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Material Issues

The KAKEN Group delivers value to society and contributes to achieving a sustainable society by practicing its corporate philosophy: “KAKEN helps improve the quality of life of patients by serving as many people as possible to return smiles of happiness to their faces, through supplying superior pharmaceuticals.” We believe that this will lead to sustainable growth of the Group. In order to set out the challenges and initiatives in achieving this objective, we have identified material issues related to the KAKEN Group’s future value creation.

Process of Identifying Material Issues

STEP
01Identify medium-to-long-term social issues

To identify material issues addressed through business activities, the Environmental Subcommittee, Human Rights Subcommittee, Human Capital Subcommittee, and Supply Chain Subcommittee-subgroups of the Sustainability Committee-took the lead. They extracted societal challenges by considering business operations, management plans, various frameworks (GRI Standards, SASB Standards, S&P Global, ISO 26000, etc.), and ESG evaluation criteria (FTSE, MSCI, etc.).

STEP
02Review and reassessment of Material Issues
based on the social issues we want to solve

We mapped the extracted social issues using two axes: “Relevance to Kaken Pharmaceutical’s Business” and “Impact on Stakeholders,” narrowing down items of high importance. Based on this narrowing-down process, we selected ‘materiality’ while considering our management philosophy and organized the “related risks and opportunities” and “key initiatives” for each. For the 2024 fiscal year materiality review, we aligned with the Long-Term Management Plan 2031, clarified industry-specific risks and opportunities, and re-selected 12 materialities.

STEP
03Identification of Material Issues

After extensive discussions within the Sustainability Committee and thorough deliberation and review, we have identified these as material issues for our group.

STEP
04Board resolution

Following discussions within the Sustainability Committee, it was finalized and approved by the Board of Directors.

Material Issues

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Material issues related to business

Creation of innovative new drugs that satisfy unmet medical needs

Expansion of access to healthcare and pharmaceuticals

Stable and sustainable supply of pharmaceuticals

Appropriate provision of pharmaceutical information

Contribution to sustainable agriculture

Creation of innovative new drugs that satisfy unmet medical needs

Expansion of access to healthcare and pharmaceuticals

Stable and sustainable supply of pharmaceuticals

Appropriate provision of pharmaceutical information

Contribution to sustainable agriculture

Material issues related to the business foundation

Promotion of environmental management

Strengthening corporate governance

Promotion of compliance

Strengthening relationships with stakeholders to achieve sustainability

Respect for human rights

Creation of fulfilling workplaces

Strengthening development of human resources

Promotion of environmental management

Strengthening corporate governance

Promotion of compliance

Strengthening relationships with stakeholders to achieve sustainability

Respect for human rights

Creation of fulfilling workplaces

Strengthening development of human resources

Material Issues Details and KPI Setting and Progress Status

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Material issues related to business
Material issues What we aim for Major initiatives
Creation of innovative new drugs that satisfy unmet medical needs
Joy for patients
  • As an R&D-driven company, contribute to longer healthy life expectancy by creating innovative drugs that satisfy unmet medical needs.
  • ●Strengthening our in-house drug discovery platform through proactive investment in R&D
  • ●Utilizing external resources during early‑stage R&D
  • ●Taking on challenges in new fields, including new modalities our company has not previously explored
  • ●In-licensing development products to expand pipeline
Expansion of access to healthcare and pharmaceuticals
Joy for patients
  • In addition to overseas expansion of pharmaceuticals, focus on eliminating drug lag and loss by in-licensing pharmaceuticals marketed in Europe and the U.S..
  • To improve the quality of life of patients, expand access to medical care and pharmaceuticals through disease awareness activities.
  • ●Expanding existing global products into unlaunched countries and regions
  • ●Developing and in‑licensing new global products
  • ●In‑licensing development products with global rights
  • ●Domestic development of pharmaceuticals used overseas and those with advanced development overseas
  • ●Promoting of disease awareness campaigns
Stable and sustainable supply of pharmaceuticals
Joy for patients
  • In order to be trusted by patients and medical professionals, strengthen production and quality assurance systems to provide a stable and sustainable supply of high-quality pharmaceuticals.
  • ●Proactive investment in pharmaceutical manufacturing facilities to enhance patient-first production and quality assurance capabilities
  • ●Enhancement of the Supply Chain framework in partnership with suppliers
Appropriate provision of pharmaceutical information
Joy for patients
  • In order to maximize the value of pharmaceuticals, promote sales information provision activities based on high ethical standards and scientific evidence.
  • ●Regular review and oversight of sales information provision activities
  • ●Strengthening an appropriate information provision framework in accordance with the “Guideline on Promotional Activities for Prescription Drugs”
  • ●Promoting information provision activities that meet healthcare professionals’ needs through the integration of in‑person and digital approaches
Contribution to sustainable agriculture
Joy for society
  • Contribute to food safety and security and the development of sustainable agriculture in harmony with the environment by promoting the use of natural pesticides.
  • ●Contribution to sustainable agriculture through Polyoxin fungicides derived from microbial fermentation
    • Expansion of registered countries for agricultural chemicals
    • Obtaining certification as organic farming materials
    • Obtaining an exemption from setting an import tolerance (IT) level for residue

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Material issues KPIs Targets Results
FY2023 FY2024
Creation of innovative new drugs that satisfy unmet medical needs
  • Number of projects in Phase I or later
  • 8 or more at all times
  • 8
  • 9
Expansion of access to healthcare and pharmaceuticals
  • Number of countries and regions where Clenafin, Ecclock, and KP-001, etc., are marketed
  • (Disclose results)
  • Clenafin: 6 countries and regions (Japan, U.S., Canada, South Korea, Hong Kong and Macao)
  • Clenafin: 6 countries and regions (Japan, U.S., Canada, South Korea, Hong Kong, Macao)
  • Number of drugs for overseas expansion
  • 3–5 at all times
  • 3 (Fiblast, Clenafin, Ecclock)
  • 4 (Fiblast, Clenafin, Ecclock, FYARRO)
  • Projects under development in Japan to eliminate drug lag and drug loss
  • (Disclose results)
  • 3 (KAR, KC-8025, Tildacerfont)
  • 4 (KAR, KC-8025, Tildacerfont, ESK-001)
  • Number of public lectures held for disease awareness
  • (Disclose results)
  • 5
  • 9
Stable and sustainable supply of pharmaceuticals
  • Number of supply outages
  • 0 per year
  • 3
  • 1
  • Number of product recalls
  • 0 per year
  • 1
  • 1
Appropriate provision of pharmaceutical information
  • Number of Audit & Supervisory Committee meetings held
  • 4 per year
  • 4
  • 4
  • Evaluation of information provision activities by medical professionals (priority clinical departments)
  • (Disclose results)
  • Dermatology: Ranked 5th
    Orthopedics: Ranked 7th1
  • Dermatology: Ranked 5th
    Orthopedics: Ranked 8th2
Contribution to sustainable agriculture
  • Authorized countries and regions for registration of polyoxins as pesticides
  • (Disclose results)
  • 21 countries and regions
  • 21 countries and regions
  • Countries and regions where polyoxins have obtained certification as organic farming materials, and applicable crops
  • (Disclose results)
  • Countries and regions where certified: 3 (U.S., Australia and New Zealand)
    Applicable crops: 25 in total
  • Countries and regions where certified: 3 (U.S., Australia and New Zealand)
    Applicable crops: 27 in total

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Material issues related to the business foundation
Material issues What we aim for Major initiatives
Promotion of environmental management
Joy for society
  • Promote measures for environmental issues such as climate change, environmental pollution, and resource depletion to realize a sustainable society.
  • ●Reducing Scope 1 and 2 emissions through energy-saving and renewable energy initiatives
    • Promotion of energy-saving initiatives
    • Introduction of energy-saving systems and high-efficiency equipment
    • Adoption of renewable energy (carbon-free electricity and an off-site solar power generation PPA)
    • Introduction of on-site power generation (solar power, captive generation, etc.)
    • Offsetting through Non-fossil certificates and credits
  • ●Increasing the share of carbon‑free electricity in a phased manner
  • ●Reducing the total amount of waste that we generate
  • ●Increasing the recycling rate and reducing the final landfill disposal rate
  • ●Reducing environmental burden
    • Switching raw materials
    • Upgrading manufacturing facilities
    • Improvement of manufacturing processes
    • Product design and associated processes
  • ●Reducing water usage through efficient water use
    • Utilization of recycled water
    • Optimizing the amount of groundwater drawn
Strengthening corporate governance
Joy for society
  • Strengthen governance by listening to the expectations of stakeholders for conducting fair and transparent management.
  • ●Conducting effectiveness evaluations to ensure the Board of Directors’ effectiveness
  • ●Strengthening corporate governance through compliance with the Corporate Governance Code
Promotion of compliance
Joy for society
  • Establish and improve our position as a company that is trusted by society by promoting business activities with high ethical standards.
  • ●Conduct compliance training
    • Tiered training
    • Departmental training and other training programs
  • ●Notification about the compliance hotline
    • Conduct a survey on awareness of the compliance hotline
    • Internal disclosure of compliance hotline usage results
  • ●Understanding compliance violations
Strengthening relationships with stakeholders to achieve sustainability
Joy for society
  • Establish trust with stakeholders through direct communications to increase corporate value and realize a sustainable society.
  • ● Establishment of an internal framework for conducting supplier surveys
  • ●Promote sustainable procurement by communicating with suppliers based on the Sustainable Procurement Policy and the results of supplier surveys
  • ●Enhancing dialogue and meetings with institutional investors
  • ●Enhancing information disclosure and the corporate website
Respect for human rights
Joy for patients Joy for society Joy for employees
  • Contribute to the sustainable development of society through pursuit of KAKEN’s “Three Joys” business philosophy and respect for human rights.
  • ●Conduct internal human rights due diligence
  • ●Conduct human rights due diligence on suppliers
  • ●Enhancing the functionality of the compliance hotline
Creation of fulfilling workplaces
Joy for employees
  • Increase employee engagement by promoting a personnel system that provides job satisfaction and improving the working environment.
  • ●Promotion of work-life balance
  • ●Diversity and inclusion
  • ●Enhancing support measures for employees balancing work with childcare, nursing care, and medical needs
  • ●Enhancing employee motivation by assigning individuals to roles that suit their abilities
  • ●Promotion of health and productivity management (KENKO Investment for Health)
Strengthening development of human resources
Joy for employees
  • Develop professionals who can pursue changes and tackle challenges through personal development and reskilling.
  • ●Enhancing tiered training and selective development programs
  • ●Proactively promoting individuals capable of delivering strong results
  • ●Fostering self-directed learning

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Material issues KPIs Targets Results
FY2023 FY2024
Promotion of environmental management
  • CO2 emissions (Scope 1 and 2)
  • 51% reduction by FY2030 compared with FY2016 (Net zero by 2050)
  • 21,408
    t-CO2
  • 20,136
    t-CO2
  • Percentage of carbon-free electricity
  • At least 80% by FY2030
  • 18%
  • 26%
  • Amount of waste generated
  • (Disclose results)
  • 977.4 t
  • 1,169.5 t
  • Recycling rate
  • At least 90%
  • 97.3%
  • 97.0%
  • Final landfill disposal rate
  • 5% or less
  • 1.9%
  • 1.9%
  • Amount of Class I designated chemical substances (PRTR) handled
  • (Disclose results)
  • 23.4 t
  • 21.8 t
  • Amount of volatile organic compound (VOC) substances handled
  • (Disclose results)
  • 151.4 t
  • 134.5 t
  • Total biological oxygen demand (BOD) of wastewater
  • (Disclose results)
  • 3.33 t
  • 3.52 t
  • Water consumption
  • 10% reduction by FY2030 compared with FY2016
  • 2,959 thousand m3
  • 3,044 thousand m3
Strengthening corporate governance
  • Number of effectiveness evaluations of the Board of Directors
  • Once per year
  • Once
  • Once
  • Corporate Governance Code compliance rate
  • 100%
  • 98.8%
  • 100%
Promotion of compliance
  • Participation rate for compliance training (including harassment training)
  • 100%
 -
  • Approx. 62%
  • Increase awareness of compliance hotline (whistleblowing system)
 100% - -
  • Number of serious compliance violations
  • 0 per year
 0 0
Strengthening relationships with stakeholders to achieve sustainability
    • Questionnaire surveys of suppliers
 - - -
  • Number of meetings with investors
  • (Disclose results)
  • IR meetings: 34
  • SR meetings: 9
  • IR meetings: 66
  • SR meetings: 14
Respect for human rights
    • Training on human rights
 -
  • Training focused on business and human rights: 1 session
    Other: Notification through compliance report
  • Training run for employees at Head Office (all departments, subsidiaries) and at the Kyoto and Shizuoka Sites
  • Conduct questionnaire surveys of suppliers
  • Communication with suppliers based on the human rights policy and questionnaires
 - - -
  • Make the corporate website multilingual
  • -
 - -
Creation of fulfilling workplaces
  • Percentage of annual paid holidays taken
  • 70% (FY2025)
  • 58.6%
  • 62.5%
  • Number of days and percentage of childcare leave taken
  • Female: 100%
    Male: 80%, at least 9 days (FY2025)
  • Female: 100%
    Men: 83.3%, 11.5 days
  • Female: 100%
    Men: 93.8%, 14.7 days
  • Percentage of women in management positions
  • 7% or higher (FY2025)
  • 4.1%
  • 5.6%
  • Average raw score and positive response rate in engagement survey
  • (Disclose results)
  • Job satisfaction of individual employees
    Average raw score: 2.7
    Positive response rate: 64.5%
    Sense of belonging to the company
    Average raw score: 2.7
    Positive response rate: 66.7%3
  • Job satisfaction of individual employees
    Average raw score: 2.73
    Positive response rate: 65.7%
    Sense of belonging to the company
    Average raw score: 2.76
    Positive response rate: 69.7%3
Strengthening development of human resources
  • Total hours of training led by the Human Resources Department
  • (Disclose results)
  • 4,197 hours
  • 4,764 hours
  • 1.From “Survey on what doctors seek in MRs: 2024 edition,” Monthly Mix: Feb. 2024 issue, p. 37
  • 2.From “Survey on what doctors seek in MRs: 2025 edition,” Monthly Mix: Feb. 2025 issue, p. 32–33
  • 3.Of the four response options, scores are calculated as follows: Strongly agree = 4 pts., Agree = 3 pts.,
    Disagree = 2 pts., Strongly disagree = 1 pt. Average raw score = Average score of responses.
    Positive response rate = Percentage of people whose responses were 3 or 4 points.

Material issues are identified
with reference to
our corporate philosophy,
the “Three Joys.”

Business Philosophy
KAKEN “Three Joys”

Philosophy

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