Chiome Bioscience (Company Note 3Q update)

2021-11-30 Coverage, Healthcare

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4583CBS2021Q3_EN211130

Various clinical trials are progressing smoothly.
Extension of contract period with Chugai Pharmaceutical Group for drug discovery support.

◇ Key points for the financial results for 3Q of FY 12/2021

In the drug discovery and development business, clinical trials and clinical trial preparations for two items (CBA-1205 and CBA-1535) progressed steadily in the clinical development stage. As for out-licensed products, the company started joint development of ADCT-701 with the National Cancer Institute in the United States, showing steady progress.
Sales of the drug discovery support business, which is currently the primary source of earnings, are strong, rising from 140 million yen in 1Q to 130 million yen in 2Q to 150 million yen in 3Q. Agreed with an extension of the contract research period with the Chugai Pharmaceutical Group.
As of the end of September 2021, cash and deposits were 2.07 billion yen. The company needs to spend about 1.2 billion yen for R&D plus other SG&A expenses, so the company will likely procure funds next fiscal year.

◇ Financial results for 3Q of FY 12/2021: Sales increased by 73% year-on-year, and loss shrank.

　For 3Q of FY 12/2021, the company posted net sales of 541 million yen (up 73% year-on-year), an operating loss of 850 million yen (an operating loss of 1,080 million yen in the same period of the previous year), an ordinary loss of 843 million yen (an ordinary loss of 1,087 million yen in the same period of the last year) and a net loss of 842 million yen (a net loss of 1,087 million yen in the same period of the previous year).

In the drug discovery and development business, a lump-sum payment for the license agreement for LIV-2008 / 2008b was recorded in 1Q, resulting in sales of 103 million yen (1 million yen in the previous fiscal year). Sales of the drug discovery support business are 438 million yen. Stable transactions with existing customers, mainly domestic pharmaceutical companies, continued, increasing sales by 128 million yen. R&D expenses are 860 million yen. Although the cost for manufacturing the investigational drug CBA-1535, etc., is recorded, it decreased by 90 million yen from the previous term.

　In BS, cash and deposits at the end of September 2021 were 2,071 million yen. It decreased by 615 million yen from the end of December 2020. Total assets were 2,950 million yen (3,494 million yen at the end of December 2020). The equity ratio fell 6.6 points from 88.2% at the end of December 2020 to 81.6%.

JPY, mn, %	Net sales	YoY %	Oper. profit	YoY %	Ord. profit	YoY %	Profit ATOP	YoY %	EPS (¥)
2017/12	259	3.0	-887	–	-883	–	-882	–	-33.48
2018/12	212	-18.1	-1,539	–	-1,533	–	-1,533	–	-57.26
2019/12	447	110.3	-1,401	–	-1,410	–	-1,403	–	-44.61
2020/12	480	7.4	-1,283	–	-1,291	–	-1,293	–	-39.06
2021/12 (CE)	–	–	–	–	–	–	–	–	–
2020/12 3Q	312	10.5	-1,080	–	-1,087	–	-1,087	–	-31.33
2021/12 3Q	541	73.5	-850	–	-843	–	-842	–	-20.94

◇Pipeline progress

Drug discovery and development business – pipeline

＊CBA-1205; The first half of the Phase I trial at the National Cancer Center is proceeding smoothly. The company changed the development plan and acquired a larger amount of safety data than originally planned. As previously reported, the second half of the Phase 1 trial is the initial evaluation of efficacy in patients with hepatocellular carcinoma, and the company aims to conduct it at the end of 2021 or the first half of 2022.

＊CBA-1205; The first half of the Phase I trial at the National Cancer Center is proceeding smoothly. The company changed the development plan and acquired more safety data than initially planned. As previously reported, the second half of the Phase 1 trial is the initial evaluation of efficacy in patients with hepatocellular carcinoma. The company aims to conduct it at the end of 2021 or the first half of 2022.

＊BMAA; With the termination of the option contract with SemaThera in May 2021, the company secured its business opportunities. It promoted joint research aimed at curing diseases involving semaphorin 3A with overseas research institutes.

＊PCDC; PCDC; The company promoted out-licensing activities centred on ADC applications and implemented additional animal tests. In July 2021, the management released the patent information collected by the World Intellectual Property Organization. The target molecule is CDCP1, a first-in-class antibody targeting solid cancers (lung cancer, head and neck cancer, oesophagal cancer, colon cancer, cervical cancer, etc.).

＊5 drug discovery research projects; for those other than the above, the company is considering out-licensing and development plans for priority projects to enrich the pipeline. The company is considering revising and abolishing existing projects to launch new projects, and preparations are underway for new basic applications.

＊ADCT-701; ADCT announced collaborative development with the National Cancer Institute for ADCT-701, an already-out-licensed product. Preparations are underway for the IND application and clinical trials in 2022.

◇ Progress of drug discovery support business: Extension of contract research with Chugai Pharmaceutical Group

　The company signed drug discovery support contracts with major pharmaceutical companies in Japan but has extended the periods of commissioned research contracts with its early customers: Chugai Pharmaceutical and Chugai Pharmabody Research. The company will extend the contract period with Chugai Pharmaceutical for three years until December 31, 2024. It will extend the contract period with Chugai Pharmabody Research for five years until December 31, 2026.

◇ Utilization and improvement of ADLib®︎ system

　 The company continued to utilize and improve the ADLib®︎ system, which is its core technology. The library of the human ADLib®︎ system in Europe and the replacement/acquisition method of the ADLib ®︎ system in Japan acquired a patent. It should enhance the drug discovery pipeline developed in-house while improving the technology related to the drug discovery support business.

Financial data

JPY, mn	2019/12				2020/12				2021/12
	1Q	2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q	2Q	3Q
[Statements of income]
Net sales	64	77	142	165	91	82	139	169	246	139	157
Drug Discovery and Development Business	0	1	1	28	1	1	0	1	103	0	0
Drug Discovery Support Business	63	76	142	137	90	82	138	168	143	138	157
Cost of sales	27	26	58	52	61	46	59	70	64	62	78
Gross profit	37	51	84	113	30	36	80	99	182	77	79
SG&A expenses	464	374	503	346	456	346	424	303	337	337	515
R&D expenses	363	273	407	256	343	266	342	206	216	243	401
Operating loss	-426	-324	-419	-233	-426	-310	-344	-204	-155	-260	-436
Non-operating income	0	1	4	0	2	0	3	0	7	0	2
Non-operating expenses	6	4	4	0	0	2	10	1	1	0	1
Ordinary loss	-432	-327	-418	-233	-425	-311	-351	-205	-150	-259	-434
Extraordinary income	2	1	6	0			0	0
Extraordinary expenses
Loss before income taxes	-430	-326	-412	-233	-425	-310	-351	-205	-150	-247	-433
Total income taxes	1	0	1	0	1	0	1	1	11	1	1
Net loss	-431	-326	-413	-234	-425	-311	-352	-206	-161	-248	-434
[Balance Sheets]
Current assets	3,048	3,206	2,807	2,561	2,309	2,805	3,316	3,249	3,294	3,088	2,675
Cash and deposits	2,776	2,899	2,469	2,106	1,967	2,472	2,881	2,686	2,580	2,302	2,071
Non-current assets	219	217	242	247	247	249	249	246	244	241	274
Tangible assets	15	14	12	11	10	9	8	7	6	6	4
Investments and other assets	204	204	230	236	237	240	241	238	237	235	269
Total assets	3,267	3,423	3,049	2,808	2,556	3,054	3,566	3,495	3,537	3,329	2,950
Current liabilities	177	207	154	145	315	427	378	343	378	428	468
Short-term borrowings					142	199	199	180	180	190	199
Non-current liabilities	41	41	41	41	42	42	42	42	42	42	53
Total liabilities	219	248	196	187	357	469	420	385	420	470	522
Total net assets	3,048	3,175	2,853	2,622	2,199	2,585	3,146	3,110	3,118	2,859	2,428
Total shareholders’ equity	3,048	3,175	2,853	2,622	2,199	2,585	3,146	3,110	3,118	2,859	2,428
Capital stock	5,856	6,084	6,132	6,132	6,133	846	1,303	1,388	1,471	1,471	1,472
Legal capital reserve	5,846	6,074	6,122	6,122	6,123	2,446	2,903	2,987	3,071	3,071	3,072
Retained earnings	-8,682	-9,008	-9,421	-9,655	-10,080	-736	-1,088	-1,294	-1,455	-1,703	-2,136
Subscription rights to shares	28	26	20	22	24	30	28	29	30	19	19
Total liabilities and net assets	3,267	3,423	3,049	2,808	2,556	3,054	3,566	3,495	3,537	3,329	2,950
[Statements of cash flows]
Cash flow from operating activities		-677		-1,537		-528		-1,360		-560
Loss before income taxes		-755		-1,401		-734		-1,290		-396
Cash flow from investing activities		–		-26		–		3		–
Purchase of investment securities		–		–		–		–		–
Cash flow from financing activities		1,248		1,341		894		1,944		176
Proceeds from issuance of common shares		1,249		1,345		697		1,769		166
Net increase in cash and cash equiv.		570		-222		366		580		-384
Cash and cash equiv. at beginning of period		2,328		2,328		2,105		2,105		2,686
Cash and cash equiv. at end of period		2,899		2,105		2,472		2,686		2,301

Note) For the cash flow statement, Q2 is the cumulative of Q1 to Q2, and Q4 is the cumulative of Q1 to Q4. Therefore, the beginning balance will be the beginning balance of Q1 for both Q2 and Q4.
Source: Omega Investment from Company materials.

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