Nxera Pharma Co Ltd

Thank you very much, Keiko. Please turn to slide five.

Good afternoon everyone, my name is Chris Cargill, Chief Financial Officer of Soce Group Corporation. Today I'm extremely pleased to report another year of strong financial performance. Throughout FY 2020 we executed on a very long list of corporate goals and these achievements have helped us to drive a second consecutive year of profitable performance. Our business model which emphasises having multiple collaborative partnerships to share the costs and risks involved in drug discovery has allowed us to achieve positive operating performance and positive cash flows. In addition, international investors took note of our leadership position in drug discovery and of our gross prospects and supported us to successfully raise $200 million, Japan's largest biotech-focused financing during COVID-19. We are now very well positioned to invest and expand corporate value from 2021 onwards. The group will continue to pursue a balanced model and sustainable financial profile.

Please turn to slide six.

Now focus on cost control and sustainable levels of R&D investment delivered a second successive year of profitable results. On the left hand side of the slide, you can see revenues were only slightly down in FY 2020, and this was due to lower upfront fees and milestone income from partners. This was not unexpected given delays seen across our industry during the COVID pandemic environment. When I was appointed CFO in November 2018, I said that we would have a stricter focus on costs and invest our R&D more wisely and effectively. In line with this approach, I'm pleased to report the cash operating expenses were again well controlled, down 12% compared to the prior period. On the right hand side of the slide, you can see we increased both cash earnings profit and operating profit in FY 2020, which was a great result. And operating profit, as reported in the Tanshin, increased 142% to 928 million yen. This is the second consecutive year of cash earnings profitability, and it's very pleasing as it points to the health of our underlying drug discovery business. This year, we've again demonstrated that it is possible to achieve R&D goals while also maintaining a cost-conscious focus. Sustainable long-term growth is what we are striving for.

Please turn to slide seven.

This slide shows the group's profit and loss breakdown for the 12-month period ended 31 December 2020. Our emphasis on collaborative drug discovery partnerships and co-investments drove a balanced split of revenues and allowed for strong management of costs. Total revenue was 8.8 billion yen, a slight decrease of 884 million yen versus the prior year. A bigger source of revenue is revenue related to upfront fees and milestone income. Revenue related to upfront fees and milestone income was similar to last year and totaled 5.4 billion yen, a slight decrease of 660 million yen versus the prior year. As I mentioned on the prior slide, this result was not unexpected, given the delays we saw US pharma companies experience during the COVID pandemic environment. In line with our strategy to broaden collaborative drug discovery and diversify our revenues, we added three new major pharma partners in FY 2020, AbbVie, Biohaven, and GlaxoSmithKline, or GSK. Furthermore, we created the co-owned investment called TemperoBio with industry veterans at AdizemBio. These four new deals brought in significant new revenues in FY 2020 and will continue to generate milestone income as the collaborations progress into the future. We drove down manageable costs in the pursuit of a sustainable financial profile and delivered a cash earnings profit. Cash R&D expenses in the year under review totaled 3.4 billion yen, a decrease of 526 million yen over the prior year. The decrease in R&D spend was largely a result of these new collaborations, which enabled us to shift the costs of development and development risk to our major partners. Cash G&A expenses in the year under review totaled 2 billion yen, a decrease of 169 million yen over the prior year. And this decrease was primarily due to strict management of costs. As I mentioned earlier, for those investors focused on our operating profit as reported in the Tanshin, we delivered an operating profit of 928 million yen, an increase of 544 million yen versus the prior year, or a 142% increase in percentage terms. Turning to items below the operating profit line, and there was an increase in net finance income this year. This is primarily due to the inclusion of a larger contingent consideration fair value movement gain in the current year over the prior year. Following SOSE's acquisition in 2015 of Heptare's, SOSE became obligated to pay certain contingent earn-out payments based on the progress of programs up until an expiry date of 31 December 2021. As the expiry date is now a near-term event, we have reassessed our position regarding the likelihood of making the remaining payments, and this has resulted in us releasing some additional credit. Moving on, you may also recall the half-year results we had a paper tax charge of 847 million yen under IFRS accounting methodology. And at the time, I said that this would reverse in the second half of the year, and it has. Net profit in the year under review totaled 1.5 billion yen, an increase of 47 million yen over the prior year.

Please turn to slide eight.

This slide highlights the group's balance sheet as of 31 December 2020. As I mentioned, positive operating cash flows and a highly successful capital raising have us well positioned to invest in enhancing our corporate value. On the right hand side of the chart, you can see we generated almost 40 million US dollars of positive operating cash flow. This is a direct result of our collaborative drug discovery strategy where costs and risks are shared with major partners. Furthermore, international investors took note of our drug discovery business and our growth prospects and supported us to successfully raise $200 million, Japan's largest biotech-focused financing during COVID-19. We finished the year with cash at hand of 40 billion yen, or US$387 million.

Please turn to slide nine. This slide shows how we performed at managing costs versus our guidance in FY2020.

Our commitment to sustainable and balanced risk and reward investing enabled us to keep costs under control. For total R&D costs, we guided to a range of 4.2 billion to 4.7 billion yen, and our actual result was 3.4 billion yen, which was well below the guided range. Now, we were able to achieve this because of the significant increase in new major collaborations, with three such collaborations executed in the last quarter of FY2020. And this meant that we were able to shift a large amount of our preclinical and early development R&D costs over to our major partners and off of our own profit and loss statement. For total G&A costs, we guided to a range of 1.8 billion yen to 2.3 billion yen. And our actual result was 2 billion yen, which was right in the middle of the range. And this was a result of continued prudent management of costs.

Please turn to slide 10.

This slide shows our guidance for FY 2021. We plan to make modest increases in investment to fuel programs, add new major partners, and drive a step up in our corporate valuation. We expect cash R&D expenses for the underlying drug discovery business to be in the range of 4 billion yen to 5 billion yen. And as a result of our recent muscarinic program review, we have decided to increase our investment in HTL 878. the selective M4 agonist lead program. Our review suggests that a novel drug with a new mechanism of action in schizophrenia is a blockbuster opportunity. The HTL878M4 program represents a unique and valuable investment opportunity and is positioned well against other early stage programs being developed for schizophrenia. Our investment will enable us to accelerate and build value in the HTL878 program whilst we can currently seek a new major partner to take the program forward from phase two in the next 12 to 18 months. We will maintain sustainable levels of investment across other discovery and development programs, including the other muscarinic programs, such as the M1 agonist program and the M1 M4 dual agonist program. We expect cash G&A expenses for the underlying drug discovery business to be in the range of 1.8 billion yen to 2.3 billion yen, which is the same guided range as last year. We will continue to make new hires to strengthen our compliance, governance, and support functions, and our aim is to prepare for and to meet the highest standards of corporate governance code in Japan. We want to operate at the same level as TSE Section 1 listed companies, even though we are a TSE mothers listed company. This year, we will also implement our new cloud-based Oracle NetSuite ERP system designed to drive group-wide efficiencies and eliminate control issues.

We are investing today to drive corporate value growth tomorrow. Please turn to slide 12.

Turning now to the operational highlight summary, and I'm extremely pleased to report another excellent year of operational performance as we look to build SOSE Group into a drug discovery powerhouse. I'll begin by talking about the organic growth plan that is driving our world leading position in GPCR drug discovery. And there are four areas of focus. One, extend technology and platform leadership. And by this, we mean expand our expertise in GPCRs. Two, generate high quality drug candidates. And we aim to generate at least two new preclinical candidates on average every year. Three, advance the pipeline. Demonstrate that we progress programs in-house and via partnerships. And four, execute high value partnerships. And we aim to secure two to three new major partnerships or co-investments every year.

Please turn to slide 13.

Now against that backdrop, I'm pleased to announce it was successfully executed on all organic growth objectives in 2020. For item one, regarding extending technology and platform leadership, we achieved a scientific breakthrough at our co-investment company, Eurexia, which brought forward new funding. This program is highly sought after in the area of erection agonism, and we look forward to more strong progress in 2021. Item number two, regarding generating high quality drug candidates, we beat our target of two and achieved three new preclinical candidate nominations in FY 2020. and these were the H4, EP4 and GPR35 programs. The last one being such a highly sought after novel GPCR target in IBD that GSK licensed it from us towards the end of the year. Item three, regarding advancing the pipeline, we pushed two in-house programs to phase one and concurrently both were licensed, as well as our partner, Pfizer, moving its second program from our technology collaboration into phase one studies. Of course, Eners Air was also approved and it moves into launch phase and will start to contribute royalty income to SoSale alongside the other Novartis products, Seabree and Altabro. And lastly, item number four, regarding executing high-value partnerships, we beat our target of two to three and achieved four new major partners, AbbVie, Biohaven, GSK, and our co-owned investment with Adetum in Tempero Bio. These new collaborations and co-investments add significant value to SoSafe's business while shifting costs and development risk to our partners.

Please turn to slide 14.

In the area of extending technology and platform leadership, it is worth noting that we continue to build and scale our expertise in GPCRs. During FY 2020, we celebrated solving our 300th high resolution molecular structure from a 30th GPCR target. Despite this, we reiterate that we are only just getting started. 75% of the GPCRs encoded in the human genome remain undrugged, representing a major opportunity across multiple modalities and indications, so say. And our proprietary STAR technology, combined with modern tools and technologies such as Cryo-EM, are enabling us to solve structures faster and to a higher resolution than ever before.

Please turn to slide 15.

Our technology and structural insight advantage is driving a highly productive structure-based drug discovery platform that's capable of generating multiple high-quality preclinical candidates every year. You will hear about other drug discovery companies generating hits and hits to leads, but what really matters is getting compounds into preclinical and clinical development. In the last 10 years, we've been responsible for helping 24 programs move into preclinical and eight into clinical development. And as it stands today, we have four programs ongoing in lead optimization, 13 in preclinical and eight in clinical studies. We are committed to delivering at least four new programs to lead optimization every two years and generating on average at least two new preclinical candidates every year. We believe this makes us one of, if not the most productive GPCR drug discovery teams in the world.

Please turn to slide 16.

And we further leveraged our SPDD platform to support COVID-19 research in 2020. And we discovered a potent series of broad spectrum antivirals that we believe will have important utility in the fight against coronavirus. Our program focused on inhibitors of the SARS-CoV-2 main protease, a highly conserved protein essential for viral replication. Our structure-based design approaches identified potent compounds for further development, as oral treatments for SARS-CoV-2 infection and future coronavirus variants. Our program advanced rapidly under an international collaboration of companies led by SOSE Heptares and as part of our commitment to socially responsible investing. And we are now seeking partners with expertise in antiviral development for rapid progression of the identified molecules.

Please turn to slide 17.

Moving now to how we're advancing our pipeline. As you can see on this slide, we added multiple new partners and in-house programs to our deep pipeline, which will drive more collaborations and value creation in the future. And most significantly, and after the full year period FY 2020 ended, we regained a large and strengthened portfolio of selective muscarinic agonist programs from AbbVie, following over $55 million of investment from Allergan. And you can see these programs at the bottom of the slide in orange with the star symbols. And more details regarding these programs are included in the appendix section of this presentation. As I mentioned earlier, we recently completed a review of these regained muscarinic programs and have decided to increase our investment in HTL878, a selective M4 agonist lead program. Our review suggests that a novel drug with a new mechanism of action in schizophrenia is a blockbuster opportunity. and the HCL 878 M4 program represents a unique and valuable investment opportunity and is positioned well against other early stage programs being developed for schizophrenia. Our investment will enable us to accelerate and build value in the HCL 878 program whilst we can currently seek a new major partner to take the program forward from phase two in the next 12 to 18 months. We will maintain sustainable levels of investment across all other discovery and development programs, including other muscarinic programs.

Please turn to slide 18.

Now we continue to make excellent progress in collaborative drug discovery, and we added three new specialist major pharma partnerships in 2020. We set ourselves a goal of at least two to three new high value partnerships per year, and we achieved this. These new collaborations bought in over $30 million of new cash flow to the business, substantially diversifying our partnership and revenue base, and will become an important source of future milestone income and value creation in the future. As you can see from the table, these partnerships are all still in their infancy, and only a fraction of the total potential deal value of approximately $5 billion has been realized to date, highlighting just how much potential and significant value there is to come. We remain committed to our target of two to three new partnerships this year, and we will seek out other companies in the top 20 global pharma and biotech list that we are yet to work with.

Please turn to slide 19.

In addition to traditional partnerships with major pharma and biotech, we also consider co-owned investments to create value from our programs. In FY 2020, we created Tempero Bio, an exciting co-owned investment with the global pharma industry leaders at Adetum Bio. Adetum Bio was co-founded by Joe Jimenez, former CEO of Novartis, to select and develop clinical assets using a novel approach combining data, software, and technology to speed up development. Tempero Bio is a new company created to develop our former mGlu5 negative allosteric modulator program, previously called HTL14242, and now called TMP301. TMP301 is the therapy targeting substance use disorders and anxiety. The aim of the co-investment is to combine the high quality mGlu5 pharmacotherapy with digital devices to support patient treatment, improve adherence, and ultimately create better patient outcomes. Tempera Bio plans to bring TMP301 into a phase two clinical trial within 12 months. utilizing Trial Spark, a tech-enabled clinical development platform, as the innovative clinical research engine. Trial Spark is also a co-investor in Tempero Bio. We see real value in our strategic equity stake in Tempero Bio and also remain eligible to receive development and commercial milestone payments plus tiered royalties into the future.

Please turn to slide 20.

And I'll now turn to our strategic growth plan, which is designed to drive so says corporate value expansion. And there are four areas of focus for us. Item one, seek out revenue generating opportunities. Here in FY 2020, we completed a $200 million capital raise, and that puts us in a position to seek out these opportunities as we move into FY 2021. Item number two, invest or collaborate in novel technologies that enhance our SBDD platform. Here, we will add new technologies to our SBDD platform, for example, GPCR targeted protein degradation, which we are doing via a collaboration with Poland-based Kaptol Therapeutics. And after the period under review ended, we also entered into a new collaboration with Cambridge-based AI company PharmaNable to drive AI-driven chemistry against the difficult GPCR target of interest to us. Item number three, expand drug target classes beyond GPCRs. And here, after the period in review ended, we took steps to expand into ion channel discovery via a collaboration with Cambridge-based Metreon Biosciences. And lastly, we continue to seek in-licensing opportunities in Japan to bring important international medicines to Japanese patients in areas of high unmet medical need. So our strategic growth plan is about adding new revenues accessing new technologies and expanding to future proof our drug discovery capabilities to ensure corporate value expansion at so say please turn to slide 21. now we have taken our first step into the exciting and hot area of gpcr targeted protein degradation via strategic collaboration with poland-based capital therapeutics Targeted protein degradation is a novel approach to drug discovery where the body's natural process for degrading proteins is diverted using small molecule drugs to eliminate disease-causing proteins. The collaboration will explore the potential of our unique combination of technologies to develop a novel GPCR degrader platform, opening up so far intractable or difficult drug targets for us to address. We chose to work with Kaptor Therapeutics due to the breadth of their platform. which has multiple approaches to obtain degraded drugs, such as molecular glues, bifunctional degraders, obterons, as well as novel ligase targets. Each approach has different characteristics and may be better suited to different targets or diseases. Our initial focus is to identify small molecules targeting a GPCR with a key role in a strongly validated signalling pathway implicated in gastrointestinal disorders.

Please turn to slide 22.

And we wanted to highlight that we are now covering around 50% of the total drug discovery landscape through the tactical expansion of strategic collaborations. As you can see on the slide, from our core capabilities and competencies in small molecule chemistry, we are quietly and confidently expanding both the drug targets that we work on and the modalities used. This cautious expansion to our SBDD platform will ensure we remain one of the world's leading drug hunters for many years to come. We look forward to updating our shareholders in the coming years regarding the progress of these tactical collaborations. I'll now hand over to CEO Shinichi Tamura to talk about future themes and the strategic outlook shaping our business. Thank you, and over to you, Tamura-san.

I'd like to talk about two important things for the future of our company. The first is how to challenge the high probability of failure in drug research and development. The second is to develop as a company that can take on social responsibility as an ESG leader. Please see page 24. First of all, I will talk about how to challenge drug research and development. It is an appropriate choice for the patient, but recently the discrimination of patients using biomarkers has become more and more important. Since Phase 2, we have been able to respond by selecting a partner in line with this trend because we have a policy to lead the development of the partner at the end. The invention and discovery of the treatment drug in the middle, but we have a record of more than 10 years based on SBDD. I think there is a lot to be prepared for the future. Of course, the progress of technology is fast, so we will not be careless and focus on new technologies. The collaboration with Farmanable, which was recently announced, is one example. The correct and legal choice on the far left is the starting point of the drug, and its importance is increasingly recognized in recent years. It is the most important task to develop as a leader of innovative translation. How to incorporate so-called omics and big data will be the decisive factor for efficient translation. By managing this process well, the value of FIPELAND will increase, and it will greatly contribute to the improvement of corporate value including coordination. Please see page 25. This is why we established a framework called New Target Ideas and Validations, or TID, to verify and verify the attractive GPCR targets of the new generation. This framework actively promotes cooperation with other companies that have top-class technology in the fields of Obix, Big Data, and Target Validation in order to improve the existing patent quality of our company. AI functions in the background. In this way, we will maximize the GPCR target of the new and relaxed GPCR, which is directly linked to the cause of the disease. Please see page 26. Over the past three to four years, we have collaborated with existing partners in the current digestive system, immune system, and nervous system, we will pursue first-in-class pharmaceuticals. In the TIV framework, it is expected that the productivity of pharmaceuticals will improve dramatically through new support. If the new attractive GPCR is verified at the same time, it will naturally get on the existing pharmaceutical engine with achievements, and high-value first-in-class pharmaceuticals will be produced. Please see page 27. I would like to talk about another important issue, ESG. In December 2020, we announced the details of our preparation for ESG in the blog. Since its founding in 1990, we have been considering the vision of becoming the first bioreader in Japan. By encouraging people all over the world to live a healthy and dignified life, We are committed to achieving a sustainable future. As a corporate activity, we will be responsible for all stakeholders, including patients, shareholders, and employees, but we will focus on the 17 SDGs announced by the United Nations in 2015. ESG is an important issue for us. Of course, we will not stop at corporate activities alone, but we will also commit at the individual level. After all, it is a matter of each person's parents and children, so I think that it should not end with just a small voice. Next is the agenda for 2021. Please see page 29. There are three main goals. First of all, as I mentioned earlier, it is not a voice, and become a true leader of ESG. This includes programs that are likely to be effective in transforming coronavirus, which Chris mentioned earlier. If there is a profit from this program, it is scheduled to be transferred to the next ESG project. Next is real growth. This is a program to introduce a new front-runner This leads to a new, high-value partnership. The goal is to establish such a partnership in two or three countries. Of course, we will take in new technology and further expand it. Finally, it is strategic growth. As announced in the financial acquisition that was carried out in 2020, we aim to make the opportunity to generate revenue that will increase business value significantly. In addition, we aim to introduce a developer in the high-end development stage for the Japanese market, such as a partnership that will add value to the nuclear engine. This concludes our December 2020 resolution announcement.