Notice Regarding Change in a Consolidated Subsidiary
(Transfer of Equity Capital)

1. Reason for Transfer of Equity Capital

The Company made a full-scale entry into the precision medicine business in 2017 with the aim of contributing to personalized medicine, a new trend in healthcare. In 2018, the Company established Konica Minolta Precision Medicine, Inc. (currently REALM IDx) which held three operating companies including Invicro to develop its business globally through integration of the strengths of each of the three companies.
However, recognizing the need to continue investment for further growth of the business and considering the Company’s financial status, the Company determined to position precision medicine as a ‘non-focused business’ in its Medium-term Business Plan for the fiscal year 2023 through 2025.

Based on the foregoing background, the Company proceeded to analyze its strategic options, including the possible sale of the business to a third party and the possible listing of the business on the U.S. stock market, among others. Ultimately, the Company decided that the sale of Invicro to Calyx represented the best option and was in the best interests of the Company’s stockholders.
Invicro supports drug discovery by specializing in imaging CRO^*1 with its strengths in advanced numerical analysis and biomarker^*2 search technologies. A large number of experts in the Invicro team are scientists holding a Ph.D. and/or M.D. degree and who provide drug discovery support services, including identification of biomarkers, streamlining of clinical trials, and risk-reduction of pharmaceutical development processes, based on advanced imaging analysis technologies that make full use of A.I. In particular, Invicro excels in the central nervous system field, including Alzheimer's disease and Parkinson's disease, and Invicro’s further growth is expected in this field, where new drug development is making progress.
Calyx is a leading global, technology-enabled service provider for medical imaging and IRT/RTSM (Interactive Response Technology/Randomised Trial Supply Management) for drug developers and the global clinical research community.

*1CRO: Contract Research Organization

*2biomarkers: All indicators that reflect physical condition can be biomarkers. Proteins and genes in tissues, blood, urine, and other body fluids are commonly used as biomarkers because they correlate with changes in medical conditions or response to the treatment.

2. Overview of the Consolidated Subsidiary

Note: Consolidated operating profit and profit attributable to owners of the parent company for the year ended March 31, 2023 includes the impact of impairment losses of US$115 million (17.4billion yen). Because Invicro is an LLC, the net assets per share and the operating profit per share are omitted.

3. Summary of the Transferee

4. Equity Capital to Be Transferred and Equity Capital before and after Transfer

5. Transfer Price

Note 1: The equity purchase agreement provides for certain adjustments to the transfer price, and includes additional contingent consideration of up to $15 million (Approximately 2.3 billion yen) which the Company will receive, based on the amount of new orders between February 2024 and April 2024.
Note 2: The Consolidated net assets in “2. Overview of the Consolidated Subsidiary (9) Business results and financial position of Invicro for the last three years (U.S. GAAP)” is in local financial report in accordance with U.S. GAAP. It is different from the net assets which will be used for calculating the gain or loss from this transfer of equity capital.

6. Timeline

Note: The closing of the equity transfer is subject to certain closing conditions and required regulatory approvals, the satisfaction of which could have an effect on the timeline noted.

7. Financial Outlook

The gain or loss due to the transfer of equity capital is expected to be recorded in the fourth quarter of the fiscal year ending March 31, 2024 and the first quarter of the fiscal year ending March 31, 2025. The impact on the gain or loss in the fourth quarter of the fiscal year ending March 31, 2024, will be negligible, though the net assets is undetermined, they will be affected by the change in the foreign exchange rate, and there will be transfer price adjustment.
The impact on the gain or loss in the first quarter of the fiscal year ending March 31, 2025 is undetermined due to the gain or loss of the Exchange differences on translation of foreign operations adjustment at equity capital transfer execution in addition to the above.

Therefore, the impact on the Company’s consolidated financial results for the fiscal year ending March 31, 2024 is deemed negligible. The Company will promptly announce any matters that require disclosure in the future.

Note: The exchange rate in this document is based on 1USD = 150.67 yen (as of February 29, 2024).

Reference: The Company’s consolidated forecasts for the fiscal year ending March 31, 2024 (as disclosed on February 1, 2024) and consolidated financial results for the fiscal year ended March 31, 2023 (in billions of yen)

*Note: `Business contribution profit’ is a profit index, calculated by deducting cost of sales and selling, general and administrative expenses from revenue.