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Edited Transcript of 4592.T earnings conference call or presentation 18-Mar-20 10:59am GMT

Chuo-Ku, Tokyo Mar 19, 2020 (Thomson StreetEvents) — Edited Transcript of SanBio Co Ltd earnings conference call or presentation Wednesday, March 18, 2020 at 10:59:00am GMT

SanBio Company Limited – Co-Founder, President, Executive Officer & Representative Director

Keita Mori, SanBio Company Limited – Co-Founder, President, Executive Officer & Representative Director [1]

Hello, everyone. Thank you very much for attending this meeting today. You know that throughout the world, there is the coronavirus serious issue going around. And again, appreciate your taking time to come to this meeting. This is Keita Mori, CEO of SanBio, and I look forward to providing updates today.

So first of all, I’d like to start off with the financial results. The first section, Page 3, I’d like to start off with the income statement. The main thing here is that the R&D cost will be moving to next year due to the postponement of an anticipated filing. If you look at the R&D cost, the forecast was JPY 5.1 billion, and the actual was JPY 4.3 billion. There is a decrease of about JPY 800 million.

So going next to the next page, Page 4. We’re moving on to our balance sheet. In the — this fiscal year, we have been able and successfully raised JPY 7.1 billion by equity finance and adding stability to finance situation. In spite of the fact that we are a development stage company spending money, we were able to increase the cash position this fiscal year.

I’d like to note a couple of other things here. This year, we have also been able to increase the net asset, as you see here, JPY 2.0 billion. Also of note is, for the first time, we are recording supplies, this is about JPY 400 million. This is in preparation for the product launch in Japan.

So moving to the — changing gear to the forecast. Now I’ll be talking about the future. This is the income statement forecast for this coming fiscal year. What we plan to do from the business point of view is to plan to promote TBI program, both in Japan and globally. And this forecast is consistent with our strategy.

Now I would like to move on to the second topic of a product approval filing for TBI in Japan. This is — this topic is probably the most — the one that’s most being interested by our investors as well as the patients and the families, and I’d like to take a good amount of time to explain in what’s going on right now.

So Page 7. This is regarding the planned postponement of product approval filing. This is something that we disclosed back in December of last year. Basically, the changes — the timing was changed from by January 2020 to by January 2021. We made the decision based upon needing to spend additional time before filing in order to assure a stable supply system, making sure that, once we launch, we have enough supplies and systems to provide our drug product, SB623, to the patients in need.

So next page, Page 8, going, this is the disclosure that we conducted back in December. 2 of them in the same week, on your left-hand side is the financial statement of the third quarter. On your right-hand is the press release we issued 3 days later.

We understand that the disclosure was not sufficiently detailed enough. And we received the feedback, and we acknowledge that there is a room for improvement for more detailed disclosure so that the investors as well as the patients and families understand where we are today. So going forward, we will be improving our detailed level of the disclosure starting today and onward.

So going to the next page, I’d like to, first of all, again, really going to next level of details in what we know about around the stable supply as well as the timing of the filing. So there are 3 reasons for postponement of a product approval filing. First one is the delay of tech transfer. This is a required additional time for tech transfer to our new CMO, specifically Hitachi Chemical. We have done this twice before. So we believe this is a matter of time, and we’ll be taking steps to ensure the tech transfer. I’ll talk more about this later.

The second issue is around the establishment of the management system for commercial production. What I mean by this is, in the past, our production was for the clinical trial purpose. And now our purpose is to make available for commercial manufacturing. So this is the difference. And there are areas that we need to improve to ensure that we meet the standard of the commercial manufacturing.

The third reason is around the standard test, and there’s some insufficiency that we are working on. In this area, there are 2 aspects. One aspect is there is a common issue in this industry of regenerative medicine. It is, in general, more difficult, and the standard is still a moving target for the regenerative medicine because cell-based product is much larger and much more complex than, for example, small molecule products. Also, because we are moving to a clinical phase, clinical phase to commercial phase, the standard is getting higher and there is a need for more robust test method, which needs to be finalized.

So these are the 3 reasons for the delay or the postponement.

I’d like to spend a couple more minutes to go into — deeper into the issues that we face. So the next page is around the tech transfer.

Basically, what the issue is, is that the new CMO, our observation is that the proficiency or job proficiency level is still not enough or sufficient compared with the past manufacturing contractor.

I’d like to note that the mass production technology itself is already established as we mentioned many times in the past. The issue here is one of the tech transfer process, which we are conducting right now. Just a fresh look at the — what we have been doing, if you could look at the diagram from left to right, we start from many, many years ago from the academia technology. And then we went through the small-scale op and then large scale-up, product characterization, QC method characterization. Then once all these are in place, we did the first tech transfer to our first CMO. And then we did another one to a second CMO. And this time, we are doing this to a third CMO, because this is the third time. And this time, it is for the commercial manufacturing.

Going to the next page. So another aspect of the challenge that we face is the one to do with the establishing a management system. As I mentioned before, there is a different level of requirement for commercial production compared with the clinical trial production. Here, we have laid out the production process from left to right, and also the management of the systems that needs to happen along the way. There are many areas that we need to take care of. And in this area, the areas that we focus are mainly the 3 areas: raw materials, quality and validations. And these also happen to be the area where the standard or the requirement is higher for the commercial manufacturing, where we need to improve the accuracy and the reliability of the system that we have.

So, so far, these are the issues, and we have our 3 areas of issues.

Now I’d like to switch gears to how we are responding to these issues. These are the action items that we have been taking in the last few months. First of all, the most important is that we are conducting a rigorous investigation on the issues that we have just described related to the tech transfer. Currently, the investigation is underway. And so far, where we have looked into, there has been no problems that have been identified.

We are continuing the investigation. And to our knowledge, we have been — I think we can say that we have been able to identify most of the areas of the issues. I’d like to also mention that we have the highest priority on this initiative, and we are conducting this project as a CEO directly directed project. So I, myself, Keita Mori, is leading the project directly on a day-to-day basis, ensuring that we have enough attentions, priorities, and resources throughout the company and sometimes, if needed, from outside to make sure that we have a timely progress.

So going on the next page, I would like to share with everyone the process that we foresee in the future towards the filing of the product filing as well as the approval process.

So first, let me explain — go through the standard product approval finding flow. Here, there is an assumption that this is a regenerative medicine product, which SB623 is, and also the assumption is that the company has obtained already a Sakigake designation, which we have already also successfully done as well.

So the process is first step is Sakigake designation. This provides a lot of the incentives from the agency, PMDA. Next step is the PMDA consultation. This provides guidance and advices according to the application. And this gives us a great opportunity to receive candid and timely feedback from the agency. It’s rather a partnership approach.

The next step is a Sakigake review. And this is a formal review process that’s in place, and it’s one of the major incentives of the Sakigake designation. PMDA reviews 5 parts including quality, nonclinical, clinical, et cetera.

Next step is a filing for approval. So let me explain this. There are 5 parts that’s needed, similar to the ones that I described just a few seconds ago. Then once filed the evaluation normally takes 6 months, under these assumptions.

In terms of the approval, MHLW decides the — for the approval, whether it’s the limited approval or conditional approval or the full approval. Pricing determination happens 4 times a year in Japan. They happen in February, May, August and November. Once this is in place, the company can start marketing the product.

So on the next page, I would like to explain the specific situations or the progress that we have made at SanBio. So first of all, Sakigake designation, we have already received this back in April of 2019. Currently, we are in the process of a PMDA consultation. We have already conducted several times so far and, as promised by the guideline, we have been getting a timely and candid advices from the agency which we pretty much feel as a partnership activity.

In terms of the content of the actual consultation, unfortunately, I must say that we need to make this remain as undisclosed as this is related to the agency and they’re very sensitive from the development strategy point of view for us. We’d like to ensure that we take the optimal route of development to make our product available to the patient as many and as quickly as possible.

Sakigake review is the next step that we need to take. As for us, SanBio, what we plan to do is to plan starting the review from the clinical portion. And we believe that the SanBio will be able to file for product when the PMDA thinks evaluation could be and will be completed within the next 6 months.

Then comes the approval. This is the same as the one that I just described 1 slide ago. Pricing-wise, specific to us, we have not yet decided or the agency has not decided yet whether the method of pricing will be the similar efficacy comparison method or the cost accounting method. And marketing-wise, we are obviously preparing marketing so that to allow rapidly follow the pricing determination.

I hope that this time, we are beginning to provide sufficient amount of details for investors, potential investors as well as the patients and families to understand what’s happening at the SanBio. And we will continue to make sufficient level of disclosures going forward.

So now I would like to sort of switch gears to the business updates. So first, I’d like to touch upon our activities in Japan. Japan is the first country we anticipate launching. So we have a special attention and the activities in this area.

Product launch activities in Japan. So as you can see, I am trying to summarize the activities. But there are many, many hundreds of activities behind this, but this is sort of the categories of the activities that we are conducting to enable the smooth launch in Japan.

Of these, in about 10 areas of our activities, the ones in red, for example, R-SAT system, understand the market needs, conference presentation, homepage, web page, these are the categories of activities that we almost are close to completion. So we have mostly done these activities.

So next page, I’d like to go into somewhat more detail of where we are today. So the area that we are dedicating the most resources, our resources is building sales structure. Based on the market research, we will be optimizing how we go about this, and this is one of our main areas of focus as of today.

We are also working on the logistics. We have a partnership with Suzuken and the R-SAT system is well underway as well.

So going to the next page, there is a — there will be this substantial amount of work getting — going into building a proper use system. Also, once we get the approval, we need to conduct a PMS, post-marketing study, so we are also building the infrastructure to do this at this moment.

To raise awareness and our reputation, we are proactively conducting scientific presentations. We have done 3 presentations at the conferences in Japan and 7 outside Japan.

On Page 19, we have the list of the scientific conference presentations regarding our team, TBI Phase II study. All of these presentations have been conducted by the top level KOLs and have attracted very strong interest at these presentations. In addition to these presentations, obviously, we are working on taking this to the next level and a publication.

So going to the next area, I’d like to talk about the platform concept for regenerative medicine. We have this platform consisting of R-SAT system, medical team, et cetera. This platform will, first of all, and most importantly, enable the smooth launch of the SB623 in Japan. But also, this will allow other new products to be launched in Japan for the patients’ benefits.

So we are starting with the TBI, but this is not — this is just the beginning, and we have a very nice product pipeline, as you see here. The status of this has not major changed from the last fiscal year, but we continue to build our pipeline to be able to address as many different diseases on a patient segment.

So on this pipeline, I’d like to now switch gears to the TBI global strategy in the next few minutes.

TBI Global Phase III. So based on the excellent results of the Phase II, we are now working on the Global Phase III. In the United States, we received RMAT, Regenerative Medicine Advanced Therapy designation from the FDA last year. And also in the EU or Europe, we have received ATMP designation. In Europe, we are currently working on approximately 10 countries in Europe and are in the process of selecting the sites.

Next page, I’d like to move on now. So this demonstrates the number of patients. So with the Phase III, we are now looking at the commercial opportunities. And if you could look at the countries where we are conducting Phase III, for example, United States and Europe, the number of patients in TBI is almost or very similar to that of stroke. This may come as a bit of surprise to many of you. But these are the number of patients, and TBI is undoubtedly a very important disease or patient segment.

In China, where there are so many patients, 11 million patients, we are looking into a possibility of the partnering to serve this patient segment.

So in this TBI, on Page 24, we obviously are watching the competitive landscape. As you can see here, competitive, there has been no major changes from the last fiscal year. Most of these candidate products are targeting acute phase of the TBI, and there is no direct competition towards the — our product, SB623.

Now switching gear from the TBI to stroke, I’d like to go to the stroke program. First of all, I’d like to make it very clear that we had a termination of the license agreement with our partner Sumitomo Dainippon Pharma. This happened in December of 2019. This was based upon 2 companies discussing how we could move forward. And we have come to an agreement to terminate this agreement. What this implies to us is that we now have the rights back to us. And as of today, we have the full rate stroke and other — all the indications and all the territories throughout the world is back to us for us, an opportunity for us to commercialize both by ourselves or with our partners.

So in terms of the stroke, we are now looking into ischemic stroke, but not only that, we are also looking into hemorrhagic stroke. And we are now evaluating different options of which territories to go after.

So in the last — lastly, I’d like to touch upon the research. Here in Japan and elsewhere, we are trying to build our pipeline, and we are actively conducting this type of activities. For example, the academias in Japan, as you see the list here.

So I think we have this strategy of the TBI. And then once TBI is accomplished, we have the strategy to build on different indications, stroke or ophthalmology or dementia, Alzheimer’s as our strategy.

So lastly, I’d like to talk about the future outlook. I’d like to just pause for a second. I tend to talk about the near-term challenges and issues and initiatives. But I think it’s very important to look back and why we exist and what we’re trying to accomplish. We have been — I have been doing this for now 20 years. And what we are trying to accomplish is brain regeneration. And we really want to make this happen and make this what people used to believe or believe impossible, we are trying to make this possible. So what I mean by this is brain regeneration has been thought to be impossible, triggered by a famous statement by the famous researcher, [Dr. Kao] in the 1906 around that time, more than 100 years ago. This has been the dogma for many years.

But good for our patients and everyone, our founding scientist, Dr. Okano, Hideyuki Okano found a breakthrough discovery in 1998, discovering the human neuro stem cells in adult brain for the first time on this planet. This triggered the possibility of the regeneration of the brain and has triggered many initiatives in the academia as well as industry like our company to pursue brain regeneration.

I’d like to also spend just briefly on our SB623, I believe, and we believe this is one of the ideal product for brain regeneration. From the mechanism point of view, we believe there is a robust type of mechanism, which could be applied to many different indications. The mechanism itself is as described here, below here. It does — we believe that it can stimulate the brain regeneration through creating a very nice environment for the patient’s brain by making new blood vessels, by making new neurons, protecting the damaged neurons or suppressing or controlling the information, which is the enemy of the regeneration or creating a biobridge and stimulating the brain regeneration.

So based on this mechanism of action, we believe that our product has many possibilities in the CNS diseases, such as stroke, TBI. But not only those 2 indications, also hemorrhagic stroke or spinal cord injury or ophthalmology indications or Parkinson’s disease or even Alzheimer or dementia.

Our strategy for SB623 or as the entire company is our aim is to becoming a global leader and helping as many and different patients as possible. How to do this, we will be doing this by growing into new indications and new geographies. And the key to the success is that we initially focus on TBI and also utilize the very promising regulatory framework of Japan.

So Japan and TBI is the initial market, and then we’ll be growing into U.S., Europe and other territories, and this will provide the infrastructure for us to build our business into new indications like a stroke, AMD, Alzheimer’s, et cetera and et cetera.

To this, we have our company mission and business objective. Our mission has always been creating a new field of health care, specifically, regenerative medicine. I know that we have many challenges to overcome, but I think what we are bringing to the patients and family is very unique and of high value and/or keep on solving the challenges and getting these products to the — in the hands of the patients and doctors. And to do this, we understand we are getting a lot of the support and help, from investors, to researchers, to doctors, to everyone in this field to make this happen. And I would like to thank everyone for your cooperation, and we continue to make progress as we have been committing to do so.

Thank you very much. Thank you.

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