VALUE CREATION MODEL

We position ourselves as an “enabler” that indirectly contributes to creating impact for patients—namely, fulfilling unmet medical needs and extending healthy lifespans around the world—by providing essential support for the business growth of pharmaceutical companies. Leveraging this unique role, we aim to realize our purpose by addressing challenges within the pharmaceutical industry. We recognize key challenges in the industry, such as declining drug discovery productivity coupled with rising costs, an increasing number of medical needs that cannot be addressed by traditional small-molecule drugs, and the fragmentation of drug discovery technologies and expertise. By utilizing the assets and knowledge held within our corporate group, we strive to solve these issues through our business activities. This process is summarized in the value creation model (logic model) shown below.

Key Features of Our Logic Model

MATERIALITY MANAGEMENT

We aim to generate a lasting impact on society by continuously implementing our value creation model (logic model). In recent years, the pharmaceutical development process has evolved from a vertically integrated model to a horizontally specialized model. As pharmaceutical companies increasingly utilize external resources, the outsourcing market for CROs and CDMOs is expected to expand rapidly over the next decade. Against this backdrop, we identified the key risks and opportunities for sustainable corporate value creation and defined our material issues (“materiality”) under three main categories and nine subcategories.

These materiality items serve as the core of our impact-driven management. Therefore, agendas related to them are treated as critical matters. We regularly assess whether the items remain appropriate and establish metrics to measure progress, ensuring ongoing and effective implementation.

Progress of Our Initiatives

The identification of material issues and the development of corresponding indicators have been the result of years of deliberation involving directors and executive officers of Axcelead as well as directors and executives from our group companies.

To date, we have made progress primarily from the perspective of “creating social impact”, including the formulation and disclosure of our logic model, the development of materiality indicators, and the establishment of a system to collect non-financial indicators, including those related to materiality. Specifically, we have identified non-financial indicators that effectively reflect our strengths and uniqueness, appointed dedicated managers for each business and thematic area, and built a system in which these managers report on progress both quantitatively and qualitatively on a quarterly basis.

From the perspectives of “empowering diverse talent” and “strengthening the management foundation”, we have formulated a human rights policy and begun monitoring employee data. Additionally, we have established guidelines for supply chain behavior and a policy on animal testing, thereby organizing and visualizing the foundational principles for promoting relevant initiatives.

Furthermore, through the Risk Management and Compliance Promotion Committee, we identify risk-related issues, make decisions on their appropriate management, and ensure compliance through the establishment and maintenance of the necessary governance systems.

Click here for “the Axcelead Group Human Rights Policy”
Click here for “the Axcelead Group Supplier Code of Conduct”
Click here for “the Axcelead Group Animal Testing Policy”

Management Indicators

To sustainably generate social impact, our corporate group believes that in addition to financial indicators, the understanding and monitoring of non-financial indicators is essential. Accordingly, we have established specific indicators for each of the three key – categories and nine sub – categories of our materiality. Below are the actual results for fiscal year 2024.

Materiality – Key Categories	Materiality – Subcategories	Description / Initiatives Undertaken	Management Indicator / KPI	Actual Value (FY2024)
Creating Social Impact	Contributing to the Creation of New Drug Candidates	Promote the Launch of New Drugs	Cumulative # of Patent Applications Filed by Clients (Involving Our Employees as Inventors)	19	*1
			# of Approved mRNA Drugs in Japan Involving Our Group	1/5	*2
	Streamlining the Drug Discovery Process	Achieve Speed That Meets Client Expectations	Client Satisfaction with Study Duration (5-Point Scale)	4.5+	*3
Success of Diverse Employees	Recruitment and Placement of Diverse Talent	Enhance Recruitment of Talent with Strong Project Leadership and Management Skills Who Can Appropriately Address Complex Drug Discovery Challenges from Diverse Perspectives, in Order to Support Global Expansion and Innovation, and Strengthen Our Competitive Advantage.	Percentage of Employees with Advanced Degrees (Master’s or Higher)	48%	*4
			Percentage of International Talent (with 3+ Years of Experience Abroad or in a Multicultural Environment)	5%	*5
	Growth Support That Fosters Individual Strengths	Provide Growth Opportunities Through Hands-On Experiences and Learning Environments to Empower Individuals to Take Ownership of Their Careers.	# of Career-Specific Interviews Conducted	254 times	*6
	A Work Environment That Is Both Supportive and Fulfilling	Promote a Vibrant Work Environment and Culture by Supporting Work-Life Balance and the Active Participation of Diverse Talent.	Retention Rate of Employees with Tenure of Three Years or More	82%	*7
*Reinforcement of Business Infrastructure	Provision of Responsible Products and Services	Respect Animal Welfare	Percentage of Animal Experiments Conducted in Compliance with AAALAC Standards	100%	*8
		Ensure Rigorous Safety Management of Products and Manufacturing Processes	Client Satisfaction with Quality of Deliverables (5-Point Scale)	4.4+	*3
		Comply with Laws, Regulations, and Compliance Requirements	# of Serious Compliance Violations Related to Products and Services	0 cases per year	*9
	Considering Environment	Address Global Climate Change Issues	Greenhouse Gas Emissions (Scope 1 + 2/3)	6,494t / 21,223t	*10
	Human Rights and Supply Chain Management	Appropriately Manage Supplier Relationships Across the Supply Chain	Implementation of Supplier Assessments	1 time per year	*11
		Protect Workers’ Rights and Prevent Harassment and Discrimination	Deployment of Human Rights Education Programs	1 time per year	*12
	Stakeholders and Impact Governance	Incorporate Impact-Oriented Thinking into Management	# of Board Resolutions and Executive Committee Discussions on Impact-Driven Management Agendas	3 times per year･ 6 times per year	*13

1. The cumulative number since 2018 of patent applications published in patent office databases in various countries in which employees involved in our group’s drug discovery support business are listed as inventors.
2. The number (numerator) of domestically approved mRNA pharmaceuticals in which our group’s name is included as the developer or co-developer (organization), out of the total number (denominator) of approved mRNA pharmaceuticals in Japan.
   (Reference: https://www.nihs.go.jp/mtgt/pdf/section3-2.pdf)
3. The average score from 102 client companies that responded to the FY2024 survey. This refers to satisfaction levels (on a 5-point scale) regarding “study period” and “quality of deliverables.”
4. Out of 529 group employees, 257 hold a master’s degree or higher (Axcelead, 24; ADDP, 145; ATWP, 57; and ARCALIS, 31). Although ARCALIS closes its fiscal year in December, all employee-related data is standardized as of the end of March.
5. The percentage of employees who are foreign nationals, naturalized citizens, or have more than three years of experience studying or working abroad.
6. The total number of career-focused interviews conducted during FY2024 (excluding performance evaluations and routine 1-on-1 meetings).
7. The average value across the three companies, excluding ATWP (established within one year): Axcelead (87.1%), ADDP (81.7%), ARCALIS (91.7%).
8. Only applies to ADDP in FY2024. All experiments at ADDP are automatically conducted in compliance with AAALAC standards.
9. The number of compliance violations related to products and services escalated to the Risk Management and Compliance Promotion Committee, which holds meetings quarterly at Axcelead.
10. Calculation began in FY2023. In FY2024, new data was obtained from Axcelead, ADDP, ATWP, and ARCALIS. For four smaller subsidiaries other than overseas entities, FY2023 data was reused considering their lower impact.
11. In the drug discovery support business, surveys were conducted for all critical research subcontractors (accounting for approximately 20% of transaction value, 27 companies). In the CDMO business, internal evaluations were conducted for 12 suppliers covering approximately 80% of transaction value.
12. Each company conducts at least one human rights training session annually (Axcelead and ADDP, once; ATWP and ARCALIS, twice).
13. The number of times impact-driven management was included as an agenda item out of all 20 Board of Directors meetings and 45 Executive Officers’ Meetings held in FY2024.

Going forward, we will regularly monitor these indicators and work toward setting target values in order to further advance our impact-driven management.