

〇 The antiepileptic agent Fycompa (perampanel) has been approved in over 45 countries as

an adjunctive therapy for use in the treatment of partial-onset seizures in adult and

adolescent patients from 12 years of age with epilepsy. Additionally, the agent was also

approved as an adjunctive therapy for use in the treatment of primary generalized

tonic-clonic (PGTC) seizures in the U.S. and Europe in June 2015, and in the Philippines

for the first time in Asia in November 2015, respectively. A new drug application for the

agent seeking approval as an adjunctive treatment of partial-onset seizures as well as

6

generalized tonic-clonic seizures was submitted in Japan in July 2015, and subsequently

approved in March 2016. In addition, an application for a new suspension formulation was

approved in the U.S. in April 2016 while in Europe the application is currently undergoing

regulatory review. Furthermore, a Phase II study of the agent as a potential therapy for

partial-onset seizures in pediatric patients is being conducted in the U.S. and Europe.

〇 Regarding the fully human anti-TNF-alpha monoclonal antibody Humira (adalimumab), in

May 2015, the Japanese Ministry of Health, Labour and Welfare (MHLW) lifted the

“all-case surveillance” special drug use-results survey condition for use in patients with

ankylosing spondylitis in Japan.

〇 In August 2015, the Company received notification from the MHLW to the effect that the

“all-case surveillance” survey condition required for approval of the anticancer agent

Gliadel 7.7 mg Implant (carmustine) has been lifted in Japan.

〇 In September 2015, the Company received additional approval for the vascular

embolization device DC Bead (specially controlled medical device) to be used for the

treatment of hypervascular tumors and arteriovenous malformations in Japan.

〇 In November 2015, the Company received notification from the MHLW to the effect that the

“all-case surveillance” special drug use-results survey condition required for approval of the

antirheumatic agent Careram Tablets 25 mg (iguratimod) has been lifted in Japan.

〇 Regarding Humira, in February 2016, the MHLW lifted the “all-case surveillance” special

drug use-results survey condition for use in the treatment of polyarticular juvenile idiopathic

arthritis in Japan.

〇 Regarding the application for re-evaluation of the egg-white lysozyme preparation Neuzym

(lysozyme hydrochloride, “lysozyme”) submitted to the MHLW, in March 2016, the Group

received the Committee on Reevaluation of the Pharmaceutical Affairs and Food

Sanitation Council’s opinion that the medical usefulness of lysozyme in the present medical

environment is thought to have decreased, and its usefulness cannot be confirmed at this

point in time. As such, sales of the product have been discontinued, and a voluntary recall

is being conducted. Neuzym was manufactured by the Group's subsidiary Sannova Co.,

Ltd. (Gunma) and marketed by the Company in Japan.

〇 In November 2015, the U.S. FDA accepted for review a new drug application for a

once-daily formulation of the antiobesity agent BELVIQ (lorcaserin).

〇 In March 2016, the Company withdrew its new drug application for ultra-high dose

mecobalamin (development code: E0302) as a treatment for amyotrophic lateral sclerosis

(ALS) in Japan.

〇 Regarding the serotonin 2C receptor agonist lorcaserin, co-development with Arena

Pharmaceuticals has been discontinued for the smoking cessation indication at the Phase

II clinical study stage in the U.S.

7

〇 Development has been discontinued for the melanoma indication for the anticancer agent

E7272 (denileukin diftitox) at the Phase II clinical study stage in the U.S.

〇 A Phase II study of the anticancer agent E7777 in peripheral T-cell lymphoma and

cutaneous T-cell lymphoma has been initiated in Japan.

〇 Development has been discontinued for the functional dyspepsia indication for the proton

pump inhibitor Pariet (rabeprazole) at the Phase II clinical study stage in Japan.

[Major Alliances, Agreements and Other Events]

〇 In April 2015, the Company entered into a collaborative agreement with Genomics plc

(U.K.) to use Genomics’ sophisticated statistical analyses of large-scale multi-phenotype

genetic association data to inform the Company’s drug discovery process, including target

validation, indication selection and repositioning.

〇 In April 2015, the Company entered into a collaboration agreement with Nihon

Medi-Physics Co., Ltd. (Tokyo) to contribute to the diagnosis and treatment of dementia

with Lewy bodies (DLB) in Japan. The two companies will share information on dementia,

including DLB, and work to generate new evidence with each other as well as hold study

meetings in order to improve the diagnosis and treatment of DLB.

〇 In July 2015, the Group’s U.S. subsidiary Eisai Inc. entered into a definitive agreement to

transfer ownership of its manufacturing facility based in Research Triangle Park in North

Carolina to Biogen Inc. (U.S.). The transfer was completed in August 2015.

〇 In July 2015, JCR Pharmaceuticals Co., Ltd. (Hyogo) and the Company concluded a

feasibility study agreement on the application of JCR Pharmaceuticals’ blood-brain-barrier

penetration technology “J-Brain Cargo” to the discovery of new treatments.

〇 In July 2015, the Company and Halozyme Therapeutics, Inc. (U.S.) signed a clinical

collaboration agreement to evaluate Eisai’s anticancer agent Halaven in combination with

Halozyme Therapeutics’ investigational drug PEGPH20 (PEGylated recombinant human

hyaluronidase) in first-line HER2-negative advanced breast cancer.

〇 In August 2015, the Company and Purdue Pharma L.P. (U.S.) entered into a worldwide

collaboration agreement for the development and commercialization of the Company’s

clinical candidate lemborexant (development code: E2006), a dual orexin receptor

antagonist entering Phase III clinical development for the treatment of insomnia.

〇 In September 2015, the Drugs for Neglected Diseases initiative (Switzerland) and the

Company signed an agreement to proceed with the clinical development of the Company’s

antifungal drug fosravuconazole for the potential new treatment of eumycetoma, a fungal

form of mycetoma and one of the world’s most neglected diseases.

〇 The Company entered into two joint research agreements for the development of

antimalarial medicines with the Liverpool School of Tropical Medicine (U.K.) / University of

Liverpool (U.K.) and the non-profit public-private partnership Medicines for Malaria Venture

(Switzerland) in September and October 2015, respectively. In November 2015, these two

joint research programs were awarded a grant from the Global Health Innovation

Technology Fund.

8

〇 In November 2015, the Company entered into an agreement to grant Roivant Sciences Ltd.

an exclusive worldwide license concerning the research, development, manufacture and

marketing of its in-house discovered selective phosphodiesterase 4 inhibitor E6005. The

development of E6005 is at the Phase II clinical study stage in Japan for the indication of

atopic dermatitis.

〇 In November 2015, the Company entered into a share transfer agreement with Sekisui

Chemical Co., Ltd. (Osaka) concerning the transfer of all shares held by the Company in its

wholly-owned subsidiary EIDIA Co., Ltd. to Sekisui Chemical. All transfer processes were

completed on December 28, 2015.

〇 In November 2015, the Company entered into a share transfer agreement with Mitsubishi-

Kagaku Foods Corporation (Tokyo), a subsidiary of Mitsubishi Chemical Corporation,

concerning the transfer of all shares held by the Company in its wholly owned subsidiary

Eisai Food & Chemical Co., Ltd. to Mitsubishi-Kagaku Foods. The share transfer was

completed on February 1, 2016.

〇 In November 2015, the Group’s China holding company Eisai China Holdings Ltd. (Suzhou,

Jiangsu) entered into an agreement to acquire all shares of the Chinese generic

pharmaceutical company Liaoning TianYi Biological Pharmaceutical Co., Ltd. (Benxi,

Liaoning), and the transfer process was completed on December 28, 2015.

〇 In December 2015, the Company entered into a business acquisition agreement with

Alfresa Holdings Corporation (Tokyo) concerning the splitting off of the Company’s

consolidated pharmaceutical manufacturing and marketing subsidiary Sannova Co., Ltd.

(shareholding ratio: 79.5%) via an absorption-type split, its succession by a newly

established company, and the subsequent transfer of all shares issued in this newly

established company to Alfresa Holdings. The share transfer was completed on April 1,

2016.

〇 In January 2016, the Company entered into an exclusive license agreement with HUYA

Bioscience International, LLC (U.S.) to develop and market the oral histone deacetylase

inhibitor HBI-8000 in Japan, South Korea, Thailand, Malaysia, Indonesia, Philippines,

Vietnam and Singapore. Under the agreement, HUYA Bioscience International will be

responsible for development of the agent for peripheral T-cell lymphoma as well as adult

T-cell leukemia-lymphoma, while the Company will be responsible for commercialization in

the licensed territories. For all other indications, the Company retains exclusive rights to

develop and market the agent in the licensed territories.

〇 In February 2016, the Company entered into a comprehensive non-exclusive collaboration

agreement with Sysmex Corporation (Hyogo) aimed at the creation of new diagnostics in

the field of dementia.

〇 In March 2016, the Group’s U.S. subsidiary Eisai Inc. agreed to return all rights to promote

and distribute AKYNZEO (netupitant/palonosetron) in the U.S. to Helsinn Therapeutics Inc.,

the U.S. subsidiary of Helsinn Healthcare S.A. (Switzerland). Regarding the antiemetic

agent ALOXI (palonosetron), the Group will continue to co-promote the product with

Helsinn Therapeutics Inc. as in the past.

9

〇 In March 2016, the Group’s U.S. subsidiary Eisai Inc. entered into a share purchase

agreement concerning the transfer of all the shares of AkaRx, Inc. held by Eisai Inc. to

PBM Capital Group, LLC. (U.S., “PBM”). In accordance with the agreement, Eisai Inc. has

transferred to PBM ownership of AkaRx and the worldwide rights to develop, market and

manufacture the investigational thrombocytopenia treatment avatrombopag (generic name,

development code: E5501).

〇 In March 2016, the Company entered into an agreement to transfer the exclusive

worldwide development and marketing rights (excluding Japan and Asia) for its

investigational anticancer agent E7777 to Dr. Reddy’s Laboratories Ltd.

〇 In April 2016, the gastrointestinal specialty pharma EA Pharma Co., Ltd. (EA Pharma) was

established through the splitting off of a portion of the Company’s gastrointestinal disease

treatment business and its subsequent succession by AJINOMOTO PHARMACEUTICALS

CO., LTD. (Tokyo), a wholly-owned subsidiary of Ajinomoto Co. Inc. (Tokyo), via

absorption-type split. EA Pharma is a consolidated subsidiary of the Company, with the

Company and Ajinomoto holding 60% and 40% of the shares in EA Pharma, respectively.

(3) Consolidated Financial Results Forecasts for Fiscal 2016

(April 1, 2016, to March 31, 2017)

[Consolidated Forecast]

(Percentage figures show year-on-year changes.)

2nd quarter (cumulative) Fiscal year

Revenue ¥279,800 million 1.6% ¥580,000 million 5.9%

Operating profit ¥19,700 million 9.0% ¥53,700 million 3.4%

Profit before income taxes ¥19,000 million 9.6% ¥52,200 million 3.4%

Profit for the period ¥10,000 million (10.2%) ¥32,400 million (41.1%)

Profit attributable to owners

of the parent ¥8,200 million (25.7%) ¥29,200 million (46.8%)

* Forecasted earnings per share attributable to owners of the parent (basic): 2nd quarter (cumulative) ¥28.54;

fiscal year ¥102.12

* Assumptions: 1 USD = ¥113, 1 EUR = ¥127, 1 GBP = ¥165, 1 RMB = ¥17.2

(Reference) Currency exchange rates for fiscal 2015 (average)

1 USD = ¥120.14, 1 EUR = ¥132.57, 1 GBP = ¥181.30, 1 RMB = ¥18.85

<Revenue>

〇 A number of factors including further growth from additional indications and the expanding

launch of global brands Halaven, Lenvima and Fycompa, combined with growth in the

Japan Pharmaceutical Business driven by the establishment of EA Pharma Co., Ltd., and

the shift to a business structure with a greater focus on regional care, in addition to

maintenance of high growth in China and Asia, will help to offset the impact of drug price

10

revisions in Japan. As such, consolidated revenue is expected to increase to ¥580,000

million (up 5.9% year-on-year).

〇 Revenue is expected to increase for Halaven and Lenvima to ¥49,000 million (up 22.0%

year-on-year) and ¥28,000 million (up 144.0% year-on-year), while revenue for Fycompa

is also expected to increase to ¥13,500 million (up 78.7% year-on-year).

<Profit>

〇 In addition to the anticipated increase in revenue due to the expansion of global brands,

through the Group’s initiatives to improve productivity, operating profit is expected to come

to ¥53,700 million (up 3.4% year-on-year). Together with carrying out focused investment

on R&D projects for flagship candidates in the strategically important areas of neurology

and oncology, the Group is striving to further enhance its revenue structure through

various initiatives including thorough investment of resources optimized for revenue

expansion and promoting a reduction in cost of sales by leveraging local advantages and

technology at each production site.

〇 Due to the effect of temporary reductions in tax expenses in the United States that

occurred in the previous period, profit for the year is expected to come to ¥32,400 million

(down 41.1% year-on-year), while profit attributable to owners of the parent is expected to

be ¥29,200 million (down 46.8% year-on-year).

11

2) Analysis Concerning Consolidated Financial Position

[Assets, Liabilities and Equity]

〇 Total assets as of the end of the period amounted to ¥973,987 million (down ¥79,831

million from the end of the previous fiscal year), in part due to a decrease in property, plant

and equipment following the U.S. plant transfer and depreciation, and a decrease in

intangible assets due to amortization of marketing rights.

〇 Total liabilities as of the end of period amounted to ¥397,159 million (down ¥54,598 million

from the end of the previous fiscal year), in part due to redemption of bonds and a

decrease in trade payables and other liabilities.

〇 Total equity as of the end of the period amounted to ¥576,828 million (down from ¥25,233

million from the end of the previous fiscal year) following a reduction in exchange

differences from the previous fiscal year-end date.

〇 As a result of the above, the ratio of equity attributable to owners of the parent was 58.9%

(up 2.1 percentage points from the end of the previous fiscal year). Furthermore, the net

debt equity ratio (Net DER) as of the end of this period was 0.01 (down 0.05 points from

the end of the previous fiscal year).

(Note) Net DER = (Interest-bearing debts [Bonds and borrowings] - Cash and cash equivalents - Time deposits exceeding

three months) / Equity attributable to owners of the parent

[Cash Flows] (April 1, 2015, to March 31, 2016)

〇 Net cash provided by operating activities amounted to ¥95,617 million (up ¥19,595 million

from the previous fiscal year). Specifically, profit before income taxes was ¥ 50,473 million;

depreciation and amortization amounted to ¥34,064 million.

〇 Net cash used in investing activities amounted to ¥6,701 million (down ¥12,140 million for

the previous fiscal year). Proceeds from sale of property, plant and equipment totaled

¥13,995 million and purchases of intangible assets, including marketing rights, was

¥33,258 million. Furthermore, net cash flow on acquisition of a generics pharmaceutical

company in China totaled ¥8,954 million and net cash inflow on sales of a subsidiary in

Japan totaled ¥20,531 million. Capital expenditures totaled ¥14,500 million.

〇 Net cash used in financial activities amounted to ¥72,944 million (up ¥13,202 million from

the previous fiscal year), Redemption of bonds was ¥30,000 million, and the amount of

dividends paid was ¥42,865 million.

〇 As a result, cash and cash equivalents as of the end of this period stood at ¥179,326

million (up ¥5,991 million from the end of the previous fiscal year).

〇 Free cash flows (net cash provided by operating activities less capital expenditure) for this

period stood at ¥81,117 million (up ¥20,707 million from the previous fiscal year).

12

[Trends in Financial Indicators]

FY2012 FY2013 FY2014 FY2015

Ratio of equity attributable to owners

of the parent (%) 48.0 54.0 56.8 58.9

Ratio of equity attributable to owners

of the parent on market basis (%) 118.7 117.7 231.3 198.8

Debt to cash flow ratio 4.3 2.8 3.2 2.2

Interest coverage ratio 11.2 15.6 17.3 24.2

Ratio of equity attributable to owners of the parent: Equity attributable to owners of the parent / total assets

Ratio of equity attributable to owners of the parent on market basis: Market capitalization / total assets

Debt to cash flow ratio: Interest-bearing debts / cash flow

Interest coverage ratio: Cash flow / interest payments

(Notes)

1. Figures are calculated based on consolidated financial results

2. Market capitalization is calculated based on the number of outstanding shares excluding treasury stock

3. Cash flow represents operating cash flow

4. Interest-bearing debts include all debts subject to interest payment among the debt amounts stated in the

consolidated balance sheet.

5. As IFRS was adopted from fiscal 2013, only the past three periods are shown for comparison.

3) Basic Policy on Profit Appropriation and Dividends for Fiscal 2015 and 2016

At Eisai Co., Ltd., the dividend payments are determined by a resolution of the Board of

Directors as specified in the Company’s Articles of Incorporation. The Company has set the

year-end dividend for fiscal 2015 at ¥80 per share as previously projected. With the interim

dividend of ¥70 per share, the company intends to pay the total dividend of ¥150 per share for

the year (same amount as the previous year). In this context, the DOE ratio is 7.3%.

The annual dividend for fiscal 2016 (the year ending March 31, 2017) is expected to be ¥150

per share (¥70 for interim and ¥80 for year-end dividend), unchanged from fiscal 2015.

For further information on the Company’s dividend policy, please refer to “2. Management

Policy 4) Basic Policy for Capital Strategy (2) Shareholder Returns” on page 16.

13

2. Management Policy

1) Corporate Mission

The Eisai Group defines its corporate mission as “Giving first thought to patients and their

families, and to increasing the benefits that health care provides.” Guided by this mission, all

corporate officers and employees aspire to meet the various needs of global health care as

representatives of a “human health care (hhc) company” that is capable of making a meaningful

contribution under any health care system. The Group codified this fundamental approach into its

Articles of Incorporation and endeavors to share its basic concept with shareholders.

In order to understand the true needs of patients and their families, it is important for each

employee to first get close to the patients, and get a sense of their thoughts and feelings that

cannot be expressed in words. This is the starting point of all of Eisai’s corporate activities. The

Group recommends that all employees worldwide spend 1% of their working hours with patients.

Translating this hhc philosophy into action, the Group is committed to deepening the

relationships built on trust with its principal stakeholders, namely patients and their families,

shareholders, and employees, while continuously ensuring compliance with applicable laws and

ethical standards, thereby enhancing corporate value.

2) Management Objectives

The Group considers Return on Equity (ROE)*1 an important indicator of the sustainable creation

of value for shareholders. In terms of ROE management, the Group aims to attain a high ROE

level that exceeds the cost of capital by improving profit margins, financial leverage, and asset

turnover in the medium- to long-term.

Furthermore, Dividend on Equity (DOE)*2 shows the ratio of dividend to shareholders’ equity

and the Group positions DOE as an important index for balance sheet management and capital

policy. In addition, the Group uses the ratio of equity attributable to owners of the parent and net

debt equity ratio as indicators to measure a healthy balance sheet. *1

ROE (Profit ratio to equity attributable to owners of the parent) *2

DOE (Dividend on equity attributable to owners of the parent ratio)

3) Medium- to Long-term Corporate Management Strategy and Issues that Need to be

Addressed

Considering the expansion of the middle-income class in emerging countries, the global aging of

society, and the rapid increase in non-communicable diseases such as cancer, lifestyle diseases

and dementia, the quality, efficiency and sustainability of healthcare is being increasingly called

into question. In order to respond to the coming environmental changes to the global

pharmaceutical industry over the next decade, the Eisai Group has set out a new medium-term

business plan “EWAY 2025” along seven themes, namely: “Patient-centricity”, “Prevention, Cure

and Care”, “Regional Care / Home Care”, “Outcomes”, “Payers”, “Access” and “Digital

Technology”, and the plan was initiated in April 2016.

14

(1) Reflecting on the HAYABUSA Plan

According to the Group’s strategic plan “HAYABUSA” (FY2011-FY2015), results were attained to

a certain extent in qualitative areas such as strengthening the Asia Region, expanding into

developing countries, creating a global business organization, installing the oncology business

as part of the foundation of the Group, as well as enhancing product creation capability. Although

profit and loss related targets for revenue and profit were not met due to an inadequate response

to business environment changes stemming from LOE of major products as well as delays in

product creation, the Group was still able to obtain certain results to improve shareholder value

such as strengthening the balance sheet by replenishing shareholders’ equity and reducing

interest bearing liabilities, as well as maintaining dividend and increasing market capitalization.

(2) The New Medium-term Business Plan “EWAY 2025”

EWAY 2025 consists of three strategic intents, and the Group’s vision to work toward over the

next decade. The three strategic intents are:

a) Respond to patients thinking “I do not want to become ill. If I do, I want to know and be cured

as quickly as possible.”

b) Respond to patients thinking “I want to control my disease in my neighborhood and safely

spend the rest of my life with peace of mind.”

c) Focus on “business domains where Eisai can find out “Ricchi (opportunities)” based on needs

and fulfill them with Eisai innovation.”

Serving as the foundation for these strategic intents is the Group’s corporate philosophy of hhc

which reflects its desire to contribute to patients. Sharing experiences by spending time together

with patients and the strong motivation to understand their true needs is the source of the

Group’s innovation.

EWAY 2025 positions “dementia-related and neurological diseases (neurology)” and “cancer

(oncology)” as strategically important areas where the Group can find out “Ricchi”, areas where

patients true needs remain unmet and the Group can become a front-runner. Accordingly, the

Neurology Business Group (NBG) and the Oncology Business Group (OBG) were established.

These two business groups are organizational structures that aggregate all functions from

research and development through to sales, and will carry out investment focused on R&D for

flagship candidates for the Ricchi identified in these two areas.

Aiming to realize prevention and cure in the field of dementia, the NBG aims to steadily roll out

its development programs for next-generation Alzheimer’s disease treatments – the BACE

inhibitor E2609 and the anti-Aβ protofibril antibody BAN2401, as well as developing therapies to

improve the symptoms associated with dementia and early stage diagnostic methods.

Furthermore, the NBG aims to address new patient needs such as sleep fragmentation

associated with dementia in addition to insomnia with the orexin receptor antagonist lemborexant

(generic name). Also, the NBG is working to advance the development of a next-generation

AMPA receptor antagonist (for multiple neurological diseases) and other treatments while

15

maximizing value for patients through additional indications and formulations for the antiepileptic

drug Fycompa and the antiobesity agent BELVIQ, both global brands.

The OBG will continue to make full use of its technological strength in synthetic chemistry and

drug discovery targeting (for molecular targets) that fostered Lenvima and Halaven to advance

new drug development toward a cure for cancer. While advancing development on novel

compounds such as the Group’s first in-house discovered cancer immunotherapy candidate

E7046 and novel antibody therapies from U.S. research subsidiary Morphotek, Inc., another U.S.

research subsidiary, H3 Biomedicine Inc., is aiming to shorten development time for its FGFR4

inhibitor (for hepatocellular carcinoma, etc.) and SF3B1 modulator (for myelodysplastic

syndromes, etc.) by taking a drug discovery approach based on cancer genome information.

Additionally, by steadily expanding the indications for global brands Lenvima and Halaven, the

OBG strives to increase patient value through both products.

Additionally, to address the rapid accelerating advances in digital technology, the Group plans

to establish an hhc data creation center that will centrally manage the collection and access to

various kinds of data represented by big data and other data accumulated within the Group. By

analyzing these data with the free use of sophisticated parsing techniques such as artificial

intelligence, the Group may be able to identify new potential drug targets and biomarkers,

provide solutions that match the individual needs of patients, and create evidence for

outcome-based assessment.

Striving to respond to forecasted reforms to the medical system including the specialization

and coordination of medical functions as well as the enhancement of home care, the Group is

implementing a change to the business mix with medical, outcomes and access at the core to

focus on regional care. Especially in Japan, the Group plans to create evidence to show how a

mix of products from EA Pharma (gastrointestinal disease) and Elmed Eisai (generics) in

addition to Eisai can bring about the best outcomes for diseases with high incidence that require

home care such as dementia, insomnia, osteoporosis, and constipation, as well as increase

access for patients. Furthermore, based on knowledge and experience in the field of dementia

built up since the launch of Aricept, the Group aims to roll out a dementia solutions business that

features tools to support early diagnosis, a multidisciplinary cooperation system, and tools to

encourage adherence, in order to contribute to patients by providing an environment under which

they can live safely with peace of mind in their local community.

The Group's business portfolio is now concentrated into six areas consisting of Neurology

Business, Oncology Business, EA Pharma, Generics Business, Consumer Business, and

Dementia Solutions Business, where Ricchi can be found out and the Group can innovate

constantly in. In the global production system as well, the Group intends to establish innovation

based “Ricchi” that utilize the strengths of each factory, and expand demand innovation activities

on a global scale.

Looking toward 2025, the Group’s ideal form is to become a “medico societal innovator” which

will fulfil hhc needs in the two most important domains of “Prevention, Cure and Care”, and

“Regional care that ensures safety and peace of mind”. Moving forward, the Group will work to

16

fully implement its new medium term business plan EWAY 2025 and strive to contribute further

to patients around the world.

(3) Initiatives to Improve Access to Medicines

To help eliminate neglected diseases in developing nations, the Group has signed an

agreement with the World Health Organization (WHO) to provide a treatment for lymphatic

filariasis for use in elimination initiatives conducted in endemic countries. Under this agreement,

the Group will provide WHO with 2.2 billion tablets of DEC (diethylcarbamazine) free of charge

by 2020. These DEC tablets are manufactured at the Vizag Plant in India. As of March 2016,

approximately 600 million tablets have been supplied to 23 countries since the commencement

of supply in October 2013. The Group is also involved in the development of new drugs for the

treatment of other neglected tropical diseases as well as tuberculosis and malaria. Partnerships

are being actively promoted with international NPOs, research institutes, and other organizations

specializing in these diseases. The Group considers its contributions to the economic

development and expansion of the middle-income class through the enhancement of health and

welfare in developing and emerging countries as a form of long-term investment in the future

growth of these economies.

4) Basic Policy for Capital Strategy

Aiming to improve shareholder value, the Group’s capital policy revolves around “medium- to

long-term Return on Equity (ROE) management,” “sustainable and stable shareholder returns”

and “value-creative investment criteria.”

(1) Medium- to Long-term ROE Management

The Company believes that ROE is an important indicator of the sustainable creation of value

for shareholders. In terms of medium- to long-term ROE management, the Company aims for

an ROE that exceeds the cost of capital (creation of a positive equity spread*1) by improving

profit margins, financial leverage and asset turnover in the medium- to long-term.

(2) Shareholder Returns

In terms of shareholder returns, profits are returned to all shareholders in a stable and

sustainable way based on factors such as a healthy balance sheet and comprehensive

consideration of the consolidated financial results, Dividends on Equity (DOE) and free cash

flow, as well as taking into consideration the signaling effect. Because DOE indicates the ratio

of dividends to consolidated net assets, the Company has positioned it as an indicator that

reflects balance sheet management, and, consequently, capital policy. Acquisition of treasury

stock will be carried out appropriately after factors such as the market environment and capital

efficiency are taken into account. The Company uses the ratio of equity attributable to owners

of the parent and net debt ratio as indicators to measure a healthy balance sheet.

17

(3) Value-Creative Investment Criteria

To ensure that strategic investments create shareholder value, the Company invests

selectively using its Value-Creative Investment Criteria based on Net Present Value and the

Internal Rate of Return spread using a risk-adjusted hurdle rate

*1 Equity spread = ROE – Cost of shareholder capital

5) Corporate Governance

(1) Basic Approach to Corporate Governance

The Company believes that the focus of corporate governance is to respect the rights of all our

shareholders, ensure fair and transparent management, and enhance corporate vitality.

Always aiming for the best corporate governance, the Company strives to achieve corporate

governance in accordance with the following basic points of view.

(2) Shareholder Relations:

The Company shall:

・ Respect the rights of all shareholders;

・ Ensure the equality of all shareholders;

・ Develop positive and smooth relations with the Company's stakeholders including all

shareholders; and

・ Ensure transparency by properly disclosing Company information.

(3) Corporate Governance System

・ The Company has adopted a “Company with a Nomination Committee, etc.” System.

・ The Board of Directors (“the Board”) shall delegate to the Corporate Officers broad

powers of decision-making over business execution, to the extent permitted by the laws

and regulations, and it shall exercise the function of management oversight.

・ The majority of the Board shall be independent and neutral Outside Directors.

・ The Representative Corporate Officer and CEO shall be the only Director who is

concurrently a Corporate Officer.

・ To clarify the management oversight function, the positions of Chair of the Board and of

Representative Corporate Officer and CEO shall be separated and performed by different

people.

・ The Nomination Committee and the Compensation Committee shall be entirely composed

of Outside Directors, and the majority of the Audit Committee shall consist of Outside

Directors.

・ Each of the Chairs of the Nomination Committee, the Audit Committee and the

Compensation Committee shall be appointed from the Outside Directors.

・ The internal control system shall operate properly to ensure the credibility of financial

reports.

18

Detailed information on the Company’s corporate governance system is available on the Eisai

corporate website along with the Company’s Corporate Governance Guidelines, Rules of the

Board of Directors, Rules of the Nomination Committee, Rules of the Audit Committee, and

Rules of the Compensation Committee.

(http://www.eisai.com/company/governance/index.html)

The Corporate Governance Report submitted to the Tokyo Stock Exchange (TSE) is available

on the website of the TSE as well as on the Eisai corporate website.

(http://www.eisai.com/company/cgregulations.html)

6) Compliance and Risk Management

The Group defines compliance as “the observance of the highest legal and ethical standards”

and positions it at the core of management activities. In addition, the Group defines internal

control as “the systems and processes established and managed internally to ensure proper and

efficient operations,” and shares the Policy for Internal Control with all officers and employees.

The Group has appointed a Chief Compliance Officer and Corporate Officer responsible for

internal control, who works to enhance compliance and internal control on a global scale in hope

of raising awareness of compliance and risks and strengthening the Group’s ability to respond to

such issues.

3. Basic Approach to the Selection of Accounting Standards

In order to make it more convenient for various stakeholders including shareholders and

investors in Japan and overseas by improving disclosure and comparability of financial

information on an international basis, the Company voluntarily adopted IFRS from the fiscal year

ended March 31, 2014 and has disclosed its consolidated financial statements in accordance

with IFRS from the first three-month period ended March 31, 2015.

http://www.eisai.com/company/governance/index.html

http://www.eisai.com/company/cgregulations.html

19

4. Consolidated Financial Statements

1) Consolidated Statement of Income

(Millions of yen)

Note Fiscal year ended March 31, 2016

Fiscal year ended March 31, 2015

Revenue (1) 547,922 548,465

Cost of sales (2) (194,459) (193,595)

Gross profit 353,463 354,870

Selling, general and administrative expenses (2) (192,817) (194,546)

Research and development expenses (2) (122,307) (131,907)

Other income (3) 17,661 981

Other expenses (4) (4,066) (1,061)

Operating profit 51,935 28,338

Financial income (5) 2,024 2,429

Financial costs (6) (3,485) (4,892)

Profit before income taxes 50,473 25,875

Income taxes (7) 4,571 17,578

Profit for the year 55,045 43,453

Attributable to

Owners of the parent 54,933 43,254

Non-controlling interests 111 200

Earnings per share

Basic (yen) 192.23 151.57

Diluted (yen) 191.76 151.37

20

2) Consolidated Statement of Comprehensive Income

(Millions of yen)



Profit for the year 55,045 43,453

Other comprehensive income

Items that will not be reclassified to profit or loss

Financial assets measured at fair value through other comprehensive income

1,609 3,365

Remeasurements of defined benefit plans (6,816) 4,965

Subtotal (5,207) 8,330

Items that may be reclassified subsequently to profit or loss

Exchange differences on translation of foreign operations

(32,660) 61,927

Cash flow hedges (725) 520

Subtotal (33,386) 62,447

Total other comprehensive income (loss), net of tax

(38,593) 70,776

Comprehensive income for the year 16,452 114,230

Attributable to

Owners of the parent 16,483 113,949

Non-controlling interests (31) 280

21

3) Consolidated Statement of Financial Position

(Millions of yen)

Note As of

March 31, 2016

As of

March 31, 2015

Assets

Non-current assets

Property, plant and equipment 104,555 132,999

Goodwill 174,877 183,756

Intangible assets 104,163 127,629

Other financial assets 43,824 42,343

Other assets 7,139 3,372

Deferred tax assets 91,630 88,995

Total non-current assets 526,188 579,094

Current assets

Inventories 73,677 87,641

Trade and other receivables 147,664 174,336

Other financial assets 19,542 28,421

Other assets 20,305 10,992

Cash and cash equivalents 176,830 173,335

Subtotal 438,018 474,724

Assets held for sale (1) 9,782 －

Total current assets 447,800 474,724

Total assets 973,987 1,053,818

22

(Millions of yen)

Note As of

March 31, 2016

As of

March 31, 2015

Equity

Equity attributable to owners of the parent

Share capital 44,986 44,986

Capital surplus 58,232 58,040

Treasury shares (36,231) (37,308)

Retained earnings 394,974 387,967

Other components of equity 111,701 145,064

Total equity attributable to owners of the parent

573,661 598,749

Non-controlling interests 3,168 3,313

Total equity 576,828 602,061

Liabilities

Non-current liabilities

Bonds and borrowings 203,593 205,846

Other financial liabilities 3,214 2,352

Retirement benefit liabilities 13,203 7,238

Provisions 1,189 1,198

Other liabilities 20,962 25,543

Deferred tax liabilities 287 514

Total non-current liabilities 242,448 242,691

Current liabilities

Bonds and borrowings － 30,235

Trade and other payables 56,399 84,586

Other financial liabilities 4,221 4,602

Income tax payables 5,437 3,880

Provisions 11,143 11,126

Other liabilities 74,728 74,636

Subtotal 151,927 209,065

Liabilities directly associated with assets held for sale

(1) 2,784 －

Total current liabilities 154,711 209,065

Total liabilities 397,159 451,757

Total equity and liabilities 973,987 1,053,818

23

4) Consolidated Statement of Changes in Equity


(Millions of yen)


Share

capital

Capital

surplus

Treasury

shares

Retained

earnings

Other components of equity

Financial assets

measured at

fair value

through other

comprehensive

income

Remeasurements

of defined

benefit plans

As of April 1, 2015 44,986 58,040 (37,308) 387,967 －－

Profit for the year －－－ 54,933 －－

Other comprehensive income (loss) －－－－ 1,608 (6,695)

Comprehensive income

(loss) for the year －－－ 54,933 1,608 (6,695)

Dividends －－－ (42,865) －－

Share-based payments － (216) －－－－

Acquisition of treasury shares －－ (94) －－－

Disposal of treasury shares － 367 1,171 －－－

Reclassification －－－ (5,087) (1,608) 6,695

Other changes － 41 － 25 －－

Total transactions with owners － 192 1,077 (47,926) (1,608) 6,695

As of March 31, 2016 44,986 58,232 (36,231) 394,974 －－


Non-controlling

interests

Total

Equity

Other components of equity Equity

attributable to

owners of the

parent

Exchange

differences on

translation of

foreign operations

Cash flow

hedges

Total other

components

of equity

As of April 1, 2015 145,475 (411) 145,064 598,749 3,313 602,061

Profit for the year －－－ 54,933 111 55,045

Other comprehensive income (loss) (32,639) (725) (38,451) (38,451) (142) (38,593)


(loss) for the year (32,639) (725) (38,451) 16,483 (31) 16,452

Dividends －－－ (42,865) (59) (42,923)

Share-based payments －－－ (216) － (216)

Acquisition of treasury shares －－－ (94) － (94)

Disposal of treasury shares －－－ 1,538 － 1,538

Reclassification －－ 5,087 －－－

Other changes －－－ 66 (55) 11

Total transactions with owners －－ 5,087 (41,570) (114) (41,685)

As of March 31, 2016 112,837 (1,136) 111,701 573,661 3,168 576,828

24


(Millions of yen)


Share

capital

Capital

surplus

Treasury

shares

Retained

earnings


Financial assets

measured at

fair value

through other

comprehensive

income

Remeasurements

of defined

benefit plans

As of April 1, 2014 44,986 57,949 (38,481) 379,210 －－

Profit for the year －－－ 43,254 －－

Other comprehensive income (loss) －－－－ 3,364 4,923


(loss) for the year －－－ 43,254 3,364 4,923

Dividends －－－ (42,810) －－

Share-based payments － (135) －－－－

Acquisition of treasury shares －－ (48) －－－

Disposal of treasury shares － 226 1,220 －－－

Reclassification －－－ 8,288 (3,364) (4,923)

Other changes －－－ 26 －－

Total transactions with owners － 91 1,173 (34,497) (3,364) (4,923)

As of March 31, 2015 44,986 58,040 (37,308) 387,967 －－


Non-controlling

interests

Total

Equity


Equity

attributable to

owners of the

parent

Exchange

differences on

translation of

foreign

operations

Cash flow

hedges

Total other

components

of equity

As of April 1, 2014 83,587 (931) 82,656 526,320 3,084 529,405

Profit for the year －－－ 43,254 200 43,453

Other comprehensive income (loss) 61,889 520 70,696 70,696 81 70,776


(loss) for the year 61,889 520 70,696 113,949 280 114,230

Dividends －－－ (42,810) (52) (42,862)

Share-based payments －－－ (135) － (135)

Acquisition of treasury shares －－－ (48) － (48)

Disposal of treasury shares －－－ 1,446 － 1,446

Reclassification －－ (8,288) －－－

Other changes －－－ 26 (0) 26

Total transactions with owners －－ (8,288) (41,521) (52) (41,573)

As of March 31, 2015 145,475 (411) 145,064 598,749 3,313 602,061

25

5) Consolidated Statement of Cash Flows (Millions of yen)

Note Fiscal year ended March 31, 2016


Operating activities

Profit before income taxes 50,473 25,875

Depreciation and amortization 34,064 38,940

Impairment losses 2,133 65

(Increase) decrease in working capital (1) 35,913 18,493

Interest and dividends received 1,896 1,887

Interest paid (3,949) (4,403)

Income taxes paid (9,995) (10,249)

Income taxes refund 2,096 3,903

Other (17,014) 1,511

Net cash from operating activities 95,617 76,022

Investing activities

Purchases of property, plant and equipment (6,814) (11,483)

Proceeds from sale of property, plant and equipment

13,995 2,813

Purchases of intangible assets (33,258) (6,942)

Net cash outflow on acquisition of subsidiaries (2) (8,954) －

Net cash inflow on sales of subsidiaries (3) 20,531 －

Purchases of financial assets (16,526) (9,912)

Proceeds from sale and redemption of financial assets

16,659 10,777

Payments of time deposits exceeding three months

(26,976) (37,174)

Proceeds from redemption of time deposits exceeding three months

34,934 33,021

Other (291) 60

Net cash from (used in) investing activities (6,701) (18,841)

Financing activities

Net increase (decrease) in short-term borrowings

(227) (5,994)

Proceeds from long-term borrowings 39,904 107,812

Repayment of long-term borrowings (40,000) (118,968)

Redemption of bonds (30,000) －

Dividends paid (42,865) (42,810)

Other 244 219

Net cash from (used in) financing activities (72,944) (59,742)

Effect of exchange rate change on cash and cash equivalents

(9,982) 21,974

Net increase (decrease) in cash and cash equivalents

5,991 19,414

Cash and cash equivalents at beginning of year 173,335 153,921

Cash and cash equivalents at end of year (4) 179,326 173,335

26

6) Notes to Consolidated Financial Statements

(Going Concern)

Not applicable

(Basis of Preparing Consolidated Financial Statements)

(1) Compliance

As the Company meets the requirements of a “Specified Company,” pursuant to Article 1-2 of the Consolidated

Financial Statement Ordinance, the consolidated financial statements of the Group have been prepared in

accordance with IFRS subject to the provisions of Article 93 of said Ordinance.

(2) Basis of measurement

The consolidated financial statements are prepared on an acquisition cost basis except for the financial instruments

that are measured at fair value and assets (liabilities) of retirement benefit plans.

(3) Presentation currency and unit

The consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency,

and figures less than 1 million yen are rounded to the nearest million yen.

(4) Changes in accounting policies

The Group has adopted the following main accounting standards and interpretations from the fiscal year ended March

31, 2016.

Accounting standards

and interpretations

Mandatory

application

(Date of

commencement)

To be applied

by the Group Description

IAS 19 Employee Benefits July 1, 2014 Fiscal year ended

March 2016

Amendment of accounting for

contributions from employees or third

parties to defined benefit plans

The effect of Accounting standards and interpretations above on the consolidated financial statements is immaterial.

(5) Changes in accounting estimates

From the fiscal year ended March 31, 2016, the useful life of sales rights was revised by changing the estimation

method regarding exclusive sales periods for pharmaceutical products. As a result, amortization expenses (cost of

sales) for the fiscal year ended March 31, 2016, have been reduced by ¥2,309 million.

The reporting segment mainly affected by this change is the Americas pharmaceutical business.

(6) Early application of new accounting standards and interpretations

The Group has early applied the following accounting standards and interpretations from April 1, 2012.

・IFRS 9 “Financial Instruments” (issued in November 2009 and revised in October 2010 and December 2011)

27

(7) New accounting standards and interpretations not yet applied by the Group

As of the date of approval of the consolidated financial statements by the Group, main new accounting standards and

interpretations that have been issued are as follows.

Accounting standards

and interpretations

Mandatory

application

(Date of

commencement)

To be applied

by the Group Description

IAS 16 IAS 38

Property, Plant and Equipment Intangible Assets

January 1, 2016 Fiscal year ended

March 2017

Clarification of acceptable methods of depreciation and amortization

IFRS 11 Joint Arrangements January 1, 2016 Fiscal year ended

March 2017 Accounting for acquisitions of interests in joint operations

IAS 1 Presentation of Financial Statements


March 2017

Clarifying disclosure requirement regarding materiality considerations

IFRS 10 IFRS 12 IAS 28

Consolidated Financial Statements

Disclosure of Interests in Other Entities

Investments in Associates


March 2017

Clarifying exceptions for applying consolidation and the equity method for investment entities

IAS 12 Income Taxes January 1, 2017 Fiscal year ended

March 2018

Clarification of accounting methods applicable to deferred tax assets for unrealized losses

IAS 7 Statement of Cash Flows January 1, 2017 Fiscal year ended

March 2018

Disclosure requirement for changes in liabilities arising from financing activities

IFRS 15 Revenue from Contracts with Customers


March 2019 Amendment of accounting for revenue recognition

IFRS 9 (final ver.)

Financial Instruments January 1, 2018 Fiscal year ended

March 2019

Amendments of financial instrument classification and measurement, impairment and hedge accounting

IFRS 16 Leases January 1, 2019 Fiscal year ended

March 2020

Amendments to recognition and accounting methods for leases

IFRS 10 IAS 28

Consolidated Financial Statements Investments in Associates

Not decided Not decided Amendments to accounting for selling assets to associates

As of the reporting date, the Group has not yet applied these accounting standards and interpretations. The Group

evaluates that none of these accounting standards and interpretations that are applied in the fiscal year ended March

31, 2017 by the Group will have a material impact on the consolidated financial statements. The impact to the

consolidated financial statements by these accounting standards and interpretations that are applied in the fiscal year

ended March 31, 2018 and after is under review.

28

(Significant Accounting Policies)

The Group’s significant accounting policies described below are applied to the consolidated financial statements

throughout the period.

(1) Basis of consolidation

The Group’s consolidated financial statements are prepared based on the financial statements of the Company, its

subsidiaries and its associate under uniform accounting policies. In case where accounting policies applied by a

subsidiary or associate are different from those applied by the Group, adjustments are made to their financial

statements as needed. In addition, all inter-company transactions, balances and unrealized gains/losses from

inter-company transactions are eliminated on consolidation.

a) Subsidiary

A subsidiary is an entity that is controlled by the Group. The Group controls an entity when the Group has the power

over the investee, is exposed to variable returns from involvement with the investee, and has the ability to use power

over the investee to affect the investor’s return.

A subsidiary’s financial statements are included in the consolidation statements from the date the Group obtains

control of the subsidiary until the date the Group loses control of it. Changes in the Group’s interest in a subsidiary

that do not result in losing control of the subsidiary are accounted for as equity transactions in which the difference

between the adjustment amount of non-controlling interests and fair value of the consideration is directly recognized

as retained earnings and made attributable to the owners of the parent.

b) Associate

An associate is an entity over which the Group has significant influence on their management policies but does not

have control. An investment in an associate is accounted for using the equity method on all of associates from the

date the Group obtains significant influence until the date the Group loses significant influence.

(2) Business combinations

Business combinations are accounted for using the acquisition method.

Based on the acquisition method, acquisition costs are sum of the considerations measured at fair value at the

acquisition date and the amount of non-controlling interest in the acquiree. Non-controlling interests are measured at

either fair value or the proportionate share in the recognized net amount of the acquiree’s identifiable assets and

liabilities. Acquisition-related costs are recognized as expenses in the period which the costs are incurred.

In case that the sum of fair value of the consideration, non-controlling interests in the acquiree and the fair value of the

proportionate share that the Group has held before at the date the Group obtains control of the acquiree exceeds from

net amount of identifiable assets and liabilities, the difference is recognized as goodwill. On the other hand, if the sum

of the considerations of acquisition is lower than net amount of identifiable assets and liabilities, the difference is

recognized as income.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the

combination occurs, the provisional amounts for the items for which the accounting is incomplete are reported in the

consolidated financial statements. The provisional amounts recognized at the acquisition date are retrospectively

adjusted during the measurement period. The measurement period is the period starting from the acquisition date and

lasting up to a maximum of one year, during which the Group obtains the whole information about facts and

circumstances that existed at the acquisition date.

29

(3) Foreign currency translation

Each company in the Group determines its own functional currency for its separate financial statements, and

transactions of these companies are presented in their functional currency. On the other hand, the consolidated

financial statements of the Group are presented in Japanese yen, which is the functional currency of the Company.

Foreign currency transactions are translated into the functional currency using exchange rates at the dates of

transactions or approximations of rates at the dates of the transactions. Monetary assets and liabilities denominated

in foreign currencies are translated into the functional currency using the spot exchange rates at the consolidated

fiscal year-end date. Exchange differences arising from translation or settlement are recognized in profit or loss.

For the purpose of recording operating results and financial positions of foreign operations in the consolidated

financial statements, assets and liabilities of foreign operations are presented in Japanese yen translated at spot

exchange rates at the consolidated fiscal year-end date. Income and expense items of foreign operations are

translated at average exchange rates. The resulting translation differences are recognized as other comprehensive

income, while the cumulative amounts are recognized as other components of equity. In addition, accumulated

translation differences are recognized as profit or loss when the foreign operations are disposed of.

(4) Revenue

Revenue is recognized only when it is probable that the economic benefits will flow to the Group and the amount can

be measured reliably.

a) Pharmaceutical goods sales

Pharmaceutical goods sales are recognized when the significant risks and rewards of ownership of the goods are

transferred to the customers (usually at the time of delivery). Sales generated from the transaction are presented as

the fair value of consideration received after deducting various provisional amounts of sales deduction items. Sales

deduction items include sales rebates, sales discounts and sales returns.

b) Co-promotion revenue

The Group recognizes the proportionate share of revenue generated from a co-promotion activity as revenue when

the Group promotes goods with alliance partners and goods sales are recognized by the alliance partners. At the

same time, a proportionate share of expenses incurred from the co-promotion activity is recognized as selling,

general and administrative expenses.

c) License revenue

Considerations received for licensing patents of developing or developed products (upfront payments, milestone

payments and running royalties) are recognized as revenue, in accordance with the substance of the transactions.

Received upfront payments and milestone payments are recognized as revenue when their performance obligations

under the agreements are fulfilled. In case that the performance obligations under the agreements exist over the

licensing period, the revenue is recognized over the period based on rational methods.

Received running royalties are recognized as revenue, in accordance with the calculation basis.

(5) Research and development expenses

a) Research expenses

Expenditures on research activities (including collaborative research and contract research) are recognized as

research and development (R&D) expenses.

b) Development expenses

Expenditures on development activities are recognized as assets only if they meet the conditions of internally

generated intangible assets. Internally incurred development expenses in the Group do not meet these conditions

30

as there are risks that developing products may not get marketing authorization and developing activities may be

delayed or ceased. Therefore, these are recognized as R&D expenses.

Acquired in-process research and development investments from external entities are recognized as intangible

assets.

In case that the Group receives contributions for developments from alliance partners in accordance with

collaborative research and development agreement, the contributions are deducted from R&D expenses.

(6) Employee benefits

a) Retirement benefits

The Group has adopted defined benefit plans and defined contribution plans.

Regarding defined benefit plans, current service costs are recognized as expenses using the projected unit credit

method in actuarial calculations made at the consolidated fiscal year-end date. All of the actuarial gains/losses

incurred in the period are recognized as other comprehensive income, while the cumulative amount is reclassified to

retained earnings after it is recognized as other components of equity. Retirement benefit liabilities are the present

value of defined benefit obligations less fair value of plan assets.

Regarding defined contribution plans, contributions of the Group are recognized as expenses at the time employees

render services that give pension rights to them.

b) Termination benefits

Termination benefits are provided in the case that the Group decides to terminate an employee’s employment

before the normal retirement date, or an employee voluntarily decides to accept an offer of benefits in exchange for

the termination of employment. The termination benefits are recognized as expenses upon termination of

employment, if the Group has detailed official plans related to termination of an employee’s employment and can no

longer withdraw the offer of the benefits.

(7) Share-based payments

a) Stock option plan

The Company had granted a part of directors, corporate officers and employees equity-settled share-based

payments (stock options) until the fiscal year ended March 31, 2013.

Services received as considerations of stock options are recognized as expenses, while corresponding amounts are

recognized as an increase in equity. These expenses are the fair value of stock options that are evaluated by using

appropriate price models at the grant date, and recognized as expenses using the straight-line method over the

vesting period. Expired rates at the time of final vesting are considered when the Company makes estimations for

evaluation. In case that the estimation is revised, adjustments are made over the remaining vesting period.

b) Performance-related share-based compensation system

The Company has introduced a performance-related share-based compensation system that distributes the

Company’s shares to corporate officers every year based on performance for three years from the fiscal year ended

March 31, 2014 to the fiscal year ended March 31, 2016. The Group measures considerations of services rendered

referring to the fair value of the Company’s share granted. Considerations of services calculated are recognized as

expenses while the corresponding amount is recognized as an increase in equity.

31

(8) Income taxes

Income taxes are presented as the sum of current income taxes and deferred income taxes.

a) Current income taxes

Current income taxes are calculated based on current taxable income. Tax rates that have been enacted or

substantively enacted at the consolidated fiscal year-end date are used for tax calculation. Income tax receivables

and payables are measured at the amount expected to be paid to or refunded from the taxation authorities.

b) Deferred income taxes

Deferred income taxes are calculated based on temporary differences between the tax base and the carrying

amount for assets and liabilities using the balance sheet liability method. Deferred tax liabilities are basically

recognized for all taxable temporary differences, while deferred tax assets are recognized only when it is probable

that taxable income will be available against which the deductible temporary differences can be utilized. However,

the following deferred tax assets and liabilities on temporary differences are not recognized.

(i) Temporary differences arising from goodwill

(ii)Temporary differences arising from the initial recognition of assets or liabilities in transactions which affect

neither accounting profit nor taxable income (except for a business combination).

Regarding taxable temporary differences arising from investments in subsidiaries and associates, deferred tax

liabilities are not recognized if the Company is able to control the timing of the reversal of the temporary differences,

and it is probable that the temporary differences will not reverse in the foreseeable future.

Furthermore, regarding deductible temporary differences arising from investments in subsidiaries and associates,

deferred tax assets are recognized only when sufficient taxable income in order to realize benefits from the

temporary differences will be available, and it is probable that the temporary differences will reverse in the

foreseeable future.

Deferred tax assets and liabilities are calculated using tax rates that will be expected to be applied when the

deferred tax assets will be recovered or the deferred tax liabilities will be settled based on acts that have been

enacted or substantively enacted by the consolidated fiscal year-end date.

Deferred tax assets and liabilities are offset when the Company or its subsidiaries have legally enforceable rights to

offset income tax receivables and payables, and they intend to settle them as offset amounts.

(9) Property, plant and equipment

Property, plant and equipment is measured using the cost model and is presented at acquisition cost less

accumulated depreciation and accumulated impairment loss.

The acquisition cost includes any costs directly attributable to purchase of assets and present value of removal and

restoration costs. In case that certain conditions are met, borrowing costs that are directly attributable to the

acquisition and construction of assets are included in the acquisition costs of the assets.

Depreciation is recognized by reducing acquisition cost of assets less residual value using the straight-line method

over the estimated useful lives of the assets. Estimated useful lives, residual value and depreciation methods are

reviewed at each fiscal year-end date, and the effects of any changes in estimation are reflected on a prospective

basis.

The estimated useful lives of the main types of property, plant and equipment are as follows:

(i) Buildings 15 to 50 years

(ii) Machinery 5 to 20 years

32

Gains/losses arising from sales or disposal of property, plant and equipment are presented as other income or other

expenses.

(10) Intangible assets

Intangible assets are measured using the cost model and are presented at acquisition cost less accumulated

amortization and accumulated impairment loss.

Intangible assets acquired separately are measured at the acquisition costs at the initial recognition. Those acquired

through business combinations are measured at fair value at the acquisition date.

Amortization is recognized using the straight-line method over the estimated useful lives of the intangible assets.

Estimated useful lives, residual value and amortization methods are reviewed at each fiscal year-end date, and the

effects of any changes in estimation are reflected on a prospective basis.

The estimated useful lives of the main types of intangible assets are as follows:

(i) Sales rights 10 to 15 years

(ii) Core technology 20 years

(iii) Software 5 years

Accounting treatments for in-process research and development investments are as follows:

a) In-process research and development investments (IPR&D assets) acquired separately

Intangible assets acquired separately are recognized as assets that meet the following conditions:

(i) It is probable that the expected future economic benefits attributable to the asset will flow to the Group

(ii) The cost of the asset can be measured reliably

Expenditures of acquiring IPR&D investments from external entities (upfront payments and milestone payments)

are recognized as IPR&D assets as they meet these conditions.

Subsequent internal development expenses on IPR&D assets are recognized as R&D expenses.

IPR&D assets are reclassified to sales rights when their products become available for sale, and are amortized

using the straight-line method over their estimated useful lives. Estimated useful lives are determined by the

projected cash flow period, which is based on the period of legal protection granted by patents.

b) IPR&D investments acquired through business combinations

IPR&D investments acquired through business combinations and recognized separately from goodwill meet the

conditions listed in a) above. Therefore, these are measured at fair value at the acquisition date and recognized as

IPR&D assets.

IPR&D assets are reclassified to sales rights when their products become available for sale, and are amortized

using the straight-line method over the estimated useful lives. Estimated useful lives are determined by the

projected cash flow period, which is based on the period of legal protection granted by patents.

(11) Impairment of property, plant and equipment and intangible assets

The Group assesses whether there is any indication that property, plant and equipment and intangible assets are

impaired at the fiscal year end date, and if any such indication exists, an impairment test is performed. Intangible

assets with indefinite useful lives or not yet available for use are tested for impairment at the same time every year or

when there is an indication that the assets might be impaired.

As an impairment test, a recoverable amount is estimated and compared with a carrying amount. The recoverable

amount is higher of fair value less expenses for sales or value in use. Value in use is calculated as the present value

of estimated future cash flows. In case that a recoverable amount of the asset is lower than the carrying amount, an

impairment loss is recognized, and the carrying amount is reduced to the recoverable amount.

33

(12) Goodwill

Goodwill arising from business combinations is recognized as an asset at the date the Group obtains control of the

entity (acquisition date). Goodwill is measured as the amount by which the sum of the fair value of the consideration,

non-controlling interests in the acquiree and fair value of the proportionate share that the Group held at the date the

Group obtains control of the acquiree exceeds the net amount of identifiable assets and liabilities. On the other hand,

if the sum of the acquisition costs is lower than the net amount of identifiable assets and liabilities, the difference is

directly recognized as income.

Goodwill is allocated to groups of cash-generating units that are expected to benefit from the synergies of the

combination. Goodwill is not amortized; however, a test of impairment is performed for groups of cash-generating

units to which goodwill is allocated at the same time every year or when there is an indication that the assets might be

impaired. In the case that a recoverable amount of groups of cash-generating units is lower than the carrying amount,

the reduction is recognized as an impairment loss.

(13) Inventories

Inventories are measured at the lower of cost or net realizable value. The costs are determined using the

weighted-average method. The net realizable value is determined as the estimated selling price less the estimated

costs necessary to complete goods and expenses necessary to sell.

(14) Financial assets

a) Classification of financial assets

All financial assets are measured at fair value at initial recognition, and classified as financial assets measured at

amortized cost, financial assets measured at fair value through profit or loss (FVTPL financial assets) or financial

assets measured at fair value through other comprehensive income (FVTOCI financial assets).

(i) Financial assets measured at amortized cost

Financial assets measured at amortized cost are debt instruments that meet the conditions below.

(1) The asset is held within a business model whose objective is to hold assets in order to collect contractual

cash flows

(2) The contractual terms of the financial asset give rise on a specified date to cash flows that are solely

payments of principal and interest on the principal amount outstanding

The financial assets measured at amortized cost are initially recognized as the sum of the fair value and

transaction costs, and recognized at amortized cost calculated by the effective interest method less impairment

loss after initial recognition.

(ii) FVTPL financial assets

Debt financial assets that are not classified as financial assets measured at amortized cost are classified as

FVTPL financial assets.

FVTPL financial assets are initially recognized at fair value, and any movement of fair value as well as

gains/losses on their sale are recognized as financial income/expenses after initial recognition.

(iii) FVTOCI financial assets

All equity instruments are classified as FVTOCI financial assets.

FVTOCI financial assets are initially recognized as the sum of fair value and transaction costs. Movement of fair

value as well as gains/losses on their sale are recognized as other comprehensive income, while the cumulative

amount is reclassified to retained earnings after it is recognized as other components of equity.

34

Dividends on FVTOCI financial assets are recognized as financial income when the vesting is settled except for

the case that the dividend obviously indicates the collection of acquisition cost of investment.

b) Impairment of financial assets measured at amortized cost

The Group assesses whether there is any objective evidence that financial assets measured at amortized cost are

impaired at the fiscal year-end date.

The assessment is performed separately for financial assets that are individually significant, while it is performed

separately or collectively for financial assets that are not individually significant.

If there is any objective evidence of impairment, an impairment loss is recognized as the difference between the

carrying amount and estimated future cash flows discounted by the effective interest rate for the financial asset. An

impairment loss is recognized, with the carrying amount of financial assets being reduced either directly or through

use of an allowance for doubtful accounts.

c) Derecognition

The Group derecognizes a financial asset only when the contractual right to the cash flows from the financial asset

expires or the Group transfers the financial asset and almost all the risks and rewards of ownership of the asset to

counterparty. Regarding gain or loss on derecognition of a financial asset, those of financial assets measured at

amortized cost and FVTPL financial assets are recognized as profit or loss, and those of FVTOCI financial assets

are recognized as other comprehensive income.

(15) Hedge accounting

The Group utilizes derivatives, including interest rate swap contracts and forward foreign exchange contracts in order

to reduce the risks related to changes in interest and exchange rates. These derivatives are measured at fair value

and recognized as assets or liabilities at the contract date.

Movements of fair value after initial recognition are recognized as profit or loss if the hedged items and hedging

instruments do not meet the conditions of hedge accounting. The accounting treatments that meet the conditions of

hedge accounting are as follows:

a) Fair value hedges

Regarding derivatives hedging instrument for the purpose of hedging risks of fair value change on hedged items, the

gain or loss by changing in the fair value of hedging instrument is immediately recognized in profit or loss. At the

same time, the changes in the fair value on the hedged item attributable to the hedged risk adjusts the carrying

amount of the hedged item, and is recognized in profit or loss.

b) Cash flow hedges

Regarding derivatives for the purpose of hedging risks of cash flow movements on hedge items, the movements of

derivative assets or liabilities are recognized in other comprehensive income, while cumulative amounts are

recognized as other components of equity until the fair value movements of hedged items are recognized as profit or

loss. The amount recognized as other components of equity is reclassified to profit or loss when the fair value

movements of hedged items are recognized as profit or loss, in order to offset the effects.

(16) Provisions

Provisions are recognized when the Group has a legal or constructive obligation arising from a past event that can be

measured with sufficient reliability as a present obligation, and it is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation

at the consolidated fiscal year-end date, considering risks and uncertainties. The carrying amount of a provision is

35

measured at estimated cash flows that are discounted to be the present value where the effect of the time value of

money is material. Where discounting is used, the increase in carrying amount of a provision in each period to reflect

the passage of time is recognized as a financial cost.

a) Provision for sales rebates

To account for possible sales rebates for finished goods and merchandise sold that may be incurred after the

consolidated fiscal year-end date, provision for sales rebates is provided by multiplying the amount of revenue by

the estimated sales rebate ratio. It is expected to be mainly settled within one year from the fiscal year-end date.

b) Provision for asset retirement obligation

To account for the obligation of restoring the rental buildings and lands on which the Group is located and removing

harmful materials related to property, plant and equipment which the Group is using, provision for asset retirement

obligation is estimated and recognized depending on individual circumstances that is based on an estimated usage

period determined by past results of restoration and the useful lives of additional fixtures in the rental buildings. It is

expected to be mainly settled over one year from the fiscal year-end date.

c) Provision for restructuring costs

Provision for restructuring costs is mainly related to restructuring of the business organization. Provision for

restructuring costs is recognized when the Group has a detailed formal plan for the restructuring and has raised a

valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or

announcing its main scheme to those affected by it.

(17) Leases

a) Finance leases

Regarding finance lease transactions, leased assets and lease obligations are measured at the lower of either fair

value of leased assets at the lease inception date or present value of the minimum lease payments. Lease

payments are allocated to financial expenses and repayments of lease obligations using the interest method.

Leased assets are depreciated over the lower of either estimated useful lives or lease period using the straight-line

method.

b) Operating leases

Regarding operating lease transactions, lease payments are recognized as expenses over the lease period using

the straight-line method.

36

(Significant Accounting Estimates and Judgments)

Preparation of the consolidated financial statements of the Group requires management estimates and judgments.

Underlying assumptions for estimation are continuously reviewed. Effects of changes in estimations are recognized in

the period and future periods. Furthermore, significant revisions of asset and/or liability carrying amounts may be

required in the future as a result of uncertainties related to these estimates and assumptions.

Significant items that require management estimates and judgments are as follows.

a) Impairment test of goodwill and intangible assets

In order to perform impairment tests of goodwill and intangible assets, estimates of value in use of allocated

groups of cash-generating units are required. Value in use is measured at present value based on the

assumptions of future cash flows expected to arise from groups of cash-generating units and discount rates.

b) Estimates of useful lives of property, plant and equipment and intangible assets

Useful lives of property, plant and equipment and intangible assets are reviewed at the fiscal year-end date.

c) Evaluation of fair value of financial instruments

Evaluation methods including input that are not based on observable market data are used in order to estimate

the fair value of specific financial assets.

d) Retirement benefits

Defined benefit obligations are affected by assumptions used for actuarial calculation. Discount rate, future

payroll level, turnover and mortality rates used for assumptions are determined based on the latest market data

and statistics.

e) Income taxes

Current income taxes are recognized as the amount expected to be paid to each tax authority by reasonable

estimates in accordance with tax laws and regulations.

Liabilities are recognized based on the estimates of revised current income taxes and their possibilities as a

result of the tax audit. If the actual amount settled by the tax audit is different from the estimated amount, the

difference is recognized in the period in which the actual amount is settled.

Furthermore, deferred tax assets are recognized only when it is probable that taxable profit will be available

against which the deductible temporary differences and tax carryforwards can be utilized. Based on its

business plan and other factors, the Group makes reasonable estimates of the period and amount of taxable

profit will be available in future period, and evaluates the potential taxable profit.

37

(Segment Information)

(1) General information

Reporting segments are units for which the Group can obtain independent financial information and for which top

management undertakes periodic reviews in order to determine the allocation of management resources and

evaluate performance.

The Group’s business is comprised of pharmaceutical business and other business. The pharmaceutical business is

organized into the following six reporting segments in this report: Japan (Prescription Medicines, Generics and

Diagnostics), Americas (North America, Central and South America), China, Asia (primarily South Korea, Taiwan,

Hong Kong, India and ASEAN), EMEA (Europe, the Middle East, Africa and Oceania) and Consumer Healthcare

Business—Japan (CHB―Japan).

(2) Reporting segments

(Millions of yen)

Fiscal year ended March 31, 2016 Fiscal year ended March 31, 2015

Revenue

Segment

profit (loss) Revenue

Segment

profit (loss)

Pharmaceutical business

Japan (Note 4) 266,810 111,642 278,399 122,378

Americas 122,246 23,731 119,822 14,884

China 49,289 12,924 41,019 10,567

Asia 34,007 8,314 30,894 7,413

EMEA 41,331 10,330 38,516 6,601

CHB—Japan (Note 4) 18,077 2,696 17,019 1,316

Reporting segment total 531,761 169,636 525,669 163,159

Other business (Note 1) 16,162 3,453 22,796 7,776

Total 547,922 173,089 548,465 170,935

R&D expenses (Note 2) － (122,307) － (131,907)

Group headquarters’ management costs and other expenses (Notes 3, 4, 5) － (13,883) － (10,690)

Gain on sales of investments in subsidiaries － 15,035 －－

Operating profit in the consolidated financial statements － 51,935 － 28,338

(Note 1) “Other business” mainly includes the pharmaceutical ingredient business.

(Note 2) “R&D expenses” are not allocated to any particular segment as the Group manages such expenses on a global

basis.

(Note 3) “Group headquarters’ management costs and other expenses” are the costs and expenses covering Group-wide

operations.

(Note 4) From the consolidated fiscal year ended March 31, 2016, the management structure for part of the costs in

Japan was revised and the method for allocation of SG&A expenses changed as a result. As such, the “Japan

pharmaceutical business” and “CHB― Japan” segment profit (loss)” as well as “Group headquarters’

management costs and other expenses” figures stated for the previous fiscal year ended March 31, 2015, have

also been restated to reflect these changes.

(Note 5) During the fiscal year ended March 31, 2016, the Group’s U.S. subsidiary, Eisai Inc., transferred its North

Carolina Plant to Biogen Inc. (U.S.). Gain on this transfer is included as “Group headquarters’ management

costs and other expenses,” being based on the Group’s global logistics strategy.

38

(3) Information on major products

Revenue from external customers

(Millions of yen)

Aricept Pariet/

AcipHex

Oncology-

related

products

Other Total

Fiscal year ended March 31, 2016 63,349 46,053 118,501 320,019 547,922

Fiscal year ended March 31, 2015 65,695 55,973 98,637 328,160 548,465

(4) Information on major customers


(Millions of yen)

Name of customer Revenue Related segment

Alfresa Holdings Corporation 67,899 Japan Pharmaceutical Business, etc.

Suzuken Co., Ltd. 60,434 Japan Pharmaceutical Business, etc.

Medipal Holdings Corporation 53,603 Japan Pharmaceutical Business, etc.


(Millions of yen)

Name of customer Revenue Related segment

Alfresa Holdings Corporation 71,282 Japan Pharmaceutical Business, etc.

Suzuken Co., Ltd. 62,000 Japan Pharmaceutical Business, etc.

Medipal Holdings Corporation 55,113 Japan Pharmaceutical Business, etc.

(5) Information on major regions

Revenue from external customers (Note 1)

(Millions of yen)

Japan

Americas

(Note 2) China Europe Other Total

Fiscal year ended

March 31, 2016 296,151 122,943 48,676 42,473 37,678 547,922

Fiscal year ended

March 31, 2015 307,805 126,380 40,533 39,765 33,982 548,465

(Note 1) Revenue from external customers are categorized by country or region based on the location of the customer.

Major areas and countries included in this category other than Japan and China are as follows:

1) Americas: North America, Central and South America

2) Europe: United Kingdom, France, Germany

3) Other: Asia, Middle East, Oceania

(Note 2) Revenue for the fiscal year ended March 31, 2016, in the United States, which is included in Americas, was

¥121,833 million (¥125,654 million for the fiscal year ended March 31, 2015).

Non-current assets (Note 1)

(Millions of yen)

Japan

Americas

(Note 2) Europe China Other Total

As of March 31, 2016 84,482 267,448 19,752 14,039 5,013 390,734

As of March 31, 2015 100,519 311,990 23,519 6,125 5,536 447,690

(Note 1) Non-current assets are categorized by country or region based on the assets location.

Major areas and countries included in this category other than Japan and China are as follows:

1) Americas: North America, Central and South America

2) Europe: United Kingdom, France, Germany

3) Other: Asia, Middle East, Oceania

39

Non-current assets are mainly composed of property, plant and equipment, goodwill and intangible assets

excluding financial assets, deferred tax assets and net retirement benefit assets.

(Note 2) The carrying amount of non-current assets as of March 31, 2016, in the United States, which is included in

Americas, is ¥267,279 million (¥311,756 million as of March 31, 2015).

(Consolidated Statement of Income)

(1) Revenue

The breakdown of revenue for the fiscal years ended March 31, 2016 and March 31, 2015 is as follows.

(Millions of yen)

Fiscal year ended

March 31, 2016

Fiscal year ended

March 31, 2015

Pharmaceutical goods sales 505,705 489,012

License revenue 3,045 21,034

Other 39,173 38,419

Total 547,922 548,465

(2) Cost of sales, selling, general and administrative expenses, research and development expenses

Details regarding cost of sales, selling, general and administrative expenses (SG&A expenses), and R&D expenses

are as follows.


(Millions of yen)

Cost of sales SG&A expenses R&D expenses Total

Depreciation and amortization 19,711 4,590 9,763 34,064

Impairment losses (Note 1) 510 － 1,623 2,133

Reversal of Impairment losses －－ (433) (433)

Short-term employee benefits 15,614 77,799 39,802 133,215

Post-employment benefit costs 521 3,654 1,983 6,158

Termination benefits (Note 2) 219 2,362 497 3,078

(Note 1) The components of impairment losses by account item were ¥1,600 million in intangible assets and ¥533 million

in plant, property and equipment (PP&E) respectively. Regarding intangible assets, impairment loss of ¥1,600

million was recognized in R&D expenses because of discontinued development of some new drug candidates.

Regarding PP&E, ¥510 million of Cost of sales was recognized as impairment loss, due to some productive

facilities becoming idle.

(Note 2) Termination benefits are primarily due to structural reform in the U.S. and Europe and the transfer of the North

Carolina plant in the U.S.


(Millions of yen)

Cost of sales SG&A expenses R&D expenses Total

Depreciation and amortization 24,590 4,636 9,714 38,940

Impairment losses 60 5 － 65

Short-term employee benefits 16,104 75,159 40,461 131,723

Post-employment benefit costs 904 3,215 1,859 5,978

40

(3) Other income

The breakdown of other income for the fiscal years ended March 31, 2016 and March 31, 2015 is as follows.

(Millions of yen)

Fiscal year ended

March 31, 2016

Fiscal year ended

March 31, 2015

Gain on sales of investments in subsidiaries (Note 1) 15,035 －

Gain on sales of non-current assets (Note 2) 1,673 372

Subsidy income 349 97

Equity in earnings of affiliates 70 75

Other 534 437

Total 17,661 981

(Note 1) During the fiscal year ended March 31, 2016, ¥15,035 million was recognized as gain on sales of investments in

subsidiaries due to the transfer of EIDIA Co., Ltd. (Tokyo) and Eisai Food & Chemical Co., Ltd. (Tokyo).

(Note 2) During the fiscal year ended March 31, 2016, ¥1,349 million was recognized as gain on sales of non-current

assets due to the transfer of the North Carolina plant in the United States.

(4) Other expenses

The breakdown of other expenses for the fiscal years ended March 31, 2016 and March 31, 2015 is as follows.

(Millions of yen)

Fiscal year ended

March 31, 2016

Fiscal year ended

March 31, 2015

Foreign exchange loss 3,464 356

Loss on sales and disposal of non-current assets 263 444

Other 339 260

Total 4,066 1,061

(5) Financial income

The breakdown of financial income for the fiscal years ended March 31, 2016, and March 31, 2015, respectively, is as

follows.

(Millions of yen)



Interest income 1,196 1,204

Dividend income (Note 1)

Financial assets measured at fair value through other comprehensive income

605 561

Financial assets measured at fair value through profit or loss

1 1

Other 221 663

Total 2,024 2,429

(Note 1) Among dividend income from financial assets measured at fair value through other comprehensive income,

there was no significant dividend income from financial assets that were sold in the fiscal year ended March 31,

2016 (¥23 million in the fiscal year ended March 31, 2015).

41

(6) Financial costs

The breakdown of financial costs for the fiscal years ended March 31, 2016, and March 31, 2015, respectively, is as

follows.

(Millions of yen)



Interest costs

Financial liabilities measured at amortized cost 3,392 4,678

Retirement benefit liabilities 28 147

Other 65 67

Total 3,485 4,892

(7) Income taxes

The breakdown of income taxes for the fiscal years ended March 31, 2016, and March 31, 2015, respectively, is as

follows.

(Millions of yen)



Income taxes―current (Note 1, 2) 2,858 3,606

Income taxes―deferred (Note 1, 2, 3) (7,429) (21,184)

Total (4,571) (17,578)

(Note 1) Decrease in income taxes due to transfer of U.S. consolidated subsidiary AkaRx, Inc.

During the fiscal year ended March 31, 2016, Eisai Inc., the Group’s consolidated subsidiary in the United States,

transferred all shares of its wholly owned consolidated subsidiary AkaRx, Inc. to PBM Capital Group. As a result,

decrease of tax expenses by ¥12,615 million was recorded in the recognition of capital loss for tax purposes at

Eisai Inc.

(Note 2) Decrease of income taxes due to a repayment of paid-in capital

Eisai Corporation of North America, the Group’s consolidated subsidiary, paid ¥58,430 million to the Company

for the repayment of paid-in capital in the fiscal year ended March 31, 2015. As a result, a decrease in tax

expenses of ¥27,822 million was recorded due to the recognition of taxable items such as capital losses for the

Company.

(Note 3) Remeasurement of deferred tax assets and liabilities due to a change in income tax rate

During the fiscal year ended March 31, 2016, according to the promulgation of “Partial Amendment of the

Income Tax Act, etc.” (Act No. 15 of 2016) and “Partial Amendment of the Local Tax Act, etc.” (Act No. 13 of

2016) in Japan, the corporate tax rate will change from the fiscal year beginning on or after April 1, 2016. As a

result, the effective statutory tax rates used to measure deferred tax assets and deferred tax liabilities changed

from 32.0% to 30.5%.

The changes in effective statutory tax rates resulted in a ¥2,433 million decrease in deferred tax assets (after

deducting deferred tax liabilities), a ¥242 million increase in other components of equity and a ¥2,675 million

increase in income taxes.

During the fiscal year ended March 31, 2015, according to the promulgation during that same period of “Partial

Amendment of the Income Tax Act, etc.” (Act No. 9 of 2015) and “Partial Amendment of the Local Tax Act, etc.”

(Act No. 2 of 2015) in Japan, the corporate tax rate changed from the fiscal year beginning on or after April 1,

2015.

As a result, the effective statutory tax rates used to measure deferred tax assets and deferred tax liabilities

changed from 35.5% to 33.0% for temporary differences expected to be reversed in the consolidated fiscal year

starting on or after April 1, 2015, and from 35.5% to 32.0% for temporary differences expected to be reversed in

the fiscal year starting on or after April 1, 2016.

42

The changes in effective statutory tax rates resulted in a ¥6,402 million decrease in deferred tax assets (after

deducting deferred tax liabilities), a ¥846 million increase in other components of equity and a ¥7,248 million

increase in income taxes.

(Per Share Information)

(1) Earnings per share attributable to owners of the parent (basic)

The basis for calculating earnings per share attributable to owners of the parent (basic) for the fiscal years ended

March 31, 2016 and March 31, 2015 is as follows.



Profit for the year attributable to owners of the parent (Millions of yen) 54,933 43,254

Weighted average number of common shares during the year (Thousands of shares)

285,764 285,371

Earnings per share attributable to owners of the parent (basic) (Yen) 192.23 151.57

(2) Earnings per share attributable to owners of the parent (diluted)

The basis for calculating earnings per share attributable to owners of the parent (diluted) for the fiscal years ended

March 31, 2016 and March 31, 2015 is as follows.



Profit for the year attributable to owners of the parent (Millions of yen) 54,933 43,254

Adjustment of profit for the year attributable to owners of the parent (Millions of yen)

－－

Profit for the year used for calculating diluted earnings per share (Millions of yen)

54,933 43,254

Weighted average number of common shares during the year (Thousands of shares)

285,764 285,371

Increase in number of common shares under stock options (Thousands of shares) (Note 1)

703 378

Weighted average number of diluted common shares during the year (Thousands of shares)

286,467 285,749

Earnings per share attributable to owners of the parent (diluted) (Yen) 191.76 151.37

(Note 1) There are no common shares reserved under the stock option plan that are excluded from the calculation of

diluted earnings per share due to antidilutive effects for the fiscal years ended March 31, 2016 and March 31,

2015.

43

(Consolidated Statement of Financial Position)

(1) Assets held for sale and liabilities directly associated with assets held for sale

During the fiscal year ended March 31, 2016, the Company entered into a business acquisition agreement concerning

the succession of the Company’s consolidated pharmaceutical manufacturing and marketing subsidiary Sannova Co.,

Ltd. (Gunma) via an absorption-type split, to a newly established company by Sannova Co., Ltd., and the subsequent

transfer of all shares issued in this newly established company to Alfresa Holdings Corporation (Tokyo). The date of

the share transfer was April 1, 2016.

For this reason, assets and liabilities of the successor company are classified as assets held for sale and liabilities

directly associated with assets held for sale, respectively.

The breakdown of assets held for sale and liabilities directly associated with assets held for sale is as follows.

(Millions of yen)


Assets held for sale

Property, plant and equipment

Inventories

Cash and cash equivalents

Other

5,430

1,619

2,496

238

Total 9,782

Liabilities directly associated with assets held for sale

Retirement benefit liabilities

Trade and other payables

Other

1,060

1,038

686

Total 2,784

44

(Consolidated Statement of Cash Flows)

(1) The breakdown of the increase (decrease) in working capital for the fiscal years ended March 31, 2016 and March

31, 2015 is as follows.

(Millions of yen)



(Increase) decrease in trade receivables 17,057 15,145

(Increase) decrease in inventories 5,402 3,893

(Increase) decrease in other receivables (567) 5,805

Increase (decrease) in trade payables 3,056 371

Increase (decrease) in other payables 10,965 (6,720)

(Increase) decrease in working capital 35,913 18,493

(2) Net cash outflow on acquisition of subsidiaries

Please refer to “Business Combinations (6) Net cash outflow on acquisition of subsidiaries”.

(3) Net cash inflow on sales of subsidiaries

Please refer to “Sales of Subsidiaries (2) Net cash inflow on sales of subsidiaries”.

(4) Cash and cash equivalents at end of period

Cash and cash equivalents at end of period for the fiscal years ended March 31, 2016 are the sum of cash and cash

equivalents of ¥176,830 million from the Consolidated Statement of Financial Position and cash and cash equivalents

of ¥2,496 million categorized as assets held for sale.

(Business Combinations)

In the fiscal year ended March 31, 2016, the Group’s China holding company, Eisai China Holdings Ltd., entered into an

agreement to acquire all shares of the Chinese generic pharmaceutical company, Liaoning TianYi Biological

Pharmaceutical Co., Ltd.

(1) Name of the acquiree

Liaoning TianYi Biological Pharmaceutical Co., Ltd.

(New name: Eisai (Liaoning) Pharmaceutical Co., Ltd.)

(2) Acquisition date

December 28, 2015

(3) Method for acquiring shares and percentage of voting rights for the acquisition

The Group acquired all shares of Liaoning TianYi Biological Pharmaceutical Co., Ltd. from the former shareholder.

(4) Primary reasons for the business combination

The China pharmaceutical market is the second largest in the world after the U.S. In particular, even higher growth is

expected for generic pharmaceuticals that will make up the majority of prescriptions in small and medium sized cities

in inland and regional areas as well as small and medium sized hospitals which have had inadequate access to

medicines until now. In addition to expanding its business focused on new pharmaceuticals, through this acquisition,

the Group will enter the generic pharmaceutical business in China as well. Further enhancing its business platform in

China, the Group aims to provide a stable supply of high quality pharmaceuticals from Liaoning TianYi Biological

45

Pharmaceutical Co., Ltd.’s GMP compliant facility under the Group’s strict quality management and quality assurance

system to meet the extensive needs of the China pharmaceutical market.

(5) Fair value of consideration transferred, assets acquired and liabilities assumed, and goodwill

(Millions of yen)

As of acquisition date

(December 28, 2015)

Consideration transferred (Note 1)

Assets acquired and liabilities assumed


Other non-current assets

Current assets


Current liabilities

4,609

5,072

1,160

578

(223)

(4,696)

Goodwill 2,718

(Note 1) In addition to cash paid as consideration transferred, the Group has loaned ¥4,351 million to the acquiree as

repayment for the acquiree’s borrowings. Furthermore, ¥21 million of acquisition related costs has been

recorded in the consolidated statement of income as selling, general and administrative expenses.

(6) Net cash outflow on acquisition of subsidiaries

(Millions of yen)

As of acquisition date

(December 28, 2015)

Cash paid (Note 1)

Cash and cash equivalents in the subsidiaries acquired

8,961

(7)

Net cash outflow on acquisition of subsidiaries 8,954

(Note 1) Cash paid includes cash of ¥4,609 million as consideration transferred and loans receivable in cash of ¥4,351

million for the acquiree.

46

(Sales of Subsidiaries)

In the fiscal year ended March 31, 2016, the Company transferred all shares of EIDIA Co., Ltd. (Tokyo) held by the

Company to Sekisui Chemical Co., Ltd. (Osaka). Furthermore, the Company transferred all shares of Eisai Food &

Chemical Co., Ltd. (Tokyo) held by the Company to Mitsubishi-Kagaku Foods Corporation (Tokyo).

(1) Consideration received, assets and liabilities over which control was lost

(Millions of yen)

Fiscal year ended

March 31, 2016

Consideration received

Assets and liabilities over which control was lost


Other non-current assets

Current assets


Current liabilities

32,016

2,673

5,878

20,604

(1,516)

(10,657)

Gain on sale of investments in subsidiaries 15,035

(2) Net cash inflow on sales of subsidiaries

(Millions of yen)

Fiscal year ended

March 31, 2016

Consideration received in cash

Cash and cash equivalents in the subsidiaries sold

32,016

(11,485)

Net cash inflow on sale of subsidiaries 20,531

(Significant Subsequent Events)

On April 1, 2016, the Company split off a portion of its gastrointestinal disease business via an absorption-type split, which

was then succeeded by Ajinomoto Co., Inc. (Tokyo)’s wholly owned subsidiary AJINOMOTO PHARMACEUTICALS CO.,

LTD.

Furthermore, the trading name of AJINOMOTO PHARMACEUTICALS CO., LTD. was changed to “EA Pharma Co., Ltd.”

This transaction will be accounted for using the acquisition method in accordance with IFRS 3 “Business Combinations”.

While goodwill is expected to arise, the amount of goodwill has not been determined yet.

(1) Name of the acquiree

AJINOMOTO PHARMACEUTICALS CO., LTD. (New name: EA Pharma Co., Ltd.)

(2) Acquisition date

April 1, 2016

(3) Method for acquiring shares and percentage of voting rights for the acquisition

The Company acquired 6,000 shares of common stock of AJINOMOTO PHARMACEUTICALS CO., LTD. as

consideration for the absorption-style split. As a result, the Company holds 60% in the voting rights ratio.

(4) Primary reasons for the business combination

The field of gastrointestinal disease is one with significant unmet medical needs. By integrating the Company’s

47

gastrointestinal disease business and AJINOMOTO PHARMACEUTICALS CO., LTD., this new integrated company

will become one of Japan’s largest gastrointestinal specialty pharmas with a product lineup that will comprehensively

cover the upper and lower digestive tract as well as the liver and pancreas, enabling the provision of an even wider

range of solutions in the field of gastrointestinal disease as well as specialized information for healthcare

professionals. In addition, consolidating both companies’ in-development products will serve to enhance the pipeline

toward the consistent launch of new treatments, and the companies aim to discover innovative new medicines by

exchanging expertise and know-how. The new integrated company will seek greater profitability through marketing

synergies from integration and the pursuit of efficiency through the review of overlapping functions, as well as to

secure necessary resources for new drug development and sustained growth.

(5) Non-consolidated performance of acquired company over last three fiscal years (Japan GAAP)

(Millions of yen)




Net assets 35,656 35,508 35,900

Total assets 49,545 50,976 61,091

Net sales 43,236 55,633 76,607

Operating profit (loss) 948 634 (2,397)

Ordinary income (loss) 1,017 699 (2,259)

Net income (loss) 147 (889) (7,530)

(Note 1) The figures in the table have not been audited by the Company’s independent auditor.

48

5) Other

1) Forecasts and Risk Factors

(1) Materials and information provided in this financial disclosure may contain “forward-looking

statements” based on current expectations, forecasts, estimates, business goals and

assumptions that are subject to risks and uncertainties, and actual outcomes and results could

differ materially from these statements depending on changes in important factors. Risks and

uncertainties include general industry and market conditions, as well as general domestic and

international economic conditions such as interest rate and currency exchange fluctuations.

(2) Risks that could cause significant fluctuations in the consolidated results of the Eisai Group or

have a material effect on investment decisions are described below. These risks, however,

have been evaluated and forecasted as of the disclosure date of the Financial Report.

〇 Risks related to overseas operations

The Group conducts production/sales activities for products in countries and regions such

as the Americas, Europe, and Asia. However, there is no guarantee that the Group can

entirely avoid risks such as legal restrictions and socio-political uncertainty in its global

business activities. In the event the Group faces such risks, there is a possibility that

original projected earnings may not be achieved.

〇 Uncertainties in new drug development

Development of a drug candidate substance may be discontinued due to shortcomings in

its effectiveness or safety profile. Even if clinical trials yield favorable results, approval may

not be granted due to changes in pharmaceutical regulations implemented during the

development of the product. As a result of the delay or discontinuation of development of a

new drug arising from the inherent uncertainties of drug development, future expected

profits may not be achieved.

〇 Risks in alliances with other companies

The Group has some products for which sales promotion activities are carried out through

business alliances with other companies. If productive relations with partners are not

sustained, revenues may decrease and significantly impact business results. Furthermore,

expected profits may not be achieved due to uncertainties associated with product

acquisition, or the licensing-in of products including products under development.

〇 Impact of medical cost containment measures

In Japan, the government enacts price revisions for prescription drugs every two years and

is adopting measures such as the promotion of generic drugs as part of its efforts to

control medical costs. Efforts to reduce drug costs are intensifying year after year in the

United States as well as in countries in both Europe and Asia. These kinds of measures

aimed at controlling medical costs may lead to a drop in revenues. Especially in Europe,

even if marketing approval is obtained for a product, the product may not be eligible for

health insurance reimbursement at the expected price and so there is a possibility that

original projected earnings may not be achieved.

49

〇 Risks related to generic products

Pharmaceutical patents have a limited term. It is common for generic makers to launch

generic products upon the expiration of a patent for the original drug. Additionally, in

countries such as the United States, an application for a generic product is accepted even

during the patent term. Generic products may have a significant impact on market share

because of their low price.

〇 Risks related to intellectual property

If a patent application is dismissed, a patent is found to be invalid after approval, or if there

is a failure to properly protect a patent, competitors may enter the market earlier than

expected, which could potentially lead to a decrease in revenues. Additionally, if the

business activities of the Group infringe on the intellectual property rights of a third party, it

may deteriorate profitability as well as necessitate a change in the business plan of the

Group or cause a significant impact on business performance of the Group, as a result of

the third party in question exercising its rights.

〇 Risks related to occurrences of side effects

If a product is found to have any serious side effects, there may be a serious impact on

performance due to the Group taking measures such as suspending product sales or

conducting a product recall.

〇 Risks regarding laws and regulations

As the Group’s pharmaceutical business is subject to various laws and regulations,

including pharmaceutical regulations and product liability, enactment of a law or changes

in the regulations may have a significant impact on business results. In the event

regulatory nonconformity is found in a product, the Group may issue a product recall, have

the product’s marketing approval revoked, or face liability claims.

〇 Risks relating to lawsuits

Results of pending or future lawsuits may have a significant impact on the Group’s

business results.

〇 Plant closure or shutdown

The Group’s plants may be closed or shut down due to technical problems, raw material

shortages, influenza and other pandemics, fire, earthquakes and other natural disasters.

In such cases, the supply of products may become difficult and can significantly impact

business results.

〇 Risks concerning the safety and quality of raw materials

If there is any concern over the safety and quality of raw materials, the Group may take

actions such as changing materials, conducting a recall, or suspending sales, which may

have a significant impact on business results.

〇 Risks associated with outsourcing

The Group outsources part of its operations, including research and production, to other

companies. Business results may be significantly impacted if the provision of outsourced

business service is disrupted due to the shutdown of any of the subcontractors’ operations

for any kind of reason.

50

〇 Environmental risks

If a serious environmental pollution event is reported at any of its business offices, the

Group may be required to close the office in question or be subject to other proceedings

required by law. Furthermore, the costs necessary to assume liability for payment of

compensation to neighboring regions and improve the environment may significantly affect

business results.

〇 Risks concerning IT security and information management

Since the Group makes full use of various IT systems for business, its operations may be

disrupted due to external factors such as inadequate system infrastructure and computer

viruses. In addition, the Group faces the risk of technical accidents that involve personal

information leakage outside of the Group, which may considerably damage the Group’s

social reputation and significantly impact business results.

〇 Risks related to financial market conditions and currency movement

As the Group holds stocks and other marketable securities, a decline in the stock market

could result in losses on sales or devaluation of stocks and other securities. In addition, an

increase in projected benefit obligations due to changes in the interest rate may have an

impact on business results. Furthermore, the effect of foreign exchange fluctuations on the

yen conversion of sales of overseas consolidated subsidiaries as well as export and import

transactions may also impact business results.

〇 Risks concerning internal control systems

In accordance with assessment and audit standards as well as implementation standards

for internal controls pertaining to financial reporting as mandated by the Financial

Instruments and Exchange Law of Japan, the Group establishes effective internal control

systems related to financial reporting and strives to appropriately manage those systems.

However, major losses that arise due to the malfunction of internal control systems or

occurrence of unexpected problems related to internal control systems may have a

significant impact on business results.

〇 Risks concerning disasters

The occurrence of disasters, including natural disasters, such as earthquakes and

typhoons, as well as accidents, such as fires, could result in large-scale damage to

business facilities and impact the business activities of the Group. In addition, repairs to

facilities damaged by these disasters may cause the Company to incur significant

expenses and have a major impact on business results.

51

2) Overview of the Eisai Group

The diagram below shows the principal operations and business flows within the Group.

Americas

(Americas Holding Company)

(Pharmaceutical Production/Sales) ◎ Eisai Corporation of North America

◎ Sannova Co., Ltd.

(Pharmaceutical R&D)

(Pharmaceutical Sales) Products Research ◎ Morphotek, Inc.

◎ Elmed Eisai Co., Ltd. ◎ H3 Biomedicine Inc.

(Pharmaceutical R&D) (Pharmaceutical R&D/Production/Sales)

◎ KAN Research Institute, Inc. ◎ Eisai Inc.

Research

(Management/Administration of Research ◎ Others—4

Pharmaceutical R&D) (Total 8 companies)

◎ Eisai R&D Management Co., Ltd.

Europe

◎ Other—1 (European Headquarters / Holding Company,

☆ Other—1 Pharmaceutical Sales)

(Total 6 companies) ◎ Eisai Europe Ltd.

E

(Pharmaceutical R&D/ Sales)

I Research

S (Pharmaceutical Sales)

◎ Eisai GmbH

A

◎ Eisai Farmacéutica S.A.

I

(Pharmaceutical Logistics) ◎ Eisai Manufacturing Ltd.

◎ Eisai Distribution Co., Ltd.

C ◎ Others—9

(Business Support Services) (Total 15 companies)

◎ Sunplanet Co., Ltd. O

China

(Total 2 companies) (Chinese Headquarters / Holding Company)

L ◎ Eisai China Holdings Ltd.

T (Pharmaceutical Production / Sales)

◎ Eisai China Inc.

D

◎ Other—2

(Total 4 companies)

Asia and Others

(Asia Holding Company)

◎ Eisai Asia Regional Services Pte. Ltd.

Symbols (Pharmaceutical Production / Sales)

Indicates sales flow ◎ PT Eisai Indonesia

◎: Consolidated subsidiary (46 companies)

☆: Associated company accounted for (Pharmaceutical R&D)

using the equity method (1 company) ◎ Eisai Clinical Research Singapore Pte. Ltd.

(Pharmaceutical R&D / Production / Sales)

◎ Eisai Pharmaceuticals India Pvt. Ltd.

(Pharmaceutical Sales)

◎ Eisai (Thailand) Marketing Co., Ltd.

◎ Eisai Taiwan Inc.

◎ Eisai Korea Inc.

◎ Others—5

(Total 12 companies)

(Pharmaceutical Production / Sales)


◎ Eisai Ltd.

◎ Eisai S.A.S.

<Other Business>

.,

.

Bulk /Products

[Japan]<Pharmaceutical Business>

[Overseas]<Pharmaceutical Business>

BusinessSupport

LogisticSupport

Research

Research / Products

Bulk / Products

Products

Bulk / Products

Bulk /Products

Bulk /Products

52

List of Group Companies

(As of March 31, 2016)

　Company Name Location Description of Operations (*1)

Voting

Rights

(*2)

Relationship Note

Sannova Co., Ltd. Gunma Pref. 300 JPYPharmaceutical production /

sales

80.01%

(80.01%)

The Company purchases

pharmaceutical products*6

Elmed Eisai Co., Ltd. Tokyo 450 JPY Pharmaceutical sales 100.00% -

KAN Research Institute, Inc. Hyogo Pref. 70 JPY Pharmaceutical R&D 100.00%The Company commissions

pharmaceutical R&D

Eisai Distribution Co., Ltd. Kanagaw a Pref. 60 JPY Pharmaceutical logistics 100.00%The Company commissions

pharmaceutical logistics

Eisai R&D Management Co.,

Ltd.Tokyo 14 JPY

Management and

administration of

pharmaceutical R&D

100.00%

The Company is entrusted w ith

a part of management,

administration and other

functions related to R&D

Sunplanet Co., Ltd. Tokyo 455 JPYBusiness support services,

etc.85.45%


business support services,

Eisai Corporation of North

America

New Jersey,

USA2,766,700 USD Americas holding company 100.00% - *3

Morphotek, Inc.Pennsylvania,

USA355,000 USD Pharmaceutical R&D

100.00%

(100.00%)

The Company commissions

pharmaceutical R&D*3

Eisai Inc.New Jersey,

USA151,600 USD

Pharmaceutical R&D /

production / sales

100.00%

(100.00%)


pharmaceutical research,

development and production /

sells bulk drug substances

*3

*5

H3 Biomedicine Inc.Massachusetts,

USA8 USD Pharmaceutical R&D

100.00%

(100.00%)


pharmaceutical R&D

Eisai Ltd. Ontario, Canada 30,000 CAD Pharmaceutical sales100.00%

(100.00%)-

Eisai Laboratórios Ltda.São Paulo,

Brazil73,174 BRL Pharmaceutical sales

100.00%

(100.00%)-

Eisai Laboratorios S. de R.L.

de C.V.

Mexico City,

Mexico3 MXN Pharmaceutical sales

100.00%

(100.00%)-

Eisai Medicamentos S. de

R.L. de C.V.

Mexico City,

Mexico3 MXN

Pharmaceutical business

(Business support services)

100.00%

(100.00%)-

Eisai Europe Ltd.Hertfordshire,

UK184,138 GBP

European headquarters /

holding company,

pharmaceutical sales

100.00%


management and administration

of its Europe Pharmaceutical

business

*3

Eisai Ltd.Hertfordshire,

UK46,009 GBP Pharmaceutical R&D / sales

100.00%

(100.00%)


pharmaceutical R&D*3

Eisai Manufacturing Ltd.Hertfordshire,

UK38,807 GBP

Pharmaceutical production /

sales

100.00%

(100.00%)

The Company sells bulk drug

substances*3

Eisai GmbHFrankfurt,

Germany7,669 EUR Pharmaceutical sales

100.00%

(100.00%)-

Eisai S.A.S. Paris, France 19,500 EUR Pharmaceutical sales100.00%

(100.00%)-

Eisai B.V.Amsterdam,

Netherlands540 EUR Pharmaceutical sales

100.00%

(100.00%)-

Eisai Farmacéutica S.A. Madrid, Spain 4,000 EUR Pharmaceutical sales100.00%

(100.00%)-

Eisai S.r.l. Milan, Italy 3,500 EUR Pharmaceutical sales100.00%

(100.00%)-

Eisai Pharma AGZurich,

Sw itzerland3,000 CHF Pharmaceutical sales

100.00%

(100.00%)-

Eisai ABStockholm,

Sw eden10,000 SEK Pharmaceutical sales

100.00%

(100.00%)-

Eisai Farmacêutica,

Unipessoal Lda.

Lisbon,

Portugal4,000 EUR Pharmaceutical sales

100.00%

(100.00%)-

Common Stock

Unit=million

(Consolidated Subsidiaries)

Unit=thousand

53

LocationDescription of Operations

(*1)

Voting

Rights

(*2)

Relationship Note

Brussels, Belgium 2,001 EUR Pharmaceutical sales100.00%

(100.00%)-

Vienna, Austria 2,000 EUR Pharmaceutical sales100.00%

(100.00%)-

Moscow , Russia 4,000 RUB Pharmaceutical sales100.00%

(100.00%)-

Jiangsu, China 664,465 RMBChinese headquarters /

holding company

100.00%

(100.00%)- *3

Jiangsu, China 576,125 RMBPharmaceutical production/

sales

100.00%

(100.00%)


substances*3

Jiangsu, China 70,000 RMB Pharmaceutical sales100.00%

(100.00%)

The Company sells

pharmaceutical products

Liaoning, China 50,000 RMBPharmaceutical production /

sales

100.00%

(100.00%)- *7

Singapore 34,469 SGD Asia holding company 100.00% -

Singapore 300 SGD Pharmaceutical sales100.00%

(100.00%)

The Company sells


Singapore 10 SGD Pharmaceutical R&D100.00%

(100.00%)


pharmaceutical R&D

Hong Kong, China 500 HKD Pharmaceutical sales100.00%

(10.00%)

The Company sells


Jakarta, Indonesia 5,000 USDPharmaceutical production

/sales100.00%


substances

Petaling Jaya,

Malaysia470 MYR Pharmaceutical sales

100.00%

(5.74%)

The Company sells


Bangkok, Thailand 103,000 THB Pharmaceutical sales100.00%

(100.00%)

The Company sells


Taipei, Taiw an 270,000 TWD Pharmaceutical sales 100.00%The Company sells


Seoul, South

Korea3,512,000 KRW Pharmaceutical sales 100.00%

The Company sells


Manila, Philippines 62,000 PHP Pharmaceutical sales50.00%

(1.45%)

The Company sells

pharmaceutical products*4

Andhra Pradesh,

India2,708,324 INR

Pharmaceutical R&D /

production / sales

100.00%

(11.08%)


pharmaceutical research,

development and production /

sells bulk drug substances /

purchases pharmaceutical

products

*3

*8

Sydney, Australia 4,000 AUD Pharmaceutical sales 100.00% -

- - - - - -

Location Description of Operations

(*1)

Voting

RightsRelationship Note

Tokyo, Japan 340 JPYContrast media imports/

production/sales49.00%



Notes:

*4. HI-Eisai Pharmaceutical Inc. is considered to be a consolidated subsidiary as the Company holds effective control over its operation

*5. Eisai Inc. is the only subsidiary w hose sales to external customers exceed 10% of consolidated revenue reported in the consolidated f inancial

statements for the f iscal year ended March 31, 2016. Key f inancial results of Eisai Inc. are as follow s:

Revenue ¥167,059 mil.

Operating profit (¥36,874 mil.)

Profit for the period (¥3,299 mil.)

Total Equity ¥296,676 mil.

Total assets ¥405,476 mil.

*6. In March 2016, the pharmaceutical manufacturing and marketing business of the Company's consolidated subsidiary Sannova Co., Ltd.

w as succeeded by a new ly established company via an absorption-type split. At the time of the absorption-type split, Sannova Co., Ltd.'s

trading name w as changed to Sansho Pharmaceutical Co., Ltd., and the new ly established company's trading name is Sannova Co., Ltd.

In April 2016, all shares issued in the new company Sannova Co., Ltd. w ere transferred to Alfresa Holdings Corporation.

*7. In December 2015, the Company's consolidated subsidiary Eisai China Holdings Ltd. acquired all shares of Liaoning TianYi Biological

completed in April 2015. The name of the merged entity is Eisai Pharmaceuticals India Pvt. Ltd.

9. In December 2015, all shares held by the Company in EIDIA Co., Ltd. w ere transferred to Sekisui Chemical Co., Ltd.

10. In February 2016, all shares held by the Company in Eisai Food & Chemical Co., Ltd. w ere transferred to Mitsubishi-Kagaku Foods Corporation.

11. With AJINOMOTO PHARMACEUTICALS CO., LTD., a w holly ow ned subsidiary of Ajinomoto Co., Inc., as the successor company

and the Company as the splitting company, EA Pharma Co., Ltd. w as established in April 2016 via an absorption-type company split.

Eisai (Liaoning)

Pharmaceutical Co., Ltd.

Unit=thousand

Company Name Common Stock

Eisai China Holdings Ltd.

Eisai SA/NV

Limited Liability Company Eisai

Pharmaceutical Co., Ltd. The new name of the company is Eisai (Liaoning) Pharmaceutical Co., Ltd.

Eisai GesmbH

Eisai Asia Regional Services

Pte. Ltd.

(Associated Companies Accounted for Using the Equity Method)

Eisai (Malaysia) Sdn. Bhd.

Eisai China Inc.

Eisai (Singapore) Pte. Ltd.

Eisai (Suzhou) Trading Co.,

Ltd.

P.T. Eisai Indonesia

Eisai Korea Inc.

Eisai Australia Pty. Ltd.

(As of March 31, 2016)

Eisai Clinical Research

Singapore Pte. Ltd.

Eisai (Thailand) Marketing Co.,

Ltd.

Eisai Pharmaceuticals India,

Pvt. Ltd.

Eisai (Hong Kong) Co., Ltd.

Other—2 companies

Eisai Taiw an Inc.

HI-Eisai Pharmaceutical Inc.

*8. Procedures to merge Eisai Pharmaceuticals India Pvt. Ltd. and Eisai Pharmatechnology & Manufacturing Pvt. Ltd. w ere

even though the Company's voting rights do not exceed 50%.

Common Stock

Unit=million

Company Name

*1. "Description of Operations" indicates the segment applicable to the respective entity.

*3. Signif icant subsidiaries. In June 2015, the Company made an additional investment to Eisai China Holdings Ltd. by providing in-

kind contribution. Follow ing this, Eisai China Holdings Ltd. has become a signif icant subsidiary w hose total capital accounts for

more than 10% of the capital of the Company.

*2. Voting rights (%): Figures in parentheses show percentage indirectly ow ned by the Company.

Bracco-Eisai Co., Ltd.

Equity(%)Equity(%)Equity(%)

Equity(%)Equity(%)Equity(%)

54

3) Proposed Changes in Directors and Corporate Officers (effective June 17, 2016)

(1) Changes in Representative Corporate Officers

None

(2) Changes in Directors/Corporate Officers

a) Nominees for New Director

Yasuhiko Katoh

(Outside Director)

currently, Chairman and Representative Director, Mitsui

Engineering & Shipbuilding Co., Ltd.

Hirokazu Kanai currently, Group Officer, Head of Corporate Accounting & Tax

Department

Tamaki Kakizaki

(Outside Director)

currently, Professor, Meiji University, School of Law

Daiken Tsunoda

(Outside Director)

currently, Partner, Nakamura Tsunoda & Matsumoto

b) Retiring Director

Kiyochika Ota

(Outside Director)

(currently, Director)

Hideaki Matsui (currently, Director)

Osamu Suzuki

(Outside Director)

(currently, Director, and Partner, YUASA and HARA)

Patricia Robinson

(Outside Director)

(currently, Director, and Associate Professor at Hitotsubashi

University Graduate School of International Corporate Strategy)

c) Nominees for New Corporate Officers

None

d) Corporate Officers Scheduled for Promotion

None

e) Retiring Corporate Officers

None

(3) Nominees for Directors

Haruo Naito currently, Director

Representative Corporate Officer and CEO

Nobuo Deguchi currently, Director

Graham Fry currently, Outside Director

Toru Yamashita currently, Outside Director, Chief Corporate Adviser, NTT DATA

Corporation

Ikuo Nishikawa currently, Outside Director, Certified Public Accountant and

Professor, Faculty of Business and Commerce, Keio University

Noboru Naoe currently, Director

Eiichiro Suhara currently, Outside Director, President, Mitsubishi Pencil Co., Ltd.

Yasuhiko Katoh currently, Chairman and Representative Director, Mitsui

Engineering & Shipbuilding Co., Ltd.

Hirokazu Kanai currently, Group Officer, Head of Corporate Accounting & Tax

Department

Tamaki Kakizaki currently, Professor, Meiji University, School of Law

Daiken Tsunoda currently, Partner, Nakamura Tsunoda & Matsumoto

55

NOTE: Graham Fry, Toru Yamashita, Ikuo Nishikawa, Eiichiro Suhara, Yasuhiko Katoh,

Tamaki Kakizaki, and Daiken Tsunoda are nominees who meet the requirements of an

Outside Director set forth in Article 2, Paragraph 3, Item 7 of the Ordinance for Enforcement

of the Companies Act of Japan.

(4) Selected Candidates for Appointment as Members of Committees

a) Nomination Committee

Chair: Eiichiro Suhara

Members: Graham Fry

Yasuhiko Katoh

b) Audit Committee

Chair: Ikuo Nishikawa

Members: Noboru Naoe

Hirokazu Kanai

Tamaki Kakizaki

Daiken Tsunoda

c) Compensation Committee

Chair: Graham Fry

Members: Eiichiro Suhara

Yasuhiko Katoh

d) Independent Committee of Outside Directors

Members Graham Fry

Toru Yamashita

Ikuo Nishikawa

Eiichiro Suhara

Yasuhiko Katoh

Tamaki Kakizaki

Daiken Tsunoda

(5) Career Summary of Nominees for New Outside Director

Name: Yasuhiko Katoh

Date of Birth: May 19, 1947

Career Summary:

Apr. 1973 Joined Mitsui Engineering & Shipbuilding Co., Ltd.

Apr. 2004 CEO, Mitsui Babcock Energy Limited

Jun. 2004 Director, in charge of Mitsui Babcock Energy Limited (stay in the United

Kingdom)

Dec.2006 Director, in charge of Special Mission, Mitsui Engineering & Shipbuilding

Co., Ltd.

Jun. 2007 President, Representative Director, Mitsui Engineering & Shipbuilding

Co., Ltd.

Jun. 2013 Chairman and Representative Director, Mitsui Engineering &

Shipbuilding Co., Ltd. (current)

Name: Tamaki Kakizaki

Date of Birth: Jan. 16, 1961

56

Career Summary:

Apr. 2002 Associate Professor, Atomi University, Faculty of Management

Apr. 2008 Professor, Toyo University, Graduate School of Law

Apr. 2012 Professor, Yokohama National University, Graduate School of

International Social Sciences

Apr. 2014 Professor, Meiji University, School of Law (current)

Name: Daiken Tsunoda

Date of Birth: Jan 29, 1967

Career Summary:

Apr. 1994 Admitted to the Tokyo Bar Association

Joined Mori Sogo(currently Mori Hamada & Matsumoto)

Jan. 2001 Partner, Mori Sogo

Mar. 2003 Partner, Joined Nakamura Tsunoda (currently Nakamura Tsunoda &

Matsumoto) (current)

Jun. 2004 Outside Auditor, Atlus Co., Ltd.

Sep. 2004 Outside Director, Polaris Principal Finance Co., Ltd.(currently Polaris

Capital Group Co., Ltd.)

Jun. 2005 Outside Auditor, INES Corporation

Jul. 2007 Outside Auditor, Sealy Japan Co., Ltd. (currently Sleep Select Co., Ltd.)

(current)

Apr. 2008 Outside Auditor, Mitsui Sumitomo Insurance Group Holdings,

Incorporated (currently MS&AD Insurance Group Holdings, Inc.)

Apr. 2008 Outside Auditor, Japan Stockholders Data Service Company, Limited

(current)

Apr. 2010 Outside Director, MS&AD Insurance Group Holdings, Inc. (current)

Mar. 2012 Outside Auditor, BILCOM, Inc.

Apr. 2014 Outside Director, Culture Convenience Club Co., Ltd. (current)

Mar. 2015 Outside Auditor, BILCOM, Inc. (current)

(6) Nominees for Corporate Officers

Representative

Corporate

Officer and CEO

Haruo Naito currently, Representative Corporate Officer and

CEO

Representative

Corporate

Officer

Hideki Hayashi currently, Representative Corporate Officer,

Japan Business and CIO

Japan Business

Dementia Solutions HQs

Chief Information Officer (CEO Office)

Representative

Corporate

Officer

Yutaka Tsuchiya currently, Representative Corporate Officer,

Healthcare Policy and China Business

Healthcare Policy

Global Product Emergency Management

Global Value & Access

Marketing Authorization Supervisor General

China Business

hhc Data Creation

Japan and Asia Medical (CEO Office)

57

Representative

Corporate

Officer

Hideshi Honda currently, Representative Corporate Officer and

Asia Region President

President, Asia Region

CEO's special mission

Executive

Vice President

Takafumi Asano currently, Executive Vice President

President, Eisai Demand Chain Systems

Executive

Vice President

Yasushi Okada currently, Executive Vice President

Chief Talent Officer

Head of Talent Innovation Headquarters

General Affairs, Environmental and Safety

Affairs

Senior

Vice President

Kenta Takahashi currently, Senior Vice President

General Counsel

Intellectual Property

Senior

Vice President

Edward Stewart

Geary

currently, Senior Vice President

Chief Medical Officer

Head of Corporate Medical Affairs Headquarters

Global Safety Board Chair

Senior

Vice President

Yuji Matsue currently, Senior Vice President

Deputy Chief Talent Officer

Senior

Vice President

Gary Hendler currently, Senior Vice President

Chief Commercial Officer, Oncology Business

Group

President, EMEA Region

Chairman & CEO, Eisai Europe Ltd.

Senior

Vice President

Terushige Iike currently, Senior Vice President

President, Oncology Business Group (CEO

Office)

Senior

Vice President

Ryohei Yanagi currently, Senior Vice President

Chief Financial Officer

Chief IR Officer

Senior

Vice President

Ivan Cheung currently, Senior Vice President

President, Neurology Business Group

President, Americas Region

Chairman & CEO, Eisai Inc. (CEO Office)

Vice President Takashi Owa currently, Vice President

Chief Medicine Creation Officer, Oncology

Business Group

Chief Discovery Officer, Oncology Business

Group

Vice President Yasunobu Kai currently, Vice President

Chief Strategy Officer, Oncology Business

Group

Lenvima Global Lead, Oncology Business

Group

Head of Strategy Department, Oncology

Business Group

Vice President Lynn Kramer currently, Vice President

58

Chief Clinical Officer, Neurology Business Group

Chief Medical Officer, Neurology Business

Group

Vice President Sayoko Sasaki currently, Vice President

Corporate Affairs

Vice President Junichi Asatani currently, Vice President

Chief Compliance Officer

Internal Control

Vice President Shaji Procida currently, Vice President

President & COO, Eisai Inc.

Vice President Teiji Kimura currently, Vice President

Chief Discovery Officer, Neurology Business

Group

Head of Neurology Tsukuba Laboratory,

Discovery, Medicine Creation, Neurology

Business Group

Vice President Satoru Yasuda currently, Vice President

Head of Regional Cooperation Shuto-Ken HQ,

Eisai Japan

Vice President Hidenori Yabune currently, Vice President

Head of Access & Outcome Headquarters, Eisai

Japan

Vice President Hiroyuki Kato currently, Vice President

Head of Medicine Development Center

Vice President Alexander Scott currently, Vice President

Chief Strategy Officer, Neurology Business

Group

Head of Strategy Department, Neurology

Business Group

Vice President Masayuki

Miyajima

currently, Vice President

President, Eisai Japan

Vice President Tatsuyuki Yasuno currently, Vice President

Corporate Planning & Strategy

Head of Corporate Planning & Strategy

Department (CEO Office)

Vice President Yanhui Feng currently, Vice President

President, Eisai China Holdings Ltd.

President, Eisai China Inc.

Vice President Rami Suzuki currently, Vice President

Head of Corporate BD Department

NOTE: Representative Corporate Officer and CEO Haruo Naito will also serve concurrently as a

Director.

consolidated financial report [ifrs] for fiscal 2015 (year

Documents