Nxera Pharma Co Ltd

Good evening.

Thank you very much for your participation in our earnings call despite the late timing of the day. I will be serving as a facilitator today. I am Nomura, Head of Ireland Corporate Strategy, Sosei Group. Our participants today are Tamura, CEO, Christopher Kagyo, CFO, Miles Congrave, Chief Scientific Officer, and Matt Burns, the Head of Drug Discovery. We'll be covering the business situations of fiscal year 2021. And then in the last 30 minutes or so, we will take questions. And the presentation materials are available in our corporate website. So you can find from our IR presentation tab over our homepage if you need it at hand. And simultaneous translation service is available. There is an English selection or Japanese selection button with a globe sign at the bottom of the screen. You may choose either Japanese or English. And if you choose off, it is the speaker's original sound. And we are very sorry, but for the Q&A sessions, we'd like to divide you into two groups. For institutional investors, analysts, and the media, when it comes to the QA, please speak up. I'm muting the microphone. Others, you can ask questions at any time during this session from the QA button at the bottom of the screen. and we'll be responding to you as many as we can in the Q&A. And your registered name at the webinar will be attached to the questions, but it's not disclosed to the other participants. Now I'd like to start. Please look at the page five. Hello, I am Tamura, chairman and CEO. Since our founding, we keep our vision of becoming a global biotech champion, originating from Japan by solving the challenges of drug discovery. Japan has a world-class track record of increasing average life expectancy while reducing national healthcare costs. On the other hand, due to the low drug price policy, the price of drug is the lowest among the developed countries. As a result, major foreign manufacturers are deliberately delaying the development of their products in Japan in order to avoid being dragged down by the drug prices in Japan. When I first entered the pharmaceutical industry more than 40 years ago, there was a problem of a so-called drug lag, where new drugs approved in Europe and the US were not approved in Japan. After that, thanks to the efforts of the MHLW and the PMTA, the drug has since been considerably eliminated. However, we are now in an ironic situation where foreign manufacturers are voluntarily delaying the development of their products in Japan. The industry and the governmental agencies are working on a solution, but I think it is difficult to expect a quick fix. Reducing healthcare costs in an aging society is a prerequisite for healthy social development. In order for biopharmaceutical companies to grow in this environment, it is necessary to develop new drugs, mainly small molecules at low cost, and to have a strategy to meet the unmet medical needs that are truly needed. To that end, it is essential to capture untapped drug discovery targets. Next slide, please. About 400 GPCRs are said to be potential targets for drug discovery, of which about 25% or 100 have already been discovered. In 2018, sales of drugs targeting GPCRs was about 20 trillion yen. which is a very large drug discovery target accounting for about a quarter of the total sales of all drugs in the world on the other hand about 75 percent of them is still untapped and this is where we are focusing on our efforts however the question that naturally arises is why No drugs have been developed for 75% or about 300 types of GPCLs, even though it is such a great target. GPCLs have a very complex structure that crosses the cell membrane seven times. When conducting normal drug discovery, it is necessary to artificially create such GPCLs. in the laboratory by taking them out of the cell membrane without destroying their structure. However, such a complex structure inevitably collapses, which is why it is extremely difficult to develop drugs for the remaining 300 GBCOs, or about 75%. Therefore, we have developed a new method to analyze the structure of GPCLs by using STAR technology, which stabilizes the fragile structure, and to develop new tracks from it. That's our unique system and the source of competitiveness, and the reason why we have been able to conclude many licenses with major companies around the world. Next slide. Our star technology is our greatest strength, but our unique IT-based SBDD is also an excellent technology, as shown in this slide, which is proven by the results in the next slide. Of course, we have also introduced AI and machine learning to increase accuracy. Next slide, please. This is our drug discovery track record, and it shows the features I explained in the previous slide. We are the world leader in IT drug discovery for GPCRs. Currently, the main focus areas of disease are the neurology, immunology, and gastrointestinal. However, of course, we are facing competition. We are not resting on our laurels, but are introducing innovative technologies and expanding our partnerships with various companies to maintain and develop our top position. For more details, Myles Congrave and Matt Burns will explain later. Next slide, please. I'd like to touch on the relationship between biotech ventures and major pharmaceutical companies. For the last 20 years or so, about 70% of drug discovery has been done by venture companies, while the remaining 30% by major pharma. Venture companies have been playing a leading role in the discovery of drugs. In other words, they originally discovered them. On the other hand, the percentage of drugs sold by venture companies was about 20% in 2020. Roughly speaking, venture companies are the discoverers of 70% of the drugs, but only about 20% of the drugs are actually sold by them, and the remaining 50% are licensed to other major companies from which they receive upfront payments, milestone payments, and royalties. That is a business model, and our business model is exactly this type of licensing business model. After discovering a drug and conducting the initial development, we license it out to major pharmaceutical companies to earn income. Next slide. Against this background, the license agreement is important for many venture companies. This slide shows the data from Evaluator Pharma, a well-known database in the pharmaceutical and biotech industry, showing the list of top 15 pharmaceutical and biotech companies by the cumulative total license value from 2015 to the end of 2020. For example, The major companies are conducting those licensing. Therefore, AstraZeneca, which are major pharmaceutical companies, ranked at the top. And including these major companies, we are ranked seventh in the world, which is a very high position amongst approximately 2,100 analyzed. On the other hand, this amount is a sum of the upfront payment and milestone payments, and does not include a royalty income, which is a certain percentage of sales. So it is not necessary the entire amount. So that has to be a point to be noted. And on the left-hand side, we show after the 2015 March, the trend of the milestone payment. milestone outstanding amounts, it's been steadily increasing. Now I'd like to talk about the potential of our existing partnerships. Since the acquisition of Hectoris in 2015, we have been demonstrating the results. And this quarter, we made another large partnership with Neurocrime. In total, we have $4.4 billion balance of potential development and approval milestones for our existing partnerships, which we may receive this year and in the next 10 years. Sales milestone total $4.5 billion, which we may receive after product launch. In addition, royalties are expected to provide a fixed percentage revenue over time. Existing contracts have a maximum royalty rates in the mid 10% range. Total big sales of a single product in a targeted disease are calculated to be $4.3 billion annually. The total market for the target disease is $25 billion per year. So it is a big amount. And those market data details, it is found in the appendix. So please refer to them later on. Now, Mr. Chris Cargill will now explain the consolidated financial results for the fiscal year ending December 31, 2021.

Thank you very much, Tamara-san. Please turn to slide 13. Good afternoon, everyone.

My name is Chris Cargill, Chief Financial Officer of Sose Group Corporation. I am pleased to report another year of successful execution and strong financial performance. Throughout FY 2021, we continued to execute on a long list of goals, The most significant achievement by our team was the investment, development and successful license of the muscarinic programs to Neurocrine for 100 million US dollars up front and 2.6 billion US dollars in future milestones. Recall that we only regained the muscarinic program from AbbVie 12 months earlier in January 2021. So the fast turnaround time to create significant value is something that we are very proud of. The Neurocrime transaction was the main driver behind our third consecutive year of profitable performance. And we were profitable despite increased investments in R&D, as well as unplanned non-cash impairment charges and a non-recurring contingent consideration charge. International investors further supported us in FY 2021, helping us to raise an additional 10 billion yen via convertible bonds. We ended the year with approximately 60 billion yen of cash, so we remain very well positioned to invest and expand corporate value from 2022. And the group will continue to pursue a balanced model and sustainable financial profile. Please turn to slide 14. This slide shows the group's revenue and operating profit for the 12-month period ended 31 December 2021. As I mentioned on the previous slide, our transaction with Neurocon drove exceptional growth in revenue and operating profit. On the left hand side, you can see revenues increased 100% to 17.7 billion yen from 8.8 billion yen in the prior year. In addition to the Neurocon transaction, Good progress across our discovery and development collaborations also drove additional milestone revenue income from partners GSK, Pfizer, Genentech, and AbbVie. This diversity of partnerships is supporting increased revenue sources and sustainability for the company. On the right-hand side of the slide, you can see operating profit increased 307% to 3.8 billion yen from 0.9 billion yen in the year prior. This was a fantastic result given we also had a planned increase in R&D expenses as well as the unplanned non-cash impairment. Please turn to slide 15. This slide shows the group's income statement for the 12-month period ended 31 December 2021. Our emphasis on collaborative drug discovery partnerships drove a balanced split of revenues, which you can see on the right-hand side of the slide. Multiple sources of revenue enabled us to modestly increase our R&D investment, and this incremental investment will create future long-term value for the company. As I already covered our strong revenue and operating profit performance on the previous slide, on this slide, I wanted to discuss the non-cash costs and non-recurring costs in the income statement. Item number one, non-cash costs, a large proportion of this figure, around 3 billion yen, relates to a collaboration partner's decision not to progress older licensed drug candidates and to instead focus their development efforts on next generation candidates with novel chemistry and longer patent protection. We therefore impaired the older programs to zero value. Item number two, net finance costs. A large proportion of this figure, 2.9 billion yen, relates to a non-recurring contingent consideration provision to cover the 35 million US dollar liability to former Heptare shareholders arising from the Neurocrime transaction. The requirement to pay contingent consideration to former Heptare shareholders on new licensing deals has now expired. and therefore we do not expect any significant provisions or charges for this in future years.

Please turn to slide 16.

This slide details the introduction of a new financial indicator called core earnings, which is favoured by investors and features in our financial results presentation here. Our income statement presentation is now in a similar format to other major TSE prime listed Japanese pharmaceutical companies. The format is based on IFRS figures. We have chosen to adopt core earnings as we recognize institutional investors are often interested in the level of core recurring earnings in the business. As you can see on this slide, we are extremely pleased this year that we were able to grow our core earnings by 206%. to 8.9 billion yen from 2.9 billion yen in the prior year.

Please turn to slide 17. This slide highlights the group's balance sheet as of 31 December, 2021.

Positive operating cash flows and another successful capital raising means the company is well positioned to invest in enhancing corporate value. On the right hand side chart, you can see we generated over 64 million US dollars of positive operating cash flow. And this is a direct result of our collaborative drug discovery strategy, where the costs and risks are shared with major partners. Together with the approximate 100 million US dollars of fresh capital raised, the company finished the year with cash at hand of 60 billion yen.

Please turn to slide 18.

This slide shows our guidance for financial year 2022. And before I discuss this guidance, a brief note on how we performed against our guidance last year. For R&D costs in FY 2021, we guided to a range of 5 billion yen to 5.75 billion yen on a cash basis. And our actual results was 5.5 billion yen on a cash basis, which was within the guided range. On an IFRS basis, the actual result was 5.9 billion yen, as shown on this slide. For G&A costs, we guided to a range of 1.8 billion yen to 2.3 billion yen on a cash basis. Our actual result was 2.5 billion yen on a cash basis, slightly above the top end of the guided range and largely due to the impact of the strong Great British Pound. On an IFRS basis, the actual result was 3.9 billion yen, as shown on this slide. Now, moving to our FY 2022 guidance. Guidance for forecast R&D and G&A is on an IFRS accounting basis, and this is to align with our new financial disclosure policy going forward. Once again, in FY 2022, we plan to make modest increases in investment to push our in-house programs forward, to support the addition of new major partners, and to drive a step up in our long-term corporate valuation prospects. We expect R&D expenses to be in the range of 5.75 billion yen to 6.75 billion yen on an IFRS basis. For reference, and as described earlier, our actual figure in FY 2021 was 5.9 billion yen on an IFRS basis. The potential increased level of investment will be used to grow capacity and progress priority programs towards early clinical development as we seek to build the most value in programs ahead of future partnering. We expect G&A expenses to be in the range of 3.75 billion yen to 4.25 billion yen on an IFRS basis Our actual figure in FY 2021 was 3.9 billion yen on an IFRS basis. This investment will be primarily used to maintain functional support teams and to continue enhancing our governance practices. Thank you. Moving to the operational highlights now, please turn to slide 20. This slide shows the excellent progress that we continue to make against the objectives that we set ourselves at the beginning of FY 2021. Executing against these core growth initiatives will secure long-term value potential for the company. Miles and Matt will speak to our strategy and progress against several of these organic and strategic initiatives. And therefore I will only briefly mention three items where we fell short last year in FY 2021. Item number one, organic growth, and our goal to execute two to three new high-value collaborations per year. Ordinarily, we aim to execute two to three major collaborations. However, in FY 2021, we chose to focus on executing one very big transaction, the license with Neurocrime. We will continue to target multiple transactions in a year going forward. However, where large transactions are achievable, we will focus on ensuring those types of partnerships are executed as a priority. Item number one under strategic growth, seeking out revenue generating opportunities, including M&A, We continue to work with professional advisors to analyze opportunities. We actively did diligence on opportunities in FY 2021 and raised additional capital in advance of an opportunity. However, we chose not to pursue specific transactions as they did not make strategic sense, nor were they valued appropriately. This item will be a key area of focus for us in FY 2022. Item number four under strategic growth in licensing late stage assets for Japan Again, we continue to work with professional advisors to analyze opportunities. We actively did diligence on opportunities in FY 2021 and raised additional capital in advance of an opportunity. However, we chose not to pursue specific transactions as they were not sufficiently de-risked scientifically, nor from the perspective of being broadly tested in the clinic. This item will again be a key area of focus for us in FY 2022. Please turn to slide 21. This slide shows a snapshot of our pipeline, which we expect to fuel significant upside potential over the longer term. There are a few programs that I would like to point out as the ones to watch over the next 12 to 24 months. On the top half of the slide, the program shaded in blue with green stars, these are our newly partnered muscarinic agonist programs with Neurocrine. Each of these programs has the potential to generate pipelines in a product. delivering transformative new treatments for patients living with schizophrenia, dementias, and other neurological disorders. Further to these programs, we have a very diversified roster of partners advancing programs across the spectrum from pre-discovery through to clinical development. On the bottom section of the slide, the program shaded in orange with the orange stars, these are our prioritized in-house programs that we intend to take into early clinical development test hypotheses, build data, before hopefully executing major license partnerships. The programs include a GPR52 agonist for neuropsychiatric disorders, a H4 antagonist for atopic dermatitis, an EP4 antagonist for immune oncology, and finally, an EP4 agonist for IBD.

Please turn to slide 22.

This slide shows a list of our major licensing and collaboration deals, with the majority being new partnerships executed within the last three years. It is worth noting that each of these partners has chosen to work with us, specifically on GPCRs or the GPCR system. The partnerships validate our technology and credentials, with many billions of potential economic value to us in the future upon successful progress.

Please turn to slide 23.

As I mentioned earlier, we have prioritized our next wave of potentially high value programs. And these are the four programs that we hope will support future Neurocrine style large global licensing deals. The programs target a range of CNS, inflammatory and immune mediated disorders. We have committed enhanced levels of investment towards these four wholly owned programs over the next few years. Our aim is to build differentiated clinical data packages for each program that could support early signals of efficacy. The programs represent a balanced mix of novel first-in-class and best-in-class targets, with all programs being potential treatments for patients living with serious illnesses with high medical needs. The target product profiles are largely designed to be convenient once-daily oral small molecule treatments. We will host an R&D investor event in the second half of 2022. And at that time, we look forward to sharing more information on the specifics of these programs, including the translational medicine strategy and clinical development plans. I will now hand over to Chief Scientific Officer, Myles Congreve, to talk about future themes and organic growth initiatives shaping our business. Thank you, and over to you, Myles.

Thank you, Chris.

So as Chris has said, our organic growth objectives were to execute two to three new high-value collaborations and co-investments every year and expand our expertise in GPCRs. So we're delighted to have found Neurocrine as a strategic partner at the end of 2021, and I'll describe this collaboration in a bit more detail in a moment. We've also continued to update and develop our drug discovery platform 2021. Next slide, please. Our new collaboration with Neurocrin is focused on developing novel muscarinic receptor agonists for schizophrenia and other neuropsychiatric disorders. The collaboration gives Neurocrin the rights to our portfolio of potential best-in-class selected muscarinic receptor agonists for the treatment of major CNS disorders. As part of this, Sotihet Tire has received a $100 million upfront payment at the end of 2021. We will also receive ongoing R&D funding to help support the Eurodrim team. The collaboration has the potential to deliver up to $1.5 billion in development and regulatory milestones, and up to $1.1 billion in commercial milestones, plus tiered up to mid-team percentage royalties on net sales. Soseptaris has negotiated the rights to develop all muscarinic M1 agonists in Japan in all indications, with Neurocrin receiving co-development and profit share options. The focus on the collaboration is initially on moving the most advanced asset, which is an M4 agonist, into a phase 2 study in schizophrenia. However, the collaboration contains a portfolio of potential CNS drug agonists and selected M1 agonists in preclinical development. And these assets will also be progressed over the coming years. We have established an excellent relationship with the NeuroClean scientists, and I'm confident that this collaboration will be very successful.

Next slide, please.

In more detail, our M4 agonist designed using our STAR drug discovery platform is HTL168788, which is now called NBI1117568. This agent is competing with the corona-xanomaly-metroscopian fixed-dose combination and also the cerebellum M4 positive allosteric modulator, or PAM. We believe that a single agent that is a highly selective M4 receptor agonist directly acting as an agonist rather than a modulator will give the best overall benefit to patients with the minimum side effect profile and be best in class. Neurocrin share this view. More specifically, NBI568 will avoid non-M4 receptor muscarinic side effects It will mitigate peripheral M4 receptor on target cardiovascular effects. And due to being a direct agonist with a different profile to a PAM, we believe an M4 agonist can be more effective in patients who lack cholinergic tone and therefore giving broader benefits. Importantly, the data generated in the clinical studies carried out by Karuna and Sarabel reported last year give us a great deal of making this target one of the most exciting opportunities in neuroscience at the moment. Working in the collaboration with Neurocrink gives us the very best chance of success with MBI568 to achieve its best in class potential.

Next slide, please.

So turning to our drug discovery platform, as I mentioned, we have the objective to continually update and improve how and we've made good progress again in 2021 in developing and improving our core technologies. In addition to the original stabilised receptor and structure-based drug design core technologies, we've made tremendous progress in 2021 applying our STAR reagents with cryo-electron microscopy to facilitate resolution of protein ligand structures using which helps us to give new protein complexes that are useful for cryo-EM, giving us structures much more quickly. We have also worked with Dell DNA encoded library vendors to use STARS to allow Dell screening for GPCRs, a technique that simply cannot be applied This is making a big impact on our hit generation process for more challenging GPCRs that are largely intractable to classical screening approaches to find useful hits for medicinal chemistry. So overall, we continue to have the world-leading drug discovery platform for GPCRs.

Let's return to slide 29, please.

So in a bit more detail, we've combined these three new technologies with our STAR structure-based drug design approach to make our platform better and faster. Firstly, Cryo-EM. We've resolved structures of 12 different GPCRs by Cryo-EM in 2021 and 2020. We've installed our own instrument and we have access to two high power instruments in Cambridge. Professor Richard Henderson, one of our co-founders and scientific advisory board members, won the Nobel Prize in 2017 for developing this technology. As an example, family B receptors are implicated in a range of disease areas and are long-standing drug targets. Structure-based determination of these receptors has been historically challenging. we've determined multiple structures of family B receptors now by both X-ray crystallography and also by cryo-EM to enable structure-based drug design. Secondly, our protein binder toolkit. Most cryo-EM structures require the introduction of additional protein domains, as the larger the protein particle, the better for this technology. In our generation, Fusion partners, mini-G proteins, nanobodies, antibody fragments have all been successfully now used, and we have a granted patent for our mini-G protein technology, which is used to give agonist GPCR structures. In addition to structures, protein binders can also facilitate protein engineering, biophysics and pharmacology. And lastly, DELT screening. So DEL is an alternative strategy for hit identification in early drug discovery. Libraries of 15 billion to over a trillion compounds can be produced, giving a much higher chance of finding hits than from conventional screening approaches. And the technique is highly complimentary to fragment-based drug discovery, fragment-based screening, which we also employ. DEL allows access to an unprecedented level of diversity Compound libraries have the potential to be engineered with unique features to facilitate identification of hits specifically to target GPCRs. In fact, we first reported DEL for our PAR-2 star in 2018, and today 13 different star proteins have been subjected to DEL screens, giving exciting hits against these targets. So that concludes my section, and I'll pass on to Matt Barnes now to tell you about our strategic growth plans at SoSat times.

Thank you, Miles. Good evening, everyone. My name is Matt Barnes, so I'm head of drug discovery. So next slide, please. Yeah, so I'd like to continue highlighting our achievements in FY 2021 with respect to strategic growth. We've made exceptional progress by investing or collaborating in novel technologies in the areas of new target identification with companies such as Inveni, AI and Verily. new molecule identification with companies such as Farm Enable and Twist, and we continue to expand our interest in other target classes beyond GPCRs with companies such as Metreon. Next slide, please. So before highlighting some examples in more detail, I would like to remind you of what we believe are the three biggest current challenges in drug discovery and development. So choosing the right target on the left-hand side, discovering a new therapeutic agent in the middle and conducting the right patient studies on the right-hand side. We've initially focused on choosing the right target and discovering new therapeutic agents as key opportunities for strategic collaboration. And we've aimed to identify and leverage technology to support this approach. Next slide, please. So how do these strategic collaborations complement our existing in-house approach to drug discovery and development? Well, to demonstrate this, we have to expand our view of our pre-discovery and discovery area into target identification and validation structure and hit identification. Our recent collaborations with Verily and Inveni AI are designed to support the identification and validation of new GPCR targets in the areas of immunology, which is a core therapeutic area for Sosaheptoris. Also, In addition to our existing core technologies, including the stabilized receptor or STAR platform, cryo-EM and DEL screening, and general structure-based drug design, we've established collaborations across a broad range of companies, with unique platforms to further complement and enhance our ability to discover new therapeutic agents. These range from companies that can assist in identifying antibodies and peptides, such as Twist and Peptadream, to those that can help provide new types of small molecules, such as Capital and PharmEnable. These collaborations will support opposition as world leaders in GPCR drug discovery and beyond. Next slide please. So let's look at some of these strategic collaboration partners in more detail. So we've established three new key partnerships in AI drug discovery over the last 12 months. So firstly, on the left hand side, in January 2022, we signed a deal with Verily to identify new GPCR drug targets and then subsequently generate novel drug candidates for immune mediated diseases. The research collaboration combines Verily's immune profiler capabilities and Soseheptase's STAR platform and SBDD to identify GPCRs expressed in immune cells, enhance our understanding of their functional relevance, and prosecute as potential drug targets in immune-mediated diseases. I will mention this briefly again in the next slide. But before that, secondly, in July 2021, we entered into a multi-target collaboration with Inveni AI. This discovery collaboration combines Inveni AI's AI-powered platform for target discovery, so that's new target discovery, with Soseheptas' GPCR SPDD platform and early development capabilities. So this is all to identify new therapeutic product concepts for immune diseases and generate novel compounds that could improve responses to existing immunotherapies. Finally, in January 2021, we signed a further deal with PharmEnable that relates to a technology collaboration to leverage PharmEnable's proprietary AI-enabled and medicinal chemistry technologies. And this allows us to do novel drug discovery against a challenging peptidergic GPCR target associated with neurological disease. Next slide, please. So as I mentioned in the previous slide, one of our most recent and exciting deals and collaborations is with Verily. So as many of you may know, Verily is a subsidiary of Alphabet, which is the parent company of Google. And this arm of Alphabet is focused on life sciences and healthcare and develops tools and devices to collect, organize, and activate health data. One such example of this is its immune profiler platform, which utilizes large data sets and combines cytometry, genetics, transcriptomics, epigenomics, and various analytics to uncover previously inaccessible signals in the immune system. So by combining Verily's immune profile with our GPCR knowledge base and STAR platform, we will identify GPCRs expressed in immune cells and enhance our understanding of their function and functional relevance and ultimately prosecute them as potential drug targets in immunological diseases. So next slide, please. So finally, this last slide shows some further recent examples of strategic collaboration partners, this time with a focus on broadening our approach to discovering new therapeutic agents. So starting on the left hand side. So in December 2020, we entered into a strategic technology collaboration with Capital Therapeutics. The aim of this collaboration is to initially identify novel small molecules that target the GPCR for degradation as potential therapeutic agents for gastrointestinal disorders. And this continues with the support of high resolution structural information around the GPCR E3 ligase complex to enhance our drug discovery efforts. This approach is commonly known as PROTAC, which has recently emerged as a very exciting new era in chemical biology and drug discovery. Next, in February 2021, we announced a collaboration to explore structure-based drug discovery approaches to ion channels. So this is beyond GPCRs with a company called Metreon Biosciences who specialise in ion channel. And so they are a CRO specialising in ion channel and drug discovery. The collaboration aims to demonstrate the potential of structure based drug design to address disease associated ion channels, with an initial focus on identifying novel, highly specific drug leads for further development against the single ion channel associated with neurological disease. Lastly, in December 2021, we entered into an antibody discovery agreement with Twist Bioscience to discover and develop novel therapeutic antibodies against GPCR targets. So the aim of this collaboration is to combine TWIST's synthetic antibody libraries and bioinformatics expertise with our star platform to discover therapeutic antibodies against GPCRs, nominated by Sose Heptaurus. Also, it's worth highlighting that we already have some track record in this area of generating therapeutic antibodies, for example, with companies like CHIMAB. But please note that in this particular agreement, Sosaheptoris will have exclusive full global rights to develop and commercialize any antibody leads identified and directed to the targets of interest. So that concludes my section highlighting our significant achievements in FY 2021 with respect to strategic growth. So I'll now pass over to Tomura-san who will highlight our objectives for FY 2022. Thank you.

Thank you very much.

Let me continue with presentation. Next slide, please. As I said in the beginning, I explained collaboration business model for license agreement. Of course, license terms would be better if development is advanced. Of course, along with that, you have higher risks for R&D and possibly the risk of failure, high risk, high return principle. As a company grows, you need to revisit risk balance. By taking maximum risk, if you try to do everything until approval, then you will have a big return. Some risk-taking U.S. bio-ventures may do that. On the other hand, if you try to minimize risk, then you can have an outsourced business like CRO, but profit would be smaller. On the other hand, a large deal, by having a good alliance management, you can secure a steady stream of milestone payments. Already, we have large-scale partnerships in our company, and rather than to have many low-value early-stage goals, we want to focus on few development assets in clinical stage for high value, and that is in line with our strategies. As Burns and Miles mentioned, platforms productivity should be improved, explore attractive candidates, and we try to have very attractive candidates. And for that, we will have more R&D expenses, For 2022, this year will be the year to charge energy for near-term lead growth. Of course, we will explore possibly big deals. Next slide. Based on my idea, I have shown you objectives for 2022 organic growth, strategic growth, SDG, ESG, first organic growth using internal drug discovery engine. We will start new preclinical programs.

At least,

one political candidate per year and that leads to high value collaboration like the collaboration with neurocrime and we want to have at least one per year i explained the reason why in the previous slide next is strategic growth in 2020 in 2021 we had the uh fund raising and I explained to you that we will seek opportunities to enhance our corporate value and we also seek collaboration to add value to our drug discovery engine and also we are thinking of in licensing for late stage to be developed for the Japanese market. Another priority is SDG-ESG. Not only the economic value, but we need to enhance social value, and that will support our sustainable growth, and we can enhance value for investors. Let me mention some points. For environment, we try to reduce CO2 emission. CO2 emission from research institute is declining. For social contribution, we have engaged R&D for oral COVID therapeutics and we have received well-known foundations in the world, and we provide the supply at low cost to developing countries. For diversity, we have a very high level for female manager ratio in non-Japanese We have 21 nationals and 47 percentage for female. In the company SDG, SDG is important topic. It's not just the company activities, but it is related to the conscience of humankind and behavior. We need to commit at personal level. It's not just you're talking about it. We need to commit on personal level. This shows the management team that would start upon approval of shareholders meeting and board of directors meeting. It's going to be a new leadership team. We have a much younger generation and they will lead the company for long term. And I will stay as chairman and I will support the new leadership in the company. That's all. Thank you very much.

Thank you.

Now I'd like to take questions. Institutional investors, analysts, and media, There is a raising hand button at the bottom of the screen. So please let us know if you have a question by pressing this button. And the moderator will call your name. Then please unmute and start speaking. And simultaneous translation is now provided. Therefore, please try to speak slowly and clearly. I would like to go to the first question.

Please wait a moment.

Excuse me.

There seems to be some technical problem that we have a difficulty to unmute the participant. Therefore, we'd like to provide answers to the questions that came in the chat box and also pre-ask the questions. Sorry for this technical trouble. So the first question, This is one of the most frequently asked questions prior to this call. That's about the share price. The recent share price is quite low. So in order to improve that, what is your measure? and for instance a shelf buyback or a dividend could be also a solution and also in the past there was a target share price so how do you see the gap between the target price and the current stock price thank you i'd like to answer to this question You may know from Nikkei and so on that we need to consider the individual case and also macroeconomics. And it is true that our stock price has been low, causing some difficulties to you. And yesterday, there was a Nikkei article saying the measures market disrupted. And in three months, there was a decline of prices 40%. And it also says that we have an impression that the managers in charge of the market are not really experts. And it is very clear in the stock market in Japan that analysts would be able to produce even higher. That's about IPO. And there are many people who consider that putting short order is more profitable rather than buying long. But individually, in our case, we are confident that we should be able to increase our corporate value over time. And concerning the possibility of a share buyback, of course, if it's possible, we'd like to do that. And we have the fund, but there is a regulation. We need to have a cumulative profits recorded. But on a cumulative basis, we are still running deficits. Therefore, we cannot do that. So please give us time. And shifting to the prime listing, that's another way. And 10 billion yen per annum, that's achieved. So we meet the requirement. But how much we'll be able to do that, we have been discussing with the TSE, so we will try. But again, about two weeks ago, there was a Nikkei article saying that from the Section 1, There are some companies that decided to move from that because there is a high entrance barrier. There are many restrictions. And once you enter into the prime, then those restrictions will be imposed. The overseas investors may not be so interested in that because they don't trust the Japanese market, so they are leaving from the Japanese stocks. That's what the article says. And I have long experiences of managing the company, and I understand those are macroscopic economics, and we had some headwinds. And when we have headwinds, it's better to focus on individual strengths. Luckily, we do have the financial capabilities to conduct investment to continue our growth. So we'd like to focus on that. Thank you very much.

Another question from the chat.

We received a question.

M1 agonist, well, this is a target for impairment this time around, but that is for some compound that the toxicity study results You were investigating toxicity study. As much as possible, can you explain the progress? That's the second question. Chris Cargill will answer this question, please.

I thank you for your question.

Yes, we did take the view that we needed to impair the M1 agonist. And that is for the reason that those programs are now part of it with Neurocrine. And it is up to Neurocrine now that they are the owners of those programs to choose what they want to progress. And as I said in the presentation earlier, our partner has elected to move forward with new programs, next generation compounds, those that have novel chemistry and a longer pattern life. It's not our place to discuss toxicity results of a program that we no longer own. However, I think we've been very clear that it is, you know, Neurocrine's intention, if they do move forward with M1 agonists, that they will be using next generation compounds. Thank you. That concludes my response.

Thank you very much.

The system is back. So we want to entertain questions from analysts. If you have a question, please use the raise hand functionality. I have three questions.

First,

You mentioned shift to the prime market sales revenue.

You are okay.

You have the criteria passing. 2.06 billion, that is income before tax. You have to have 2.5, so you're below that, either revenue or profit income. So that is okay according to the prime market eligibility. Am I right? Let me answer one by one. You're right. says revenue and the income before tax. For the revenue, we pass the criteria. And we are talking with TSE. But there are various criterias, including implementation criteria. We don't know how much restrictions or limitations we are going to face. We don't know that we will negotiate. But as a company, how is this helpful for the growth of the company? Of course, stock price may stabilize, but aside from that, we need to have careful assessment, I think. CFO Chris can have additional comment. Chris, you can go ahead.

Thank you, Tamara-san. Yes, I mean, it is clear that we have met the metric on one basis, and that enables us as Tamra-san has said, to have an open dialogue with the TSE regarding a potential move. Now, as Tamra-san has said, that move needs to be considered with respect to what is best for our ability to invest in our programs. and to create value for the company. Because if there are too many restrictions placed upon the company as to how it can operate on a go-forward basis, it may be difficult for us to invest in the sort of growth opportunities that we would like to. So we are, as has been said, having a very open conversation with TSC, and we will see how that all plays out over the coming months.

Thank you, that concludes my response.

My second question, one compound impairment. You explained in your presentation, and as a nuance, I felt that neurocrime is developing new generation program. Is that right? So that means not only impairment, but you need to do something as compensation to Neurogrind as financial compensation. And regarding the M1, you maintain the right to develop in Japan. And for this new generation program, you, Sosei, is going to lead? Thank you. Chris will answer to this question.

Thank you for your question. The answer is no, we do not owe any compensation or payment to Neurocrine. We simply impaired a number of older M1 compounds that we held on our balance sheet because we know that it is not the intention of our partner to progress them. So no, there is no payments owed to New York.

And the second question, that was that.

And the third one, simple, let me answer. We have the right in Japan. Yes, so your understanding is right. Thank you very much. Lastly, collaboration with Pfizer, GLP-1 compound. At Pfizer's earnings call, In the pipeline, there was no update, but it was mentioned in the meeting, Pfizer is developing twice-daily GLP-1 compound and one steady compound that they have collaboration with you. And going forward in phase two, they may develop in one study that was kind of nuanced and what is your view on this and glp-1 compound regarding that shugai farmer mentioned either lidi and sugar are developing power 833 that is also aura one daily small molecule compound so what is the differentiation point that you can have Possibly properties of compound or sales scheme. Do you have any information on this? Congress will answer to this question.

Yes, thank you for the question. So, yes, we are very pleased to hear the statements daily and it clarifies that it's a once daily drug over danuclipron which is the the most advanced compound which is twice daily and it was mentioned that there may be advantages for a once daily drug over twice daily and so I think overall we're optimistic that Pfizer will have rights as part of the collaboration into phase two based on these statements. In terms of the differentiation versus the July compound, it's difficult to say at this point. We haven't sight of all of the detailed information that Pfizer have generated in the clinical studies for our once daily compound. to compare that with results from the Shugai Lily compound. But it was stated that the molecule is an excellent drug and that there's an opportunity to progress it as well as Daniel Glipron in further trials. So I think we're very pleased by these statements that were made on that call. That concludes my answer.

Thank you very much.

That's all for me.

Thank you, Miura-san.

We'd like to move on to the next. Next is Matsubara-san, Nomura Securities. This is Matsubara, Nomura Securities. Can you hear me? Yes, we can. Thank you. I have two questions. Page 23, your in-house development, you listed four products, and you see efficacy in preclinical, and you believe that it is promising, or you already have some negotiations or discussions with potential partners, licensing partners, which is the case? For Miles, I would like to ask to answer.

So as Chris has said, these programs are prioritized for us to move into early development ourselves and build value in the projects. We are excited by the preclinical data in each case against the clinical target molecule and product profile. We believe these are very interesting areas of biology that fit very nicely with our core strategy. We do, of course, always have ongoing business department discussions and interest in our programs, but it's not our intention to license these programs pre-clinically at this time.

So that concludes my answer.

Thank you. And Matt, do you have any additional comments? If you have any, please.

Yeah, thank you. So, yes, I agree with with miles. So these with the reason we've prioritized these four programs is they are a very nice blend of validated and novel targets. They are a nice blend of You know, across our core therapeutic areas. We're very excited, I think, about these. And that's the reason why we want to invest in these and take them forward ourselves internally. But I think as Miles says, we also we are very experienced in the business development area. We know that sometimes these deals can take a long time. We know it's about relationships. So, you know, we are kind of open to talking about the programs. But when we do talk to potential partners, we make this point very clear that we are intention at the moment is to, you know, take them forward into the clinic ourselves. Thank you.

Thank you very much.

As a follow-up question, clinical studies, are there any planned or estimated timing of starting clinical studies for those products? Matt, could you answer?

Yes. So I think Chris mentioned earlier on the call, I think there'll be an R&D investor day at some point later this year. And I think we'll reveal more of our translational medicine and early clinical development plans at that. But at the moment, I think what we can say is that over, you know, these four programs will be advancing over 2022 and 2023. Thank you.

Thank you very much.

My second question is about the mascarinic agonist milestones. For each pipeline, I understand that the milestones are set. And you mentioned that the development is dependent on new client. So probably M4 is prioritized and dual is deprioritized. Then is there any possibilities that you may receive less amount of milestone? Chris, could you answer?

Yeah, sure. Thank you for the question. And may I apologize for earlier, my internet cut off clearly. One of the hazards of working from home these days. So yes, the way that the transaction was structured is that we receive milestones on progress, not only against the M4 program, sorry, but also against non-clinical programs. So the dual M1, M4, and the M1 agonists. Now, our expectation, as we said at the time, was that an M4 phase two trial is very possible this year. We are working hard with our partner, Neurocrine, to make sure that happens. If it does, we expect to receive a milestone. With regard to the non-clinical programs, realistically, they're most likely to progress in the 2023 and beyond timeline. And if they do progress, we are also entitled to receive milestones. That concludes my answer.

Thank you very much.

Matsubara-san, next question. Yamazaki-san from Ichiyoshi Economic Research Institute. Yamazaki from Ichiyoshi. Do you hear me? Yes. Regarding collaboration plan for this year, I have one question. You have been saying, it was suggested that for this year, clinical trial and the poc obtained then license out that was a policy that was mentioned in the presentation does that mean that you have your internal program that is not good candidate for that So that means for this year, license for compound would not be expected. And also in the Tanshin, it says upfront money is expected. Is that coming from drug discovery? Can you answer to this question? Let me answer to this first. All collaborations. It doesn't mean that we don't do collaboration until we reach clinical stage now, so we want to have another NeuroClean type deal. That means we need more preparation time. It's not that we want to have collaboration, whatever that is, we do have some of those assets, but. Collaboration with Pfizer was very early, so there were 10 items and it was for target that is for platform. If conditions are good, we'll do that. If good times are reached and if the target is hot, maybe it's not in clinical stage, but we may have a deal possibly. We may have those deals before the asset reaches clinical stage. We have possible partners. We have many, and we should have good alliance management so that we can have good milestone as the next stage. That's also important part of our job. Probably, Chris, you want to add comments. Go ahead.

Sure. Thank you, Tamara-san. Yes, in the Tanshin where we refer to the receipt of upfronts this year, we are probably more specifically referring to a platform or drug discovery collaboration style deal. or potentially the expansion of an existing collaboration that we have with one of our partners. As you will know, we are very diverse in the types of deals that we can do. We have said today that around the four prioritized programs, we want to build much more value in those programs before we do a license deal. But that doesn't mean, as Tamara-san has said, that we can't receive upfronts from different styles of deals. And as I mentioned, a platform-style collaboration, like what we've done with Pfizer, like what we've done in drug discovery with Takeda and AbbVie, for example, in the past, we can do transactions like that again in the future as well. That concludes my response.

Thank you very much.

Clear. That's all.

Thank you. In the interest of time, I would like to now take the final question.

And if you have any questions. In the Q&A button, you can write it down or enter your questions. And after this call, there is no questionnaire. So if you have any questions, before closing, please put your questions in the Q&A box. Then we'll be able to answer to your question. Next is Suzuki-san of Mizuho Securities, please. Suzuki, Mizuho Securities. Can you hear me? Yes, we can. Thank you. I also have your financial result related questions regarding R&D and G&A cost. What is your estimate or forecast for this coming year? Is it on the same level as the last year? And the mascarinic program R&D cost. Partially, I think it's borne by Neuroclime. Therefore, in that sense, keeping the same level, meaning that you will be having more R&D costs, is that right understanding? Chris, could you answer?

Sure, thank you. The answer to your first question is as presented here on this slide. Last year, we spent 5.9 billion yen on R&D. And this year, we are forecasting to spend somewhere between 5.75 and 6.75. It is more likely going to increase for the reasons we have discussed today. We have some fantastic, wholly owned programs that we want to move towards clinical development that will likely result in slightly higher R&D expenses. But the range that we have set is here on this slide. For G&A, again, last year, 3.9 billion yen was the result. And again, we're not expecting it to increase markedly, 3.75 to 4.25 billion yen is the range that we have set. To answer your second question around muscarinic, yes, now that these programs are outlicensed to Neurocrime, any activities that we conduct to progress those programs under the license and research agreement will be paid for by Neurocrime. So there is no direct cost to us. The only time where there would be a direct cost to us would be in the future if we choose to move forward the M1 agonist in Japan, where we have retained the Japanese rights. But certainly over the next 12 to 24 months, Any activities that we conduct on the muscarinic programs will be fully paid for by Neurocrime under the terms of the agreement. Thank you. That concludes my response.

Thank you very much.

And overall, I'd like to ask about your concept. If it is a Japanese biotech venture company, I think they may target that early partnership. But now you are saying that you'd like to go to the later stage, and then making it a sort of a matured program. So then you'd like to license out. That is an impression that I have, having heard your discussion today. Is this impression correct? Let me answer to your question. Yes, you're right. In our presentations, we mentioned that we'd like to add high values. Otherwise, we cannot be successful in big deals. And actually, there is no truly Big biotechs originated from Japan yet, and overall, globally, stock prices are sluggish. And we'd like to raise the fund and we'd like to prepare ourselves. For instance, GPCRs, there is a company called Arena in San Diego. And it was acquired by Pfizer, 750 or 60 billion last year. And they were doing something similar to us. They did phase one or phase two and building a very strong pipeline. Then they could create high value. In our case, we are listed in Japan, so we cannot do exactly what the American companies do. We already had failure experiences several years ago, but we would like to secure our income source. In that sense, we would like to progress our discussion in our deals. Of course, development takes time. If we do it too early, then we may not be able to add enough high values. Therefore, we need to hit a balance in between. And while we are preparing, we'd like to take a strategy from the managerial point to increase our adding values. And that's to be done under my leadership. But I think probably it's better to have Chris to comment on this, please.

Thank you very much, Tamura-san. Yes, I mean, that is correct. We have made great strides over the last three years to add a significant number of new global partners across a diverse range of programs. And what that means for our business now is that we have lots of different potential sources of revenue and value going into the future. And we have now got ourselves to a point where we can make, you know, incremental investment, take a little bit more risk in order to build significant value. And to the question around going to the later stage, I just want to be clear right now with those four wholly owned programs we've discussed today, it is our intention to not go any further than a phase 1B or a phase 2A trial. We think that you can generate significant value with the right studies that generate the right data at that point. And as I've said, because of the great progress that we've made in the last three years to diversify our business, we're now in a position where we can make these little incremental steps in making more R&D investment on a year-by-year basis. That's what this is all about. And we think that this is absolutely the right strategy for the company going forward. And that concludes my response. Thank you.

Thank you very much. It's clear. Just last question. oral COVID-19 therapeutics is drawing much attention in the market. Your oral COVID-19 therapeutics progress so far and your outlook for progress coming years. Miles, can you answer to this question?

Yes, so as you know, we have our program now funded by Wellcome. We, of course, have against the MPRO target, and that changes the environment for our programme. I think in discussions with Wellcome, we think the focus of future work should be to very much have a low-dose, best-in-class compound, one in particular that doesn't require co-dosing with ritonafir and doesn't have drug drug interactions because many of the vulnerable patients that most need an mpro inhibitor may be on co-medications because of other underlying health concerns so i think we um we have changed our priorities and rather than a first generation molecule that we've progressed quickly into the clinic we're now working with welcome under their guidance, we are looking for a best in class low dose, once daily, very high quality drugs. So this will take a bit more time, but we'd anticipate that we'll have candidate drugs towards the end of this year, and then can start to move them forward towards clinical development after that. Certainly, this I'm interested in antiviral agents. And what's now required is a superior molecule than the Pfizer molecule that is high dose.

That concludes my answer.

Thank you very much.

Thank you very much, Mr. Tsuzuki.

My line was down, so I'm using Tamura's chair. I apologize for this confusion. close our question and Q&A session. We had some technical issues. I apologize for that, and thank you for your support. We are able to close very smoothly. For your questions that you submit in the chat, we will later go back to you. I mean, through our blog website, we will provide answers. Thank you very much. With this, we close today's meeting.