1. Objectives of transformation
Sosei is establishing itself as a global biopharmaceutical company. It has developed a low risk business model by generating products opportunities from in-house product discovery through the reprofiling of established marketed drugs as well as in-licensing western products for local development and sales in Japan. The Company commercialises products through a mixture of out-licensing and establishing specialty sales, initially in Japan. This reorganisation has been effected to ensure the efficient management of the Company's business objectives.
Following the restructuring, the Company will comprise four main entities - Sosei Group Corporation (responsible for corporate matters), Sosei Co. Ltd. (responsible for Japanese operations - specialty sales and marketing and product development in Japan), Sosei R&D Ltd. (responsible for worldwide discovery and "Rest of World" development (i.e. outside Japan)) and Sosei Inc. (responsible for US operations).
2. Details of reorganisation
1) Schedule
15 May 2006 Approval of Demerger by Board of Directors
23 June 2006 Demerger to be approved by Shareholders at Annual General Meeting
1 October 2006 Expected Date of Demerger
2 October 2006 To be registered as Newco
2) Method of reorganisation
(1) Sosei will apply the "incorporation-type demerger" method, in which the Company is to become the demerging company (to be re-named as "Sosei Group Corporation) and its newly incorporated subsidiary (Newco, to be named as "Sosei Co. Ltd.") will become the successor company.
(2) This method is the most efficient method allowing prompt completion of the process.
3) Allocation of shares
Newco shall issue common stock of 1 share, which will be assigned to the Company.
4) Cash payments upon Demerger
None
5) Rights and obligations continued by Newco
Newco shall succeed assets, debts, rights, obligations, contracts and intellectual properties from the Company.
6) Claims and liabilities
The execution of the claims and liabilities which belong to the Company or Newco after Demerger is considered to be acceptable.
7) Board Directors to be assigned to Newco Yoshiyuki Yamakawa Koki Sato Genjiro Ine Hiroyoshi Usuda (Statutory Auditor) 3. Outline of relevant companies
1) Company name Sosei Co. Ltd. "Newco" [demerger company] [successor subsidiary] (to be renamed after (to be named after demerger as Sosei Group incorporation as Sosei Corporation) Co. Ltd.) 2) Business Pharmaceuticals - Pharmaceuticals - Development & Development & commercialisation commercialisation 3) Incorporation 22 June 1990 1 October 2006 4) Address 8 Ichiban-cho, Chiyoda-ku, 8 Ichiban-cho, Tokyo, Japan Chiyoda-ku, Tokyo, Japan 5) Representative Shinichi Tamura Yoshiyuki Yamakawa President & CEO President & CEO Representative Executive Representative Board Officer Director 6) Capital 15,226 million yen 100 million yen 7) Issued shares 98,300 shares 1 share 8) Fiscal year End of March End of March 9) Major 1. Nomura International Sosei Group shareholders plc. Client Account Sosei Corporation - 100% - 25% 2. Shinichi Tamura - 3.71% 3. The Chase Manhattan Bank NA London SL Omnibus Account - 3.59% 4. BBH 493424 OM Execuserve UK LLP -- 2.98% 5. OM 04 SSP Client Omnibus -- 2.54% 10) Main banks Mizuho, SMBC, Mitsubishi N/A UFJ Trust
Note: The details of the Company are as of 31 March 2006 and Newco assumed as of its incorporation, 1 October 2006
(12) Recent Financial Results of the Company (million yen) For fiscal years ended: 31 March, 2004 31 March, 2005 31 March, 2006 Sales 203 208 38 Operating income (914) (1,762) (1,924) Ordinary income (908) (1,845) (2,028) Net income (912) (1,847) (2,027) Net income per share (22,335.90) (32,610.93) (24,377.45) (yen) Dividends per share - - - (yen) Shareholders' equity per 22,344.99 156,852.69 267,863.88 share (yen)
4. Details of the business to be transferred 1) Business description Sosei Co Ltd.'s pharmaceutical business operations. 2) Financial results of the relevant business (million yen) Relevant business (a) Non-consolidated as of (a/b) end of March 2006 (b) Sales 38 38 100% Gross profit 16 16 100% Operating income (1,030) (1,924) 53.6% Ordinary income (1,030) (2,028) 50.8% 3) Succession of Assets and liabilities (as of end of March 2006) Assets Liabilities Current assets 3,677 million yen Current 109 million yen liabilities Total 3,677 million yen Total 109 million yen
4) Change of the name the Company The Company, Sosei Co. Ltd., will change its name effective as of 1 October 2006 upon Demerger as "Sosei Group Corporation". This will be subject to shareholder approval at the forthcoming Annual General Meeting on 23 June 2006.
5) Detail of the Company after Demerger (1) Company name Sosei Group Corporation (2) Business Holding company (3) Headquarters 8 Ichiban-cho, Chiyoda-ku, Tokyo, Japan (4) Representative Shinichi Tamura President & CEO Representative Executive Officer (5) Capital No effect by Demerger (6) Total assets Decrease of the amount of liabilities succeeded to Newco (7) Fiscal year End of March
(8) Financial effects of this reorganisation The Company does not expect major effect on the consolidated results. As for non-consolidated status, revenue of Sosei Group Corporation will mainly consist of management advisory fees from the Group's affiliates, which will be utilized as company resources for payments of operational expenditures of the holding company and dividends, etc. (At the end of the latest consolidated fiscal year, the Company had no funds available for earnings distribution as dividends as prescribed by the Company Law. If the Company's financial condition improves in the future, management will, in line with its policy of placing importance on the return of earnings to shareholders, consider the payment of a dividend while taking into consideration the Group's operating results and financial condition.)
Appendix: Transformation Scheme Current Structure Sosei Co. Ltd (100%) (100%) Other subsidiaries Arakis Limited (UK) Kosei, Inc. (US) (Stem Cell Sciences K.K.) Holding Company Structure (Demerging Company) Sosei Group Corp. (Holding Company, Ex-Sosei Co. Ltd.) (100%) (100%) (100%) Other subsidiaries Sosei Co. Ltd. Sosei R&D Ltd. Sosei Inc. (Stem Cell (Successor Subsidiary, (biopharmaceutical (US base, Sciences K.K.) biopharmaceutical R&D, ex-Arakis ex- Kosei, Inc.) development and sales) Ltd.)
Source: Sosei Co Ltd
