Kubota Pharmaceutical 6K Current report | KBBTF 8 Aug 17

EXHIBIT 99.1



(Translation)

Financial Results for the Second Quarter of the Fiscal Year Ending June 30, 2017 [IFRS] [Consolidated]

August 8, 2017



Company name	Kubota Pharmaceutical Holdings Co., Ltd.
Stock exchange listing	Tokyo Stock Exchange Mothers Market
Code number	4596
URL	www.kubotaholdings.co.jp/en/
Representative	Dr. Ryo Kubota
	Title: Chairman, President and Chief Executive Officer
Contact	Yasuo Ishikawa, Director of Financial Reporting
	Japan Office
	(Telephone: 03-6550-8928)
Scheduled date of quarterly report submission	August 8, 2017
Scheduled date of dividend payment commencement	—
Supplementary materials for financial results	Yes
Earnings announcement for financial results	No

1. Financial Results for the Six Months Ended June 30, 2017 in FY2017 (Consolidated) (January 1, 2017 to June 30, 2017)

(1) Consolidated Operating Results

(Unit: in millions, % change from the previous fiscal year)



	Operating Revenue				Loss from operations				Income (loss) before income tax				Net loss attributable to common shareholders
2Q FY2017	¥	—	NA		¥	(2,071	)	NA	¥	(1,986	)	NA	¥	(1,986	)	NA
2Q FY2016	¥	745	—	%	¥	(2,471	)	—	¥	(2,390	)	—	¥	(2,392	)	—

(Note) Comprehensive loss: 2Q FY2017 - ¥2,618 million; 2Q FY2016 - ¥5,257 million

(Unit: ¥)



	Basic loss per share			Diluted loss per share
	Basic loss per share			Diluted loss per share
2Q FY2017	¥	(52.45	)	¥	(52.45	)
2Q FY2016	¥	(64.42	)	¥	(64.42	)

(2) Consolidated Financial Position

(Unit: in millions, except for % and per share data)



	Total assets		Net assets		Shareholders’ equity		Shareholders’ equity ratio		Shareholders' equity per share
	Total assets		Net assets		Shareholders’ equity		Shareholders’ equity ratio		Shareholders' equity per share
As of June 30, 2017	¥	14,714	¥	14,211	¥	14,211	96.6	%	¥	374.26
As of December 31, 2016	¥	17,172	¥	16,524	¥	16,524	96.2	%	¥	436.25

2. Dividends

(Unit: US$ and ¥)



	Annual dividend per share
	First Quarter		Second Quarter		Third Quarter		Year-end		Total
FY2016	¥	—	¥	—	¥	—	¥	—	¥0
FY2017	¥	—	¥	—	¥	—	¥	—	¥0
FY2017 (forecast)	¥	—	¥	—	¥	—	¥	—	¥0

(Note) Revisions to dividend forecast most recently announced: None.

3. Projected Financial Results for FY2017 (January 1, 2017 to December 31, 2017)

(Unit: ¥ in millions, except for % and per share data)



	Revenue from collaborations		Loss from operations		Income (loss) before income tax		Net loss		Net loss per share ¹
Full Year 2017 Forecast	—		(4,290	)	(4,180	)	(4,180	)	(110.00	)
Percentage Change (%) - omitted where not meaningful	—	%	—	%	—	%	—	%	—	%

(Note) Revisions to projected financial results for FY2017 most recently announced: None.

Instead of the U.S. GAAP -based forecast released on February 14, 2017, this forecast is based on IFRS.

1 - Net income (loss) per share was computed for Full Year 2017 Forecast using 37,972,073 weighted average shares for expected basic and diluted shares outstanding.

Note: Earnings forecast of the Company is based on US dollar amounts. Amounts as to the earnings forecast for FY2017 are converted amounts (Japanese Yen (¥) in thousands except for per share amounts) at the rate of 1 US Dollars = ¥110 which is the rate use to forecast 2017 for the sake of convenience.

4. Others

(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in a change in scope of consolidation): Not Applicable

(2) Adoption of simplified accounting method or specific accounting methods: None

(3) Changes in accounting policies

(i) Changes caused by revision of accounting standards, etc: None

(ii) Changes other than (i) None

(4) Number of shares issued and outstanding (common stock)

1) Number of shares issued and outstanding as of the end of the reporting period (including treasury stock):



Number of Common Shares
As of June 30, 2017	37,972,073
As of December 31, 2016	37,877,705

2) Number of shares of treasury stock as of the end of the reporting period:



Number of Treasury Shares
As of June 30, 2017	70
As of December 31, 2016	70

3) Average number of shares outstanding during the reporting period:



Weighted Average Number of Common Shares
2Q FY2017	37,865,504
2Q FY2016	37,135,249

* Implementation status of quarterly review procedures

The quarterly financial report is exempt from quarterly review procedures as stipulated under the Financial Instruments and Exchange Act of Japan.

* Disclaimer Regarding Forward-Looking Statements and Other Items of Note

Effective December 1, 2016, we completed a triangular merger, the Redomicile Transaction, pursuant to which Acucela Inc., the former parent company of Kubota Holdings, the Company, merged with and into Acucela North America Inc., a wholly owned subsidiary of the Company, established on March 24, 2016, as a surviving corporation. Under such transaction, the shares of common stock of the Company were allocated and issued to the shareholders of Acucela Inc. in exchange for the common stock of such company. The Company listed on the Tokyo Stock Exchange Mothers Market on December 6, 2016.

Forecasts and other forward-looking statements included in this report are based on information currently available and certain assumptions that the Company deems reasonable. Actual performance and other results may differ significantly due to various factors.

TABLE OF CONTENTS

1. Qualitative Information for the Second Quarter of FY2017

(1) Qualitative Information on Operating Results

Comparison of the Six Month Periods Ended June 30, 2017 and June 30, 2016

Revenue from collaborations.

By program, revenues were as follows (in thousands JPY (¥), except for %):



	Six Months Ended June 30,				2016 to 2017 ¥ Change			2016 to 2017 % Change
	2017		2016		2016 to 2017 ¥ Change			2016 to 2017 % Change
Emixustat	¥	—	¥	744,653	¥	(744,653	)	(100.0	)%
Other	—		339		(339		)	(100.0	)%
Total	¥	—	¥	744,992	¥	(744,992	)	(100.0	)%

The decrease in revenue from collaborations for the six months ended June 30, 2017 compared to the same period in 2016 was due to the completion of the Emixustat clinical trial during the year and wind-down activities related to Emixustat following the termination of our collaboration with Otsuka. Wind-down activities related to Emixustat were completed in December 2016.

Our Phase 2b/3 clinical trial results related to Emixustat for the treatment of geographic atrophy was completed in May 2016. We do not expect to generate any revenue from the terminated collaboration with Otsuka related to Emixustat in the future.

Research and development.

Under our strategic plan we anticipate that we may independently develop potential product candidates, and, in the absence of establishing new collaborations, our expenditures on such programs will not be funded by collaborative partners. We expect our total research and development expenses to increase in absolute dollars as we pursue development of our product candidates in multiple indications and potentially execute additional in-licensing transactions, which may result in potential upfront and milestone payments.

By program, our research and development expenses were as follows (in thousands JPY (¥), except for %):



	Six Months Ended June 30,				2016 to 2017 ¥ Change			2016 to 2017 % Change
	2017		2016		2016 to 2017 ¥ Change			2016 to 2017 % Change
Internal Research	¥	870,169	¥	682,299	¥	187,870		27.5	%
Emixustat	428,915		865,691		(436,776		)	(50.5	)%
Total	¥	1,299,084	¥	1,547,990	¥	(248,906	)	(16.1	)%

Research and development expenses incurred through internal research activities increased for the six months ended June 30, 2017 due to to expenses incurred in the pre-clinical development of ACU-6151 and development of our mobile Health applications or Patient Based Ophthalmology Suite, PBOS. This was offset by an upfront non-refundable fee of ¥560 million paid to YouHealth Eyetech Inc. in the prior year in connection with the option and license agreement for lanosterol technology.

Research and development expense related to clinical programs under the Emixustat Agreement decreased for the six months ended June 30, 2017 compared to same period in 2016, mainly due to the completion of the Phase 2b/3 clinical trial and

related wind-down in activities related to such clinical trial following the termination of the Emixustat Agreement in 2016. In 2017, we incurred research and development expense related to the Emixustat clinical programs for Stargardt disease and proliferative diabetic retinopathy.

General and administrative.

The general and administrative expenses were as follows (in thousands JPY (¥), except for %):



	Six Months Ended June 30,				2016 to 2017 ¥ Change			2016 to 2017 % Change
	2017		2016		2016 to 2017 ¥ Change			2016 to 2017 % Change
General and administrative	¥	771,455	¥	1,668,262	¥	(896,807	)	(53.8	)%

General and administrative expenses decreased ¥897 million for the six months ended June 30, 2017 compared to the same period in 2016 primarily due to the following:


•	we recognised less stock based compensation expense primarily due to fully vested market based awards and accelerated vesting for terminated executives in the prior year in the amount of ¥352 million;


•	we incurred ¥246 million less of corporate legal expense due to completing the Redomicile Transaction in the prior year;


•	due to having fewer employees in 2017, thereby decreasing personnel expenses by ¥228 million due to incurring fewer charges in salaries, taxes, other benefits, and travel;


•	for accounting, compliance, investor relations, consulting, and public relations fees decreased by ¥69 million due to changing of our auditors and the completion of our Otsuka collaboration;


•	other expenses decreased by ¥16 million; and


•	we increased expenses in the current year from the Seattle office move by ¥14 million primarily due to the write off of leasehold improvements.

(2) Qualitative Information on Financial Position

Current Assets

Current assets as of June 30, 2017 totaled ¥13,590 million, representing a decrease of ¥1,249 million compared to December 31, 2016. This change was primarily the result of a decrease in our short-term investment holdings of ¥1,109 million paired with a decrease in trade accounts receivable of ¥213 million due to the ending of our collaboration with Otsuka offset by an increase in cash holdings of ¥135 million.

Non-current Assets

Non-current assets as of June 30, 2017 totaled ¥1,125 million, representing a decrease of ¥1,209 million from December 31, 2016. This change was the result of transferring a portion of our long-term investment holdings to cash to fund pre-clinical research programs.

Current Liabilities

Current liabilities as of June 30, 2017 totaled ¥390 million, representing a decrease of ¥147 million compared to December 31, 2016. This change was primarily a decrease in accrued compensation due to the Company having settled most of its severance liabilities related to two former executive officers.

Long-term Liabilities

The Company had ¥113 million in long-term liabilities as of June 30, 2017 which represented our long-term portion of deferred office rent. There were no material changes to our long-term liabilities as of June 30, 2017 compared to December 31, 2016.

Equity

Equity as of June 30, 2017 totaled ¥14,211 million, representing a decrease of ¥2,313 million from December 31, 2016. This change was due to ¥1,986 million of net loss during the period and a decrease of foreign currency translation adjustments attributable to Japanese yen appreciation.

(3) Qualitative Information on Operating Results Forecast

There are no changes to the earnings projections for the year ending December 31, 2017 released on February 14, 2017.

2. Quarterly Financial Statements and Other Information

(1) Condensed Consolidated Statements of Financial Position

KUBOTA PHARMACEUTICAL HOLDINGS CO., LTD.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Yen in thousands)



	The date of transition to IFRS
	January 1, 2016			December 31, 2016			June 30, 2017
Assets
Current assets:
Cash and cash equivalents	¥	613,678		¥	1,042,474		¥	1,177,421
Trade receivables	739,724			212,830			—
Other financial assets	12,921,792			13,213,631			12,104,581
Other current assets	248,194			370,206			307,883
Total current assets	14,523,388			14,839,141			13,589,885
Non-current assets:
Property, plant and equipment	110,961			78,111			39,725
Other financial assets	6,618,474			2,218,092			998,231
Other assets	37,871			37,053			86,644
Total non-current assets	6,767,306			2,333,256			1,124,600
Total assets	¥	21,290,694		¥	17,172,397		¥	14,714,485
Liabilities and equity
Current liabilities:
Trade payables	¥	24,966		¥	51,132		¥	38,815
Accrued liabilities	378,487			201,004			160,548
Accrued compensation	296,339			267,373			161,159
Deferred revenue	297,545			—			—
Deferred rent and lease incentives	17,247			17,795			29,322
Total current liabilities	1,014,584			537,304			389,844
Non-current liabilities:
Long-term deferred rent, lease incentives, and others	133,154			110,967			113,206
Total non-current liabilities	133,154			110,967			113,206
Total liabilities	1,147,738			648,271			503,050
Equity:
Share capital	500			19,082			52,479
Capital reserve	23,878,351			25,056,311			25,328,468
Accumulated deficit	(3,735,895		)	(7,646,621		)	(9,632,526		)
Accumulated other comprehensive loss	—			(904,646		)	(1,536,986		)
Total equity attributable to owners of the Company	20,142,956			16,524,126			14,211,435
Total liabilities and equity	¥	21,290,694		¥	17,172,397		¥	14,714,485

(2) Condensed Consolidated Statements of Operations

KUBOTA PHARMACEUTICAL HOLDINGS CO., LTD.

CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(Yen in thousands)

(unaudited)



	Six months ended June 30,
	2016			2017
Operating revenue	¥	744,992		¥	—
Expenses:
Research and development	1,547,990			1,299,084
General and administrative	1,668,262			771,455
Total expenses	3,216,252			2,070,539
Loss from operations	(2,471,260		)	(2,070,539		)
Other income (expense), net:
Financial income	79,081			79,881
Other income (expense), net	1,804			4,925
Total other income, net	80,885			84,806
Loss before income tax	(2,390,375		)	(1,985,733		)
Income tax expense	(1,995		)	(172		)
Net loss	(2,392,370		)	(1,985,905		)
Net loss attributable to owners of the Company	¥	(2,392,370	)	¥	(1,985,905	)

(3) Condensed Consolidated Statements of Comprehensive Loss

KUBOTA PHARMACEUTICAL HOLDINGS CO., LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE PROFIT OR LOSS

(Yen in thousands)



	Six Months Ended June 30,
	2016			2017
Net loss	¥	(2,392,370	)	¥	(1,985,905	)
Other comprehensive income (loss):
Items that may be reclassified to profit or loss
Cumulative translation adjustment, net of tax	(2,865,010		)	(632,340		)
Total comprehensive income (loss)	(5,257,380		)	(2,618,245		)
Total comprehensive income (loss) attributable to owners of the Company	¥	(5,257,380	)	¥	(2,618,245	)

(4) Condensed Consolidated Statements of Shareholders' Equity

KUBOTA PHARMACEUTICAL HOLDINGS CO., LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Yen in thousands)



						Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Share Capital		Capital Reserve
	Amount		Amount
Balance at January 1, 2016	¥	500	¥	23,878,351		¥	—		¥	(3,735,895	)	¥	20,142,956
Share-based compensation	—		594,580			—			—			594,580
RSUs withheld for employee payroll taxes	—		(372,059		)	—			—			(372,059		)
Common stock issued in connection with stock option exercises (net of ¥352 million withheld for payroll taxes)	—		827,760			—			—			827,760
Net loss	—		—			—			(2,392,370		)	(2,392,370		)
Cumulative translation adjustment	—		—			(2,865,010		)	—			(2,865,010		)
Balance at June 30, 2016	¥	500	¥	24,928,632		¥	(2,865,010	)	¥	(6,128,265	)	¥	15,935,857
Share-based compensation	—		189,559			—			—			189,559
RSUs withheld for employee payroll taxes	—		(132,597		)	—			—			(132,597		)
Common stock issued in connection with stock option exercises (net of ¥20 million withheld for payroll taxes)	18,582		74,291			—			—			92,873
Excess net tax benefit related to tax provision	—		(3,574		)	—			—			(3,574		)
Net loss	—		—			—			(1,518,356		)	(1,518,356		)
Cumulative translation adjustment	—		—			1,960,364			—			1,960,364
Balance at December 31, 2016	¥	19,082	¥	25,056,311		¥	(904,646	)	¥	(7,646,621	)	¥	16,524,126
Share-based compensation	—		295,141			—			—			295,141
Common stock issued in connection with stock option exercises	33,397		(22,984		)	—			—			10,413
Net loss	—		—			—			(1,985,905		)	(1,985,905		)
Cumulative translation adjustment	—		—			(632,340		)				(632,340		)
Balance at June 30, 2017	¥	52,479	¥	25,328,468		¥	(1,536,986	)	¥	(9,632,526	)	¥	14,211,435

(5) Condensed Consolidated Statements of Cash Flows

KUBOTA PHARMACEUTICAL HOLDINGS CO., LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Yen in thousands)



	Six months ended June 30,
	2016			2017
Cash flows from operating activities
Net loss	¥	(2,392,370	)	¥	(1,985,905	)
Adjustments to reconcile net loss to net cash used in operating activities:
Asset impairment	—			55,519
Depreciation	16,614			15,912
Share-based compensation	594,580			295,141
Amortization, net, of premium/discount on marketable securities	88,896			13,901
Net loss on disposal of fixed assets	—			21,158
Changes in operating assets and liabilities:
Trade receivables	292,883			205,942
Other current assets	(27,995		)	(67,685		)
Accounts payable	36,208			(9,667		)
Accrued liabilities	(6,150		)	(33,291		)
Accrued compensation	(16,708		)	(98,009		)
Deferred rent and lease incentives	(7,866		)	18,796
Deferred revenue	(269,258		)	—
Other assets	(107,590		)	(51,071		)
Net cash used in operating activities	(1,798,756		)	(1,619,259		)
Cash flows from investing activities
Interest earned on investments	78,384			79,833
Payments for purchase of investment securities	(3,815,543		)	(5,765,520		)
Proceeds from maturities of investment securities	5,594,615			7,477,823
Net additions to property and equipment	(2,088		)	(1,839		)
Net cash provided by investing activities	1,855,368			1,790,297
Cash flows from financing activities
Value of equity awards withheld for tax liability	(724,265		)	—
Proceeds from issuance of common stock	1,172,467			10,413
Net cash provided by financing activities	448,202			10,413
Effect of exchange rate change on cash and cash equivalents	(134,457		)	(46,504		)
Increase in cash and cash equivalents	370,357			134,947
Cash and cash equivalents—beginning of period	613,678			1,042,474
Cash and cash equivalents—end of period	¥	984,035		¥	1,177,421

(6) Notes on the Consolidated Quarterly Financial Statements

(a) Note regarding Assumption of Going Concern

None noted as of the date of filing of this report.

(b) Note in case of Significant Changes in the Amount of Equity

Not applicable.

1. First-time Adoption of IFRS

The Company is adopting IFRS for the first time this financial year (January 1, 2017 through December 31, 2017). The date of transition to IFRS is January 1, 2016. Upon transition to IFRS, the Company has adjusted amounts previously reported in its condensed consolidated financial statements prepared in accordance with US GAAP. The effects of the transition from US GAAP to IFRS on the Company’s reported statements of financial position, statements of profit or loss, statements of comprehensive profit or loss and statements of cash flows are explained in the reconciliations and notes that follow.

(1) IFRS 1 Exemptions

IFRS 1 requires that first-time adopters of IFRS shall apply IFRS retrospectively to prior periods. However, it provides some mandatory exceptions and voluntary exemptions from full retrospective application. Adjustments as a result of the first-time adoption of IFRS and these exemptions are recognised through retained earnings or other components of equity at the date of transition. The Company has taken advantage of the following voluntary exemptions:


(a)	Foreign Currency Translation Adjustments

Cumulative foreign currency translation adjustments are deemed to be zero as of the transition date.


(b)	Share-Based Payment

IFRS 1 permits first-time adopters not to apply IFRS 2, Share-based Payment, to equity instruments that were granted after November 7, 2002 and which vested before the date of transition to IFRS. The Company has taken advantage of this exemption.

(2) Reconciliation of US GAAP to IFRS and Related Notes

The reconciliations required to be disclosed in the first IFRS financial statements are described in the reconciliations below. "Reclassifications" includes items that do not affect retained earnings and comprehensive loss. "Foreign Currency Translation" shows the difference each reporting period between using the spot convenience rate as reported in our pre-Redomicile Transaction financial statements and the average rate which we are now required to use under IFRS. "IFRS Adjustments" includes items that affect retained earnings and comprehensive loss.

(i) Reconciliation of Equity as of the Transition Date (January 1, 2016)



													(Yen in thousands)
US GAAP	US GAAP			Reclassification			IFRS adjustments		IFRS			Note	IFRS
Assets													Assets
Current assets:													Current assets:
Cash and cash equivalents	¥	613,678		¥	—		¥	—	¥	613,678			Cash and cash equivalents
Accounts receivable from collaborations	740,546			(822		)	—		739,724			A	Trade receivables
Investments	12,895,862			—			25,930		12,921,792			B	Other financial assets
Prepaid expenses and other current assets	247,372			822			—		248,194			A	Other current assets
Total current assets	14,497,458			—			25,930		14,523,388				Total current assets
													Non-current assets:
Property and equipment, net	110,961			—			—		110,961				Property, plant and equipment
Long-term investments	6,575,054			—			43,420		6,618,474			B	Other financial assets
Other assets	37,871			—			—		37,871				Other assets
Total non-current assets	6,723,886			—			43,420		6,767,306				Total non-current assets
Total assets	21,221,344			—			69,350		21,290,694				Total assets
Liabilities and shareholders’ equity													Liabilities and equity
Current liabilities:													Current liabilities:
Accounts payable	24,966			—			—		24,966				Trade payables
Accrued liabilities	378,487			—			—		378,487				Accrued liabilities
Accrued compensation	296,339			—			—		296,339				Accrued compensation
Deferred revenue from collaborations	297,545			—			—		297,545				Deferred revenue from collaborations
Deferred rent and lease incentives	17,247			—			—		17,247				Deferred rent and lease incentives
Total current liabilities	1,014,584			—			—		1,014,584				Total current liabilities
Commitments and contingencies
													Non-current liabilities:
Long-term deferred rent, lease incentives, and others	133,154			—			—		133,154				Long-term deferred rent, lease incentives, and others
Total long-term liabilities	133,154			—			—		133,154				Total non-current liabilities
Total liabilities	1,147,738			—			—		1,147,738				Total liabilities
Shareholders’ equity:													Equity:
Common stock	23,878,851			(500		)	—		23,878,351			C	Capital reserve
				500			—		500				Share capital
Accumulated other comprehensive loss	(69,350		)	—			69,350		—			B	Accumulated other comprehensive loss
Accumulated deficit	(3,735,895		)	—			—		(3,735,895		)		Accumulated deficit
Total shareholders' equity	20,073,606			—			69,350		20,142,956				Total equity attributable to owners of the Company
Total liabilities and shareholders’ equity	¥	21,221,344		¥	—		¥	69,350	¥	21,290,694			Total liabilities and equity

Notes to reconciliation of equity as of the date of translation to IFRS (January 1, 2016)


(A)	Reclassifications

Reclassifications: We reclassified less than ¥1 million in non-trade accounts receivable accounts from trade receivables to other current assets as of January 1, 2016.


(B)	Financial instruments

Adjustments: As a result of early adopting IFRS 9, Financial Instruments, issued in 2014, short-term and long-term investments representing corporate debt securities, US government agency securities, commercial paper and certificates of deposit increased as a result of adjusting investments from their fair market value under US GAAP to their amortised cost under IFRS. Short-term investments increased ¥26 million as of January 1, 2016. Long-term investments increased ¥43 million as of January 1, 2016. This increase impacted unrealized gain/(loss) within accumulated other comprehensive loss, a component of equity in the Statement of Financial Position, and net unrealized gain (loss) on securities, net of tax, a component of the Statement of Comprehensive Profit or Loss.

Reconciliation of Equity as of June 30, 2016



																	(Yen in thousands)
US GAAP	US GAAP			Reclassification			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Assets																	Assets
Current assets:																	Current assets:
Cash and cash equivalents	¥	984,035		¥	—		¥	—		¥	—		¥	984,035			Cash and cash equivalents
Accounts receivable from collaborations	383,442			(3,726		)				—			379,716			A	Trade receivables
Investments	11,611,644			—			—			1,065			11,612,709			B	Other financial assets
Prepaid expenses and other current assets	162,083			3,726			—			—			165,809			A	Other current assets
Total current assets	13,141,204			—			—			1,065			13,142,269				Total current assets
																	Non-current assets:
Property and equipment, net	81,401			—			—			—			81,401				Property, plant and equipment
Long-term investments	3,314,936			—			—			(7,924		)	3,307,012			B	Other financial assets
Other assets	135,224			—			—			—			135,224				Other assets
Total non-current assets	3,531,561			—			—			(7,924		)	3,523,637				Total non-current assets
Total assets	16,672,765			—			—			(6,859		)	16,665,906				Total assets
Liabilities and shareholders’ equity																	Liabilities and equity
Current liabilities:																	Current liabilities:
Accounts payable	50,529			—			—			—			50,529				Trade payables
Accrued liabilities	316,248			—			—			—			316,248				Accrued liabilities
Accrued compensation	242,250			—			—			—			242,250				Accrued compensation
Deferred rent and lease incentives	15,539			—			—			—			15,539				Deferred rent and lease incentives
Total current liabilities	624,566			—			—			—			624,566				Total current liabilities
Commitments and contingencies
																	Non-current liabilities:
Long-term deferred rent, lease incentives, and others	105,483			—			—			—			105,483				Long-term deferred rent, lease incentives, and others
Total long-term liabilities	105,483			—			—			—			105,483				Total non-current liabilities
Total liabilities	730,049			—			—			—			730,049				Total liabilities
Shareholders’ equity:																	Equity:
Common stock	21,216,853			(500		)	3,591,558			120,721			24,928,632			C	Capital reserve
	—			500			—			—			500				Share capital
Accumulated other comprehensive loss	6,895			—			(2,865,046		)	(6,859		)	(2,865,010		)	B	Accumulated other comprehensive loss
Accumulated deficit	(5,281,032		)	—			(726,512		)	(120,721		)	(6,128,265		)	C	Accumulated deficit
Total shareholders' equity	15,942,716			—			—			(6,859		)	15,935,857				Total equity attributable to owners of the Company
Total liabilities and shareholders’ equity	¥	16,672,765		¥	—		¥	—		¥	(6,859	)	¥	16,665,906			Total liabilities and equity

Notes to reconciliation of equity as of June 30, 2016


(A)	Reclassifications

Reclassifications: We reclassified ¥4 million in non-trade accounts receivable accounts from trade receivables to other current assets as of June 30, 2016.


(B)	Financial instruments

Adjustments: As a result of early adopting IFRS 9, Financial Instruments, issued in 2014, short-term and long-term investments representing corporate debt securities, US government agency securities, commercial paper and certificates of deposit decreased as a result of adjusting investments from their fair market value under US GAAP to their amortised cost under IFRS. Short-term investments increased ¥1 million as of as of June 30, 2016. Long-term investments decreased ¥8 million as of June 30, 2016. This decrease impacted unrealized gain/(loss) within accumulated other comprehensive loss, a component of equity in the Statement of Financial Position, and net unrealized gain (loss) on securities, net of tax, a component of the Statement of Comprehensive Profit or Loss.

Adjustment: As a result of adopting IFRS 2, Share-based Compensation, the Company changed its expensing of awards from the straight-line method over the entire vesting period to the graded vesting method whereby each installment of an award is treated as a separate grant. When compared to the straight-line method, this often results in additional expense being recorded in earlier periods. For the six months ended June 30, 2016, we recorded additional share-based compensation expense of ¥121 million. This adjustment resulted in a re-allocation of functional expense between the Research and development and General and administrative categories for the periods then ended with a mirroring increase impacting common stock, a component of equity in the Statement of Financial Position.

Reconciliation of Profit or Loss and Comprehensive Profit or Loss for the three months ended June 30, 2016



STATEMENT OF PROFIT OR LOSS
							(Yen in thousands, except per share data)
US GAAP	US GAAP			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Revenue from collaborations	¥	295,763		¥	16,096		¥	—		¥	311,859			Operating revenue
Expenses:														Expenses:
Research and development	453,010			12,523			16,998			482,531			B	Research and development
General and administrative	676,736			42,194			1,906			720,836			B	General and administrative
Total expenses	1,129,746			54,717			18,904			1,203,367				Total expenses
Loss from operations	(833,983		)	(38,621		)	(18,904		)	(891,508		)		Loss from operations
Other income (expense), net:														Other income (expense), net:
Interest income	36,636			1,935			—			38,571				Interest income
Other income (expense), net	(309		)	46			—			(263		)		Other income (expense), net
Total other income, net	36,327			1,981			—			38,308				Total other income, net
Loss before income tax	(797,656		)	(36,640		)	(18,904		)	(853,200		)		Loss before income tax
Net loss	¥	(797,656	)	¥	(36,640	)	¥	(18,904	)	¥	(853,200	)		Net loss
	¥	(797,656	)	¥	(36,640	)	¥	(18,904	)	¥	(853,200	)		Net loss attributable to owners of the Company

Net loss per share														Net loss per share attributable to owners of the Company
Basic	¥	(21.34	)							¥	(22.83	)		Basic
Diluted	¥	(21.34	)							¥	(22.83	)		Diluted

STATEMENT OF COMPREHENSIVE PROFIT OR LOSS

US GAAP	US GAAP			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Net loss	¥	(797,656	)	¥	(36,640	)	¥	(18,904	)	¥	(853,200	)		Net loss
Other comprehensive income (loss):														Other comprehensive income (loss):
														Items that may be reclassified to profit or loss
Net unrealized gain (loss) on securities, net of tax	20,891			—			(20,891		)	—			A	Net unrealized gain (loss) on securities, net of tax
Cumulative translation adjustment, net of tax	—			(1,545,133		)	—			(1,545,133		)		Cumulative translation adjustment, net of tax
Comprehensive loss	¥	(776,765	)	¥	(1,581,773	)	¥	(39,795	)	¥	(2,398,333	)		Total comprehensive income (loss)
	¥	(776,765	)	¥	(1,581,773	)	¥	(39,795	)	¥	(2,398,333	)		Total comprehensive income (loss) attributable to owners of the Company

Notes to the reconciliation of loss and comprehensive loss for the three months ended June 30, 2016


(A)	Financial instruments

Adjustments: As a result of early adopting IFRS 9, Financial Instruments, issued in 2014, short-term and long-term investments representing corporate debt securities, US government agency securities, commercial paper and certificates of deposit decreased as a result of adjusting investments from their fair market value under US GAAP to their amortised cost under IFRS. This decrease impacted net unrealized gain (loss) on securities, net of tax, a component of the Statement of Comprehensive Profit or Loss by ¥21 million for the three months ended June 30, 2016.


(B)	Share-based compensation

Adjustment: As a result of adopting IFRS 2, Share-based Compensation, the Company changed its expensing of awards from the straight-line method over the entire vesting period to the graded vesting method whereby each installment of an award is treated as a separate grant. When compared to the straight-line method, this often results in additional expense being recorded in earlier periods. For the three months ended June 30, 2016, we recorded additional share-based compensation expense of ¥19 million. This adjustment resulted in a re-allocation of functional expense between the Research and development and General and administrative categories for the periods then ended with a mirroring increase impacting common stock, a component of equity in the Statement of Financial Position.

Reconciliation of Profit or Loss and Comprehensive Profit or Loss for the six months ended June 30, 2016



STATEMENT OF PROFIT OR LOSS
										(Yen in thousands, except per share data)
US GAAP	US GAAP			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Revenue from collaborations	¥	682,293		¥	62,699		¥	—		¥	744,992			Operating revenue
Expenses:														Expenses:
Research and development	1,370,864			143,109			34,017			1,547,990			B	Research and development
General and administrative	1,477,375			104,183			86,704			1,668,262			B	General and administrative
Total expenses	2,848,239			247,292			120,721			3,216,252				Total expenses
Loss from operations	(2,165,946		)	(184,593		)	(120,721		)	(2,471,260		)		Loss from operations
Other income (expense), net:														Other income (expense), net:
Interest income	72,757			6,324			—			79,081				Financial income
Other income (expense), net	1,544			260			—			1,804				Other income (expense), net
Total other income, net	74,301			6,584			—			80,885				Total other income, net
Loss before income tax	(2,091,645		)	(178,009		)	(120,721		)	(2,390,375		)		Loss before income tax
Income tax benefit (expense)	(1,750		)	(245		)				(1,995		)		Income tax benefit (expense)
Net loss	¥	(2,093,395	)	¥	(178,254	)	¥	(120,721	)	¥	(2,392,370	)		Net loss
	¥	(2,093,395	)	¥	(178,254	)	¥	(120,721	)	¥	(2,392,370	)		Net loss attributable to owners of the Company

Net loss per share														Net loss per share attributable to owners of the Company
Basic	¥	(56.37	)							¥	(64.42	)		Basic
Diluted	¥	(56.37	)							¥	(64.42	)		Diluted

STATEMENT OF COMPREHENSIVE PROFIT OR LOSS

US GAAP	US GAAP			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Net loss	¥	(2,093,395	)	¥	(178,254	)	¥	(120,721	)	¥	(2,392,370	)		Net loss
Other comprehensive income (loss):														Other comprehensive income (loss):
														Items that may be reclassified to profit or loss
Net unrealized gain (loss) on securities, net of tax	66,068			—			(66,068		)	—			A	Net unrealized gain (loss) on securities, net of tax
Cumulative translation adjustment, net of tax	—			(2,865,010		)	—			(2,865,010		)		Cumulative translation adjustment, net of tax
Comprehensive loss	¥	(2,027,327	)	¥	(3,043,264	)	¥	(186,789	)	¥	(5,257,380	)		Total comprehensive income (loss)
	¥	(2,027,327	)	¥	(3,043,264	)	¥	(186,789	)	¥	(5,257,380	)		Total comprehensive income (loss) attributable to owners of the Company

Notes to reconciliation of profit or loss and comprehensive profit or loss for the six months ended June 30, 2016


(A)	Financial instruments

Adjustments: As a result of early adopting IFRS 9, Financial Instruments, issued in 2014, short-term and long-term investments representing corporate debt securities, US government agency securities, commercial paper and certificates of deposit decreased as a result of adjusting investments from their fair market value under US GAAP to their amortised cost under IFRS. This decrease impacted net unrealized gain (loss) on securities, net of tax, a component of the Statement of Comprehensive Profit or Loss by ¥66 million for the six months ended June 30, 2016.


(B)	Share-based compensation

Reconciliation of Equity as of December 31, 2016



																	(Yen in thousands)
US GAAP	US GAAP			Reclassification			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Assets																	Assets
Current assets:																	Current assets:
Cash and cash equivalents	¥	1,042,474		¥	—		¥	—		¥	—		¥	1,042,474			Cash and cash equivalents
Accounts receivable from collaborations	239,393			(26,563		)	—			—			212,830			A	Trade receivables
Investments	13,205,924			—			—			7,707			13,213,631			B	Other financial assets
Prepaid expenses and other current assets	343,643			26,563			—			—			370,206			A	Other current assets
Total current assets	14,831,434			—						7,707			14,839,141				Total current assets
																	Non-current assets:
Property and equipment, net	89,643			—			—			(11,532		)	78,111			D	Property, plant and equipment
Long-term investments	2,210,404			—			—			7,688			2,218,092			B	Other financial assets
Other assets	37,053			—			—			—			37,053				Other assets
Total non-current assets	2,337,100			—			—			(3,844		)	2,333,256				Total non-current assets
Total assets	17,168,534			—			—			3,863			17,172,397				Total assets
Liabilities and shareholders’ equity																	Liabilities and equity
Current liabilities:																	Current liabilities:
Accounts payable	51,132			—			—			—			51,132				Trade payables
Accrued liabilities	201,004			—			—			—			201,004				Accrued liabilities
Accrued compensation	267,373			—			—			—			267,373				Accrued compensation
Deferred rent and lease incentives	17,795			—			—			—			17,795				Deferred rent and lease incentives
Total current liabilities	537,304			—			—			—			537,304				Total current liabilities
Commitments and contingencies
																	Non-current liabilities:
Long-term deferred rent, lease incentives, and others	110,967			—			—			—			110,967				Long-term deferred rent, lease incentives, and others
Total long-term liabilities	110,967			—			—			—			110,967				Total non-current liabilities
Total liabilities	648,271			—			—			—			648,271				Total liabilities
Shareholders’ equity:																	Equity:
Common stock	23,730,843			(19,082		)	1,221,805			122,745			25,056,311			C	Capital reserve
	—			19,082			—			—			19,082				Share capital
Accumulated other comprehensive loss	285,249			—			(1,205,290		)	15,395			(904,646		)	B	Accumulated other comprehensive loss
Accumulated deficit	(7,495,829		)	—			(16,515		)	(134,277		)	(7,646,621		)	C,D	Accumulated deficit
Total shareholders' equity	16,520,263			—			—			3,863			16,524,126				Total equity attributable to owners of the Company
Total liabilities and shareholders’ equity	¥	17,168,534		¥	—		¥	—		¥	3,863		¥	17,172,397			Total liabilities and equity

Notes to reconciliation of equity as of December 31, 2016


(A)	Reclassifications

Reclassifications: We reclassified ¥27 million in non-trade accounts receivable accounts from trade receivables to other current assets as of December 31, 2016.


(B)	Financial instruments

Adjustments: As a result of early adopting IFRS 9, Financial Instruments, issued in 2014, short-term and long-term investments representing corporate debt securities, US government agency securities, commercial paper and certificates of deposit increased as a result of adjusting investments from their fair market value under US GAAP to their amortised cost under IFRS. Short-term investments increased ¥8 million as of as of December 31, 2016. Long-term investments increased ¥8 million as of December 31, 2016. This decrease impacted unrealized gain/(loss) within accumulated other comprehensive loss, a component of equity in the Statement of Financial Position, and net unrealized gain (loss) on securities, net of tax, a component of the Statement of Comprehensive Profit or Loss.


(C)	Share-based compensation

Adjustment: As a result of adopting IFRS 2, Share-based Compensation, the Company changed its expensing of awards from the straight-line method over the entire vesting period to the graded vesting method whereby each installment of an award is treated as a separate grant. When compared to the straight-line method, this often results in additional expense being recorded in earlier periods. For the year-ended December 31, 2016, we recorded additional share-based compensation expense of ¥123 million. This adjustment resulted in a re-allocation of functional expense between the Research and development and General and administrative categories for the periods then ended with a mirroring increase impacting common stock, a component of equity in the Statement of Financial Position.

Due to recording additional share-based compensation expense for the year-ended December 31, 2016, under IAS 12, Income Taxes, the Company did not assess any material tax impact from windfall or shortfalls when remeasuring awards to their intrinsic value at each reporting period end date.

(D) Website development costs

Adjustment: For the year ended December 31, 2016, the Company decreased Property and equipment, net to de-recognize website development costs required to be recorded as an asset under US GAAP in the amount of ¥12 million. The Company expensed the previously capitalized amount to general and administrative expense.

Reconciliation of Profit or Loss and Comprehensive Profit or Loss for the year ended December 31, 2016



STATEMENT OF PROFIT OR LOSS
										(Yen in thousands, except per share data)
US GAAP	US GAAP			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Revenue from collaborations	¥	870,198		¥	(23,944	)	¥	—		¥	846,254			Operating revenue
Expenses:														Expenses:
Research and development	2,370,363			(83,043		)	47,966			2,335,286			B	Research and development
General and administrative	2,620,904			(124,080		)	85,295			2,582,119			B, C	General and administrative
Total expenses	4,991,267			(207,123		)	133,261			4,917,405				Total expenses
Loss from operations	(4,121,069		)	183,179			(133,261		)	(4,071,151		)		Loss from operations
Other income (expense), net:														Other income (expense), net:
Interest income	161,254			(7,959		)	—			153,295				Interest income
Other income (expense), net	7,307			(124		)	—			7,183				Other income (expense), net
Total other income, net	168,561			(8,083		)	—			160,478				Total other income, net
Loss before income tax	(3,952,508		)	175,096			(133,261		)	(3,910,673		)		Loss before income tax
Income tax benefit (expense)	(41		)	(12		)	—			(53		)		Income tax benefit (expense)
Net loss	¥	(3,952,549	)	¥	175,084		¥	(133,261	)	¥	(3,910,726	)		Net loss
	¥	(3,952,549	)	¥	175,084		¥	(133,261	)	¥	(3,910,726	)		Net loss attributable to owners of the Company

Net loss per share														Net loss per share attributable to owners of the Company
Basic	¥	(105.64	)							¥	(104.52	)		Basic
Diluted	¥	(105.64	)							¥	(104.52	)		Diluted

STATEMENT OF COMPREHENSIVE PROFIT OR LOSS

US GAAP	US GAAP			Currency translation			IFRS adjustments			IFRS			Note	IFRS
Net loss	¥	(3,952,549	)	¥	175,084		¥	(133,261	)	¥	(3,910,726	)		Net loss
Other comprehensive income (loss):														Other comprehensive income (loss):
														Items that may be reclassified to profit or loss
Net unrealized gain (loss) on securities, net of tax	50,783			—			(50,783		)	—			A	Net unrealized gain (loss) on securities, net of tax
Cumulative translation adjustment, net of tax	300,296			(1,204,942		)	—			(904,646		)		Cumulative translation adjustment, net of tax
Comprehensive loss	¥	(3,601,470	)	¥	(1,029,858	)	¥	(184,044	)	¥	(4,815,372	)		Total comprehensive income (loss)
	¥	(3,601,470	)	¥	(1,029,858	)	¥	(184,044	)	¥	(4,815,372	)		Total comprehensive income (loss) attributable to owners of the Company

Notes to reconciliation of profit or loss and comprehensive profit or loss for the year ended December 31, 2016


(A)	Financial instruments

Adjustments: As a result of early adopting IFRS 9, Financial Instruments, issued in 2014, short-term and long-term investments representing corporate debt securities, US government agency securities, commercial paper and certificates of deposit decreased as a result of adjusting investments from their fair market value under US GAAP to their amortised cost under IFRS. This decrease impacted net unrealized gain (loss) on securities, net of tax, a component of the Statement of Comprehensive Profit or Loss by ¥51 million for the year-ended December 31, 2016.


(B)	Share-based compensation

Adjustment: As a result of adopting IFRS 2, Share-based Compensation, the Company changed its expensing of awards from the straight-line method over the entire vesting period to the graded vesting method whereby each installment of an award is treated as a separate grant. When compared to the straight-line method, this often results in additional expense being recorded in earlier periods. For the year-ended December 31, 2016, we recorded additional share-based compensation expense of ¥123 million. This adjustment resulted in a re-allocation of functional expense between the Research and development and General and administrative categories for the periods then ended with a mirroring increase impacting common stock, a component of equity in the Statement of Financial Position.

Adjustment: For the year ended December 31, 2016, the Company increased general and administrative expense to de-recognize capitalised website development costs and related depreciation expense required to be recorded under US GAAP in the amount of ¥10 million.

Material items of reconciliation of the consolidated statements of cash flows for the six months ended June 30, 2016 and the year-ended December 31, 2016

There are no material differences between the consolidated statement of cash flows presented under IFRS and the consolidated statement of cash flows presented under US GAAP.

Kubota Pharmaceutical (KBBTF) Inactive 6-KCurrent report (foreign)