Interaction and
Interchange
Annual Report 2013
For the year ended March 31, 2013
VISION
For the Benefit of All Humankind
A healthcare innovator
creating drugs that
are 100% effective
Achieve a revolutionary therapeutic effect by
delivering therapeutic antibodies optimized to
individual patients
Create technologies capable of
discovering antibodies that can be
administered to people in
only a few weeks
Offer a complete substitute for
vaccines with the fully human
ADLib
®system
Our goal for
2023:
the ultimate
made-to-order medicine
Our goal for
2014:
establishment of
a fully human
ADLib
®
system
Our goal for
2018:
countermeasures
for pandemic diseases
Dealing with my family’s suffering from
diseases and the medical treatment
options available to them, I have
serious doubts about current medicines
that bring limited or poor outcomes,
and even severe side effects or on
occasion some type of subsequent
complication. Being invented in the
RIKEN Research Institute in Japan, the
ADLib
®system is a drug discovery
technology platform that quickly
discovers a diverse array of antibodies
against antigens that were difficult or
impossible to obtain using conventional
methods. Our ultimate goal is to attain
100% therapeutic effectiveness through
the rapid generation of therapeutic
antibodies with superior therapeutic
effects and negligible side effects.
Mission
“Interaction and interchange” are key business principles at CHIOME. A major element
of our business strategy is therefore to form relationships and alliances with a large
number of businesses and institutions. At CHIOME our aim is to develop a unique
international service based on technology for diversifying genetic information while
fostering interchange among a diverse array of people and ideas. We seek to meet the
diverse needs of clinicians everywhere through masterful use of our proprietary
technology.
C o n t e n t s
VISION:
For the Benefit of All Humankind
1
A Personal Letter to Our Shareholders
2
STRENGTH:
Unique Value
5
Unique Business Model
6
Exclusive Technology
7
VOICES
of Academia Partners
8
Proven Partnership
9
At a Glance
10
Six-Year Financial Summary
12
Management’s Discussion & Analysis
13
Corporate Information
16
Stock Information
17
Chiome
Chi
asma -
ome
“Chiome” (pronounced as “kai-ohm”) is a fusion word
from “Chiasma” and “-ome.” The “chi” (pronounced as
“kai”) of Chiome is the “chi” of “Chiasma.” “Chiasma” is
the point of contact between paired chromatids during
meiosis, resulting in a cross-shaped configuration. It is
the cytological manifestation of crossing over,
representing the blending of genes and the birth of a
new generation.
The “-ome” of Chiome is the same as the “-ome” of
“Genome” and “-ome” of “Proteome,” which carries the
meaning of “collectivity.” The name Chiome therefore
signifies “Exchange,” “Diversity,” “Sustainability” and
“Fusion.”
A Personal Letter to Our Shareholders
Dispensing with the formulaic approach to messages from senior management, I
would like to take a few minutes of your time to deliver a personal letter to current
and potential shareholders, whom I fervently hope will form the majority of
readers.
Taking care not to blind you with the science that so vitally underpins Chiome
Bioscience’s operations, my intention is simple: to paint a jargon-free picture of the
human aspects involved and to touch on just a few key financial indicators. More
scientific and financial details can easily be found elsewhere in this report and on
our website.
By getting back to basics, I would just like to reiterate who we are, what we
do, why we do it, and—most importantly—why you should certainly continue to
place your valued investments with us or add our name to your portfolio.
Who We Are
Having marked only our eighth company anniversary in
February 2013, we employ a young and dynamic biotech
venture team of 31 dedicated personnel here at our
headquarters and research laboratories in central
Tokyo. A source of that dynamism and a salient feature
is the combination of business acumen and distinguished
science backgrounds provided by our eight-strong
leaders.
A technology-driven ethical health care innovator,
Chiome Bioscience is imbedded with a corporate
culture in which innovation, inspiration, and inquiring
minds thrive in equal measure.
What We Do
A bioscience company generally conjures up images of
a different kind of culture, one being produced on glass
dishes by people in white lab coats. While long ago it
became fashionable for companies to trumpet some
prized facet as being “in our DNA”—the amino acids that
have been described as the building blocks of life—the
world-leading drug discovery technologies we possess
are inextricably linked with the real DNA that is in each
and every one of us. In Chiome Bioscience’s case, the
secrets of success really do lie in our DNA.
We have already charted an ambitious yet realistic
10-year course toward a world of made-to-order drugs
in a revolutionized medical system. Using our
proprietary, patent-protected ADLib
®system, we are
working to combine DNA from different sources in the
rapid creation of highly effective drugs. These drugs
will become powerful weapons in the fight against a
number of diseases that are afflicting the human race
right now.
In the shorter term, the indications are that in 2014 we
will be in the position to create and quickly administer
human antibodies, the substances normally produced by
our blood to ward off illness and disease. Set for 2018, the
next milestone will be the use of the ADLib
®drug discovery
platform to replace vaccines in pandemic control.
Why We Do It
As scientists, we derive great satisfaction from the
ADLib
®system’s capabilities that allow us to see
results and thus where the problems lie. Above all, we
want to display management capabilities that lead to
success as a business.
On a deeply personal note, many of you reading this
will know of someone who is currently experiencing
the effects of some debilitating disease. Having been at
Chiome Bioscience since its inception, I myself retain
particularly poignant memories of my disappointment
at the state of medicine at the time of my mother’s
illness and of having to pay for treatment that was
ultimately ineffective. Those memories are a driving
force behind the work I am doing today.
While we remain earnest about and dedicated to
every facet of our business, on the brighter side of our
operations, we are firm believers that work should be
fun. Thinking outside the box and staying one step
ahead, even to the point of occasional eccentricity, can
often provide the wellspring for innovation. In this
regard, we are looking forward to the advances that we
will be making for the sake of society at large in the
years ahead.
The Key Part You Play
As you would expect, our painstaking research is highly
labor and cost intensive, hence the need to share the
burden with other organizations.
Our work involves a chain of crucial partnerships
that could be described as being similar to the chainlike
form that DNA itself takes. The close-knit Chiome
Bioscience team is linked into a number of alliances—
involving close collaboration with major
pharmaceuti-cal companies, the Japanese government and
academia—that are interacting to facilitate the
end-user partnerships between doctors, medical
teams and above all their patients.
First listed on the Tokyo Stock Exchange Mothers Index
in December 2011, our shareholders’ investments
STRENGTH
Unique Value
Our value is derived from providing
gratification to people
Source
of
Values
Growing
Market
Exclusive
Technology
(ADLib
®System)
Unique
Business
Model
Multiple
Earning
Points
Strong
Client
Base
Proven
Partners
We will then commence and add impetus to the second
stage, the creation of innovative drug pipelines. The
third and final stage calls for us to be a prime mover in
what is nothing less than a medical revolution: the rapid
provision of optimal antibodies customized to the needs
of individual patients.
In specific terms, in three years’ time we anticipate
recording net sales of ¥4.3 billion from three revenue
streams, having added and speedily developed the
concomitant Licensing Out Platform Technology segment
(¥2.9 billion) to the existing Drug Discovery Alliance (¥1.0
billion) and Lead Antibody Licensing (¥0.4 billion)
segments.
The targets outlined in the business plan cover the
following four perspectives:
R&D
Financial and customer
Internal controls and personnel development, and
Social contribution
In Conclusion
I sincerely hope these few words have served to
reinforce your sense of what Chiome Bioscience is all
about and the key role that you can play in ultimately
saving lives.
I would urge you to either get involved or deepen
your involvement in our ultimately altruistic enterprise.
Thank you very much for your time.
June 27, 2013
provide a vital resource that helps bind the entire chain.
We would, however, prefer that our shareholders buy
into Chiome Bioscience not for short-term profit but
because they fully understand the nature and
significance of what we are trying to achieve over the
long term.
The Way Forward
After three years of growth, our two-segment net sales
of ¥324.1 million for the fiscal year ended March 31,
2013, represented a 48.8% decrease compared with the
¥633.2 million of the previous fiscal year. However, this
result should be weighed against the ¥309.7 million in
expenses incurred in our Drug Discovery Alliance
business and a massive 73.9% increase in R&D
expenses. We are forecasting net sales to bounce back
to ¥740 million in the current year and be that much
closer to recording our first overall operating profit.
Having lauded the unique benefits of our superb
ADLib
®system, there remains a great deal of work to
be done before we can bring to fruition even the
short-term goal of the full generation of human
antibodies in the next year. Leveraging the special
feature that produces the ADLib
®system’s rapid
results, it is our avowed intention to show a steady
performance.
Following the announcements of our antibody
acquisition technology and our practical successes
thus far, we have garnered rave responses from our
alliance partners and investors alike.
The development of human antibodies forms an
exciting short-term target in our new, recently launched
medium-term business plan, which will run for the next
three years and end on March 31, 2016.
Under the banner of working for the people of the
world who are eagerly awaiting new medicines, we are
targeting a three-stage switch to a high-value-added
business model. Already well advanced, the first stage
involves the creation of sustainable new drug discovery
technologies based on a range of genetic information.
Masa Fujiwara, D.V.M
Chief Executive OfficerAntibodies are naturally occurring drugs
that exist in everyone’s bodies. If a
technology to produce antibodies existed, it
would change medicine forever. As a
researcher, I intuitionally understand the
potential of this game-changing technology.
The ADLib
®system is an antibody
discovery technology that can rapidly
generate a diverse array of antibodies
against antigens that are difficult to obtain
by conventional methods. Conventional
drugs were developed principally based
upon the statistical concept and attitude
that drugs cannot be consistently effective
for all people. However, if a tailored
therapeutic antibody which is ideally suited
for an individual patient can be generated
by the advanced ADLib
®system, then
personalized medicine in a mature sense
— 100% therapeutic effectiveness - will
become reality.
Unique
Business Model
Three
Core Businesses
Lead
Antibody
Licensing
Drug
Discovery
Alliance
Licensing Out
Platform
Technology
Exclusive
Technology
Based on alliances with pharmaceutical companies, the ADLib
®system is deployed to generate
antibodies for the development of therapeutics candidates. Chiome Bioscience provides antibodies
tailored to the needs of its partners, who then analyze the functions of the antibodies and examine
their potential to become future drugs.
Chiome Bioscience licenses the ADLib
®system to pharmaceutical and diagnostic companies, and
allows them to generate antibodies through their own effort.
Chiome Bioscience discovers first-in-class therapeutic antibody candidates for its own discovery
purpose, against targets discovered from research collaborators including universities and public
institutions. Chiome Bioscience then licenses these lead antibodies to pharmaceutical companies
after having evaluated those antibodies for their therapeutic potential. Licensing at an early
stage reduces Chiome Bioscience’s exposure to risk in later development stages, while securing
compensation in the form of upfront fees, milestone payments and royalties.
Three business lines centered on
the ADLib
®system
Earnings model for each business
Eyeing robust growth in the antibody drug market, global pharmaceutical companies have
been plowing resources into the development of antibody drugs. Chiome Bioscience’s ADLib
®system is an excellent technology for generating antibodies for therapeutic use.
Chiome Bioscience has acquired basic patents for the
ADLib
®system in major markets including Japan, China,
the U.S. and Europe, as well as related patents in Japan
and other countries. Chiome Bioscience has an exclusive
worldwide right to commercialize the ADLib
®system.
The ADLib
®system has piqued the interest of major
pharmaceutical companies around the world. Chiome
Bioscience has been working with these companies in the
three following business models.
Antibody drug development typically takes 6.5 to 9 years
from discovery research to market launch following clinical
trials. Chiome Bioscience is focusing on the drug discovery
stage, the most upstream part of the drug development
process, aiming to earn revenue in the early stage. By
operating three business models based on the ADLib
®system, Chiome Bioscience can generate revenue by stable
earnings and milestone payments at each stage of the value
chain, from drug discovery research to market launch.
The ADLib
®system and
its main features
Shift to a high-value added business model :
Long-term business strategy
Accelerate the shift from a “technology
devel-opment-centered” to a “drug
discovery-cen-tered” strategy
Lead Antibody Licensing (antibody drug development) Licensing Out Platform Technology
Drug Discovery Alliance
Time
DT40 cells TSA treatment
Activates recombination Antibody selection: 30 minutes Magnet Antigen Magnetic beads Cultivation for 1 week Acquisition of specific monoclonal lgM antibodies Provide antibodies in about 10 days ADLib® S N
Feature #1: Cell-based diverse antibody library
Trichostatin A (TSA) activates the antibody gene diversification mechanism in the DT40 cells, and then a diversified, cell-surface displayed antibody library is generated. The antibody library can be used on a regular basis.
Feature #2: Rapid screening of antibodies specifically bind to the target
Magnetic beads coated with a specific antigen are introduced into a cell-based antibody library, and antibodies that bind to the target antigen are harvested. These steps are accomplished in only 30 minutes. The harvested antibody-expressing cells are then cultivated. The avian antibodies obtained by the ADLib® system can be
converted to human antibodies, which can be further developed as drug candidates.
Feature #3: Application to tough antigens
The ADLib® system can generate a variety of antibodies against antigens for
which antibodies are difficult to obtain with conventional methods, such as toxins, pathogens, and self-antigens.
For example, ADLib® axCELL, one of the applications of the ADLib®
system, is a successful method in obtaining antibodies against multiple-trans-membrane proteins including G-Protein-Coupled Receptor (GPCR). GPCR is a protein family that is thought to be important drug targets, but yet remain difficult to obtain antibodies using conventional methods.
The ADLib
®system is a game-changing, antibody generation platform providing diversity,
speed and application to tough antigens, three problems that had previously been viewed as
difficult to overcome. These advances have caught the attention of antibody drug discovery
companies around the world.
Toward a fully human ADLib
®system
Further technological innovation
Patents obtained in major markets
around the world
As an upgrade of the ADLib
®system, Chiome Bioscience has
been developing a fully human antibody library that would
allow human antibodies to be obtained, instead of avian
antibodies that must be humanized by protein engineering.
Homologous recombination has been confirmed to occur in
both the heavy and light chains in human immunoglobulin
genes, and also the expression of membrane-bound and
secreted human IgG has been confirmed. In order to develop
a fully human ADLib
®system for efficient antibody screening,
Chiome Bioscience has been focusing on developing a
prototype library and completed it. If development proceeds
smoothly, we expect to generate a fully human ADLib
®system for commercial use in 2014, which would allow for the
generation of human antibodies in about 10 days.
In order to discover high-quality lead antibodies, Chiome
Bioscience is promoting joint technology development in
alliances with companies around the world that have
cutting-edge technologies. For example, Chiome
The basic patent of the ADLib
®system has been issued in
China in 2007, Japan in 2008, and the U.S. and Europe in
2010. In addition, Chiome Bioscience has filed related
patents inside and outside of Japan. Chiome Bioscience has
an exclusive worldwide right to commercialize the ADLib
®system technology.
Title of the invention: Method of Enhancing Homologous
Recombination of Somatic Cells and Method of
Constructing Specific Antibody
Chiome Bioscience and RIKEN each hold 50% of the
patent rights
Bioscience’s alliance with Biotecnol, Inc. in the U.S. has
given it access to Tribody technology, which contributes to
the development of antibody drugs with higher efficacy. A
Tribody can recognize up to three different antigens in a
single molecule. This makes it possible to develop antibody
drugs with multiple mechanisms, such as the ability to
attack cancer cells while overcoming disease resistance of
some patients.
Sa
le
s
Alliance with state-of-the art technologies Royalties from clients Completion of fully human ADLib® pre sent
Create pipelines continuously
Accelerate the shift to a high value-added company
Proven
Partnership
Advantages of having alliances with
many companies and organizations
With patents on its ADLib
®system filed in major markets, Chiome Bioscience helps people
lead healthy lifestyles through technological innovation and the development of antibody
drugs in alliances with companies around the world.
Voices
of
Academia Partners
Chiome Bioscience does not out-license drug candidates
as its main business model. Accordingly, we enter
contracts with multiple companies and multiple contracts
with one company. Upgrades to the ADLib
®system have
made it possible to generate antibodies against antigens
for which antibodies have been difficult to obtain using
conventional technologies. We plan to run our businesses
When I was researching neurobiology, I conjectured that
Semaphorin 3A (SEMA3A) plays a broad and critical role
after noticing that it was prevalent not only throughout
the nervous system, but also in the lungs and other
organs. I decided to obtain some SEMA3A antibodies and
pursue this research further, but with the antibodies
available at the time, I has issues with their specificity
and sensitivity. Unfortunately, I was unable to produce
the antibodies on my own using conventional
methodologies. After going through this process of trial
In a bid to effectively and efficiently solve challenges,
Chiome Bioscience partners with companies and
academic institutions that specialize in fields requiring
fundamental and advanced expertise, such as clarifying
the diversification mechanism of the ADLib
®system and
3. Alliances related to technological development
Partner Contract
Chugai Pharmaceutical Co., Ltd. Joint research into antibody production using the ADLib® system
Chugai Pharmaceutical Co., Ltd. Contract-based research into antibody production using the ADLib® system
Five Prime Therapeutics, Inc. Contract-based research into antibody production using the ADLib® system
Chugai Pharmabody Research Pte. Ltd. Work related to the calibration of essential research materials for the efficient development of antibody drugs
1. Alliances with drug discovery companies
Our alliances based on the ADLib
®system support drug discovery and antibody drug creation at our clients via their own R&D.
in a sustainable fashion by continuing to upgrade the
ADLib
®system.
Chiome Bioscience has also partnered with academic
institutions and public organizations, and with companies
and organizations that have related technologies. This
approach reduces risk in the drug discovery business,
which requires long periods of time for an outcome to
materialize, while building multiple promising product
pipelines. Our close relationships with academia also
facilitate the creation of product pipelines.
There are 99 failures for every breakthrough in technology.
A sizeable amount of upfront investment is necessary from
the R&D stage to commercialization, because learning
from a large number of mistakes is an essential part of the
development of new technologies. Fortunately, Chiome
Bioscience received grants from the Ministry of Education,
Culture, Sports, Science and Technology, Japan Science
and Technology Agency (JST) and New Energy and Industrial
Technology Development Organization (NEDO) to sustain
its efforts to improve the maturity of core technologies and
commercialize the system.
The market for antibody drugs has been expanding
steadily. Corporations around the world are rushing to
discover new drugs in response to the pressing need to
develop medicines that can treat cancer, because one out of
two people are likely to get cancer, and the population of
elderly people is growing in societies around the world. The
ADLib
®system’s ability to quickly create antibodies for an
array of diseases, including cancer, has garnered
considerable attention around the world.
With the development of a fully humanized ADLib
®system on the horizon, we are steadily advancing toward
Chiome Bioscience’s vision when it was founded of
practically realizing the ultimate in made-to-order drugs
with 100% efficacy for all patients, thanks to the limitless
possibility of the ADLib
®system.
and error for more than 10 years, I heard that a venture
company called Chiome Bioscience was building a
monoclonal antibody fabrication system. When I had an
opportunity to actually use the ADLib
®system, I was
astounded to see it produce a viable sample of functional
antibodies in about 10 days.
Through industry-academic collaboration, I hope
Chiome Bioscience will make interesting new discoveries
in areas that others have not looked into, and lead to the
development of new drugs.
Partner Contract
University of Tokyo, Takahashi Lab Production of antibodies against membrane protein targets as indications of diabetes and cancer. Japanese Foundation for Cancer Research Production of antibodies against antigens with specific expressions, such as for breast cancer.
Shizuoka Cancer Center Production of antibodies against first-in-class targets believed to be indications of several types of cancer in the high unmet needs category.
National Cancer Center In July 2012, began production of antibodies against first-in-class targets believed to be indications of several types of cancer.
2. Alliances with academia, etc.
Chiome Bioscience aims to expand operations through
alliances with academia, which may lead to the acquisition
of target antigens and technological innovations. We
contribute to research by providing antibodies against
specific antigens. If antibodies demonstrate efficacy in
disease-model animals, we jointly file for a patent with the
academic institution and acquire commercialization
rights.
Chiome Bioscience is currently researching the drug
efficacy of anti-SEMA3A antibodies against targets that
cause blood poisoning together with Yokohama City
University. We also engage in joint research with the
University of Tokyo, the Japanese Foundation for Cancer
Research, the Shizuoka Cancer Center and the National
Cancer Center to license out lead antibodies.
analyzing the level of antibody diversification. In 2012,
Chiome Bioscience partnered with Biotecnol of the U.S.
and now uses its Tribody technology to further research
into the production of high-value-added antibody drugs.
Chiome Bioscience’s
groundbreak-ing antibody production technology,
the ADLib
®system, is the outcome
of my basic research into gene
recombination at RIKEN (The Institute
of Physical and Chemical Research).
I was astonished by the power of
the ADLib
®system. Antibodies
that were impossible to produce
with 10 years of effort can now be
obtained in as few as 10 days.
Kunihiro Ohta
Professor,
Graduate School of Arts and Sciences The University of Tokyo
Executive Director (outside) of Chiome Bioscience Inc.
Yoshio Goshima
Professor, Molecular Pharmacology and Neurobiology Graduate School of Medicine Yokohama City University
At a Glance
Drug Discovery Alliance
Lead Antibody Licensing
Licensing Out Platform
Technology
Summary
Chiome
Bioscience
partners
with
pharmaceutical companies and other
institutions to jointly research antibodies for
the development of ethical drugs. Antibody
research is also undertaken on a contract
basis.
Net sales: ¥318,810,000
(down 49.2% year on year)
Gross profit: ¥199,423,000
(down 52% year on year)
Chiome
Bioscience
prepares
novel
antibodies as candidates for therapeutic
drugs and out licenses them at an early
stage to pharmaceutical companies.
Chiome Bioscience licenses the ADLib
®system to pharmaceutical companies,
allowing them to use the ADLib
®system for
their own R&D purposes.
Net sales: ¥5,317,000
(unchanged year on year)
Gross profit: ¥5,290,000
(up 23% year on year)
Strength
This business offers a diverse range
of earnings opportunities as Chiome
Bioscience enters into alliances with
multiple companies.
In addition to supporting clients in drug
discovery, Chiome Bioscience engages in its
own R&D to develop therapeutic antibodies.
By licensing out its proprietary drug
discovery platform technology on a
non-exclusive basis, Chiome Bioscience is able to
generate earnings on the same scale as that
of its alliance agreements.
Developments
New contract entered into with Chugai
Pharmabody Research Pte. Ltd.
Research underway with clients including
Chugai Pharmaceutical Co., Ltd. and
Glaxo Group Limited
Stepping up marketing to sign on new clients
with the full-fledged commercialization of
the ADLib
®system based on a chimeric
antibody library.
Successfully obtained humanized antibody
for the anti-SEMA3A antibody, and confirmed
drug efficacy in immune systems of animal
disease models.
Entered into a contract with the National
Cancer Center, and drug discovery research
was launched.
Extended joint research contracts with
the Takahashi Lab in the University of
Tokyo. Strengthening alliances in discovery
research with the Japanese Foundation for
Cancer Research and the Shizuoka Cancer
Center.
Out-licensed the ADLib
®system to
Fujirebio Inc. for R&D into reagents used
for clinical testing and diagnosis.
Negotiating and conducting technological
evaluation verification testing with several
companies in Japan and overseas.
Earnings Models
Upfront fees are collected as alliances are
formed at the early research stage
Periodical research fees throughout the
contract period in accordance with the
alliance agreement
Upfront fees for the commercial license
of the lead product at the outcome of the
alliance
Milestone payments based on development
outcomes by the licensee
Royalty income is received as a percentage
of sales of the licensee’s antibody drug
Upfront fees are collected as alliances are
formed at the early research stage
Lump-sum fees are received on conclusion
of the development contract depending on
the outcome of the alliance agreement
Milestone payments are received based on
development outcomes by the licensee
Royalty income is received as a percentage
of sales of the licensee’s antibody drug
Upfront fees are collected when licensing
contracts are signed
Technology access fees are received
while the licensee uses the technology
Milestone payments are received based
on development outcomes by the licensee
Royalty income is received as a percentage
of sales of the licensee’s antibody drug
Launch of an international joint project with
Biotecnol, Inc.
In January 2013, Chiome Bioscience entered into a co-development and exclusive option agreement with Biotecnol, Inc. This international joint project has been getting underway for the evaluation, non-clinical trial and clinical development of therapeutic antibodies and will combine Chiome’s ADLib® system and Biotecnol’s Tribody technology to
generate Tribody molecules (multi-specific T-cell engager antibodies) for cancer treatment.
Merit award received for
industry-academia-government collaboration by
the Minister of Education, Culture, Sports, Science and
Technology
Chiome Bioscience received a merit award from the Minister of Education, Culture, Sports, Science and Technology in commendation of its involvement in collaboration among industry, academia and government. Sponsored by the Cabinet Office and various government ministries, this award recognizes the advancements made possible with the ADLib® system in the in vitro generation of a diverse array of
antibodies against antigens over a short time period of about ten days, and the successful preparation of monoclonal antibodies against lipids and evolutionarily conserved proteins that had been difficult to obtain using conventional methods.
Progress building a fully humanized ADLib
®system
In addition to the observation of homologous recombination in antibody light chain and heavy chain genes, Chiome Bioscience has confirmed that gene conversion occurred between pseudogenes and functional genes in the variable domains of both the light chains and heavy chains in the same cell. Chiome Bioscience also confirmed the expression of membrane-bound and secreted human IgG on the same cell. R&D efforts successfully completed the prototype in June 2013.
Generation of high-affinity antibodies
Chiome Bioscience has developed technology that improves the affinity of antibodies obtained through direct ADLib® screening by optimizing
conditions for their acquisition. This technology also eliminates the need for a diversification step during drug processing, thereby considerably shortening the time required to prepare high-affinity antibodies to around three weeks.
Six-Year Financial Summary
Management’s Discussion & Analysis
Thousands of Yen Thousands of U.S. Dollars2008
2009
2010
2011
2012
2013
2013
(For the year ended March 31)
Net sales ¥ 34,207 ¥161,818 ¥380,815 ¥ 463,184 ¥ 633,197 ¥ 324,127 $ 3,446
Selling, general and
administrative expenses − − 420,227 495,570 427,035 617,874 6,569
Including research and
development expenses − − 209,752 245,407 177,981 309,437 3,290
Net loss (277,255) (204,617) (164,400) (180,233) (44,417) (426,890) (4,538)
Cash used in operating
activities ¥ - ¥ - ¥ 4,006 ¥(195,289) ¥ (48,867) ¥ (373,258) $ (3,968)
Cash used in investing
activities - - (264,687) (85,664) (3,813) (114,786) (1,220)
Cash provided by financing
activities - - 269,617 383,420 419,269 463,473 4,927
Net loss per share
(Yen and U.S. dollars) ¥ (119.96) ¥ (78.22) ¥ (62.83) ¥ (63.38) ¥ (12.11) ¥ (101.94) $ (1.08)
Shareholders’ equity per share
(Yen and U.S. dollars) (151.67) (229.89) (281.95) (285.29) 253.04 228.34 2.43
(As of March 31)
Capital stock ¥517,000 ¥517,000 ¥554,500 ¥779,500 ¥1,027,996 ¥1,213,090 $12,898
Shareholders’ equity and
subscription right to shares 617,228 412,611 323,211 592,978 1,045,552 1,037,894 11,035
Total assets 729,279 660,861 865,735 876,017 1,265,866 1,296,734 13,787
Ratio of R&D expenses to
operating revenue (%) - - 55.1 52.9 28.0 95.4 -Equity ratio (%) 84.6 62.4 37.3 67.7 82.6 76.3 -(¥94.05 to U.S. $1) Thousands of Yen 2013 2012 YOY Change% Operating revenue 324,127 633,197 (48.8)
Cost of sales, selling, general and administrative expenses 737,288 640,463 15.1
Research and development expenses 309,437 177,981 73.9
Other 427,850 462,482 (7.5)
Operating loss (413,160) (7,266) -
Ordinary loss (424,813) (42,904)
-Net loss (426,890) (44,417)
-In fiscal 2012, the year ended March 31, 2013; operating revenue declined 48.8% compared with the previous year to ¥324,127 thousand. Despite the extension of its contract research agreement with Chugai Pharmaceutical Co., Ltd. in the first quarter, and the execution of a new agreement with Chugai Pharmabody Research Pte, Ltd. (CPR), a Singapore-based Chugai Pharmaceutical subsidiary, in the Drug Discovery Alliance business, this downturn in operating revenue was largely attributable to the Company’s inability to fully cover delays in securing projects through to the second quarter resulting from the effects of contract amendments
Drug Discovery Alliance
During the fiscal year under review, Chiome Bioscience witnessed positive developments in its research and business undertakings with several licensees. In addition to the joint research contract and extension of its research agreement with Chugai Pharmaceutical Co., Ltd., Chiome Bioscience entered into a new agreement with CPR. At the same time, the Company concluded a joint research agreement with Biotecnol, Inc., a U.S.-based company that has developed the unique Tribody technology, which generates multi-specific antibodies, and continued to develop ties with the U.K.-based GlaxoSmithKline group and several academic institutions. Harnessing the competitive advantage of the Company’s ADLib®
system, which draws on its IgG chimera antibody library, currently entering full-fledged practical application, Chiome Bioscience is engaging in marketing activities that are designed to secure large-scale contracts with several pharmaceutical companies.
Despite each of the aforementioned factors, operating revenue in the Drug Discovery Alliance business declined ¥309,069 thousand compared with the previous year to ¥318,810 thousand. Gross profit in this business fell ¥216,046 thousand year on year to ¥199,423 thousand.
from the third quarter and beyond. While Chiome Bioscience took steps to contain expenses wherever possible, the Company witnessed an upswing in research and development expenditures as it channeled in-house resources toward the development of a fully human ADLib® System. This was consistent with the drop in
external projects. As a result, Chiome Bioscience incurred an operating loss of ¥413,160 thousand, up ¥405,893 thousand year on year. The Company’s ordinary loss climbed ¥405,893 thousand to ¥424,813 thousand and the net loss grew ¥382,472 thousand to ¥426,890 thousand.
Lead Antibody Licensing
Focusing on its ongoing anti-SEMA3A antibody research with Yokohama City University, Chiome Bioscience continues to draw on its R&D results to negotiate with numerous pharmaceutical companies in Japan and overseas. In advancing these negotiations, the Company is working to develop a first-in-class therapeutic antibody. In another major development, Chiome Bioscience partnered with the National Cancer Center to begin joint research into new therapeutic antibodies targeting cancer-specific molecules owned by the Center. The Company has also extended the term of its joint research agreement with a research laboratory led by Dr. Shinichiro Takahashi at the Graduate School of Agriculture and Life Sciences, the University of Tokyo, and entered into an agreement with the Shizuoka Cancer Center to search for therapeutic antibodies. As a part of ongoing efforts to uncover and obtain new therapeutic antibodies, Chiome Bioscience is strengthening its collaborative ties with academic and public research institutes including the Japanese Foundation for Cancer Research.
There was no operating revenue or earnings in this segment for the fiscal year under review.
Results by Business Segment
Operating Revenue
Management’s Discussion & Analysis
Licensing Out Platform Technology
Chiome Bioscience has licensed the ADLib® system to Fujirebio Inc.,
which continues to use the system to conduct research and engage in the development of reagents for application in diagnosis. Negotiations regarding agreements for technological assessment are also under way with several Japanese and overseas
pharma-The current status of Chiome Bioscience’s research and development activities is presented briefly as follows.
Practical application of the IgG Chimera
antibody library
Chiome Bioscience has successfully developed over 80 chimera antibody libraries with improved diversity and quality. Through the Drug Discovery Alliance business and multiple joint research projects with academia aimed at developing proprietary lead antibodies, the Company has successfully applied its chimeric antibody library to obtain antibodies for several antigenic proteins. In this regard, the chimeric antibody library is fast becoming the platform standard for obtaining antibodies.
Building a fully human ADLib
®system
Currently, Chiome Bioscience is introducing human antibody genes into the DT40 cells in order to build a fully human antibody library that is capable of obtaining human antibodies, not avian antibodies. Successful development of a fully human ADLib® system is likely to
have a significant impact on the development of therapeutic antibodies.
The Company had originally set the goal of both antibody and pseudo-gene locus conversion into human genes and the development of a homologous recombination fully human antibody library prototype to be realized by the end of March 2013. In order to bridge the gap between a prototype that offers diversified antibody genes and practical application, Chiome Bioscience recognizes the need for prudent development. Accordingly, the Company has put in place increasingly stringent criteria for the establishment and screening of a prototype pushing back the completion date to the end of June 2013. Chiome Bioscience has finally verified the expression of membrane-bound and secreted-type human antibodies, and gene conversion occured in a single cell by adopting new methods in the introduction of genes in an effort to ensure the definitive practical application of a fully human ADLib® system.
The Company has successfully completed a prototype that is capable of expressing diverse antibodies.
Obtaining functional antibodies
As for the anti-SEMA3A antibody, which is discovered in the collaborative research with Yokohama City University, Chiome
ceutical companies interested in licensing the ADLib® system.
As a result, operating revenue in this segment totaled ¥5,317 thousand, an increase of ¥0 thousand from the previous fiscal year. Gross profit increased ¥991 thousand year on year to ¥5,290 thousand.
Bioscience confirmed the efficacy of both chimeric and humanized antibodies on mouse model-based tests for immunological and infectious diseases, more specifically, lipopolysaccharide (LPS)-induced sepsis model. Moreover, tests clearly indicate the therapeutic efficacy of the anti-SEMA3A antibody to substantially improve the survival rates of patients even as a sole regimen. Chiome Bioscience filed a patent application on February 6, 2013 and continues to engage in full-fledged marketing activities with the aim of out licensing the antibody to pharmaceutical companies in Japan and overseas.
In addition, Chiome Bioscience is making steady progress with its joint research to generate new therapeutic antibodies targeting cancer-specific molecules discovered by the National Cancer Center, the development of new antibodies with a research laboratory led by Dr. Shinichiro Takahashi at the University of Tokyo, new therapeutic antibodies targeting cancer-specific molecules with the Shizuoka Cancer Center, and endeavors with the Japanese Foundation for Cancer Research. By bolstering joint-research with multiple universities and public research organizations, Chiome Bioscience is further reinforcing its ability to obtain new therapeutic antibodies.
Obtaining high affinity antibodies
Chiome Bioscience is engaging in research in an effort to isolate high affinity antibodies from a growing number of cells in the ADLib®
library. To this end, the Company is working to enhance the technological capabilities of its ADLib® system.
In this context, Chiome Bioscience is witnessing steady progress in a variety of activities including the development of methods to enrich high affinity cells, techniques to efficiently isolate antibodies by improving screening methods, and a method to select diversified libraries based on library diversification analysis by next-generation sequencing machine. At the same time, the Company has integrated each of the aforementioned improvements and is establishing a discovery process of high affinity antibodies in the internal antibody discovery projects. As a result, Chiome Bioscience has successfully put in place the general protocols for discovery of high affinity antibodies going forward. Looking ahead, the Company will incorporate these methods into the overall operating processes for developing therapeutic antibodies. This is expected to substantially enhance antibody development efficiency.
Research and Development
Total assets stood at ¥1,296,734 thousand as of March 31, 2013, up ¥30,868 thousand compared with the end of the previous year.
Total liabilities totaled ¥258,840 thousand, a year-on-year increase of ¥38,527 thousand. This was largely attributable to the upswing in loans payable of ¥47,915 thousand mainly reflecting the refinance of long-term loans payable.
Net assets totaled ¥1,037,894 thousand, down ¥7,658 thousand
compared with the previous year-end. Principal movements included the drop in retained earnings of ¥426,890 thousand on the back of the Company’s net loss for the period. In March 2013, Chiome Bioscience issued its seventh series subscription rights. As a result, new share warrants climbed ¥49,044 thousand. Accounting for the exercise of new share warrants, the total of the Company’s common stock and capital reserve increased ¥370,188 thousand.
Financial Position
Cash and cash equivalents as of the end of the period stood at ¥988,535 thousand, down ¥24,550 thousand.
Net cash used in operating activities was ¥373,258 thousand. The principal movements were loss before income taxes of ¥424,813 thousand, depreciation and amortization of ¥55,455 thousand, and changes in accrued consumption taxes of ¥28,701 thousand.
Net cash used in investing activities amounted to ¥114,786 thousand. During the fiscal year under review, the major components were increase in lease deposits and others of ¥71,985 thousand and
purchases of property and equipment of ¥42,801 thousand relating to the relocation of the Company’s head office and research laboratory.
Net cash provided by financing activities came to ¥463,473 thousand. The primary cash inflows were the increase in issuance of shares of common stock in connection with the Company’s Seventh Series of Share Warrants and the exercise of warrants totaling ¥415,558 thousand as well as the increase in long-term loans payable of ¥150,000 thousand representing the refinancing of loans payable.
Cash Flows
Chiome Bioscience engages in substantial anticipatory investment, which is recorded largely as research and development expenditure. This is essential in securing ongoing breakthroughs in its R&D activities. To date, the Company has reported successive operating losses and accordingly is required to procure the necessary financing to fund its working capital and business activity needs, research and development expenditure, and capital investment. In order to address this requirement, Chiome Bioscience undertook a third-party allotment of its shares on March 4, 2013. As a result, the
Company issued 426,000 share of common stock in the form of stock warrants to Milestone Capital Management, LLC. A portion of these share warrants has already been exercised with a total of ¥261,560 thousand raised as of March 31, 2013.
All share warrants were exercised as of May 1, 2013 with the total amount of funds procured reaching ¥3,776,598 thousand. This has in turn had a dilutive effect of 10.01% on the total amount of the Company’ issued and outstanding shares as of February 15, 2013.
Funds Procurement
Chiome Bioscience has continued to incur net losses since its establishment. The Company is yet to pay a cash dividend. Recognizing the need to engage in research and development into the future, Chiome Bioscience will continue to place priority in securing the necessary funds. As a result, the Company does not expect to pay a cash dividend for the foreseeable future.
Despite these current conditions, management has positioned the return of profits to shareholders as a key task and commitment. Looking ahead, Chiome Bioscience will then work steadfastly toward the payment of cash dividends and return of profits to shareholders while taking into consideration its financial position and operating results.
Corporate Information
(As of June 27, 2013)Stock Information
(As of March 31, 2013)Name:
Chiome Bioscience Inc.
Total authorized shares:
16,536,000
Total outstanding shares:
4,330,600
Number of shareholders:
6,147
Stock listing:
Tokyo Stock Exchange, Mothers (Market of high-growth and emerging stocks)
Securities code:
4583
Share registrar:
Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo, 100-0005
Annual shareholders’ meeting:
June
Mailing address and
Sumitomo Mitsui Trust Bank, Limited
telephone number:
2-8-4, Izumi, Suginami-ku, Tokyo, 168-0063
The toll-free service of the transfer agent (Japan only)
(0120-782-031)
For Further Information:
Investor Relations Section
E-mail: ir@chiome.co.jp
Upgrading IR website contents
Stock price / Turnover of common stock
To provide disclosure of a
broad range of information
about the Company that is
useful to all stakeholders,
we are working to upgrade
and expand the contents of
our website.
http://www.chiome.co.jp/english/ir/
Major shareholders:
Masa Fujiwara
272,600
6.29
Kunihiro Ohta
240,000
5.54
Keiichi Sasaki
189,000
4.36
Masahiro Amazutsumi
131,000
3.02
Fast Track Initiative, Inc.
125,000
2.88
Matsui Securities Co., Ltd.
123,400
2.84
Hidetaka Seo
122,600
2.83
FUJIREBIO INC.
100,000
2.30
Rakuten Securities, Inc.
84,200
1.94
Naoto Nakamura
79,700
1.84
Business:
Research and development
centered on the ADLib
®system, our proprietary
drug discovery platform
technology.
Board of directors:
Chief Executive Officer
Masa Fujiwara, M. Agr., D.V.M.
Executive Directors
Keiichi Kiyota, M.B.A.
(Executive Director of Business Administration)
Shigeru Kobayashi, M.E.
(Executive Director of Business Development)
Executive Directors (*)
Kunihiro Ohta, Ph.D.
Tsutomu Kawaguchi, Ph.D.
Audit & Supervisory Board
Yasuhiro Tsuji, Ph.D.
Members (*)
Masashi Iwaki
Noriko Sawai, Attorney at Law
Yoshiaki Asahi
(*) outsideAddress:
Headquarters, Research Laboratories
Sumitomo Fudosan Nishi-shinjuku Bldg. No.6, 3-12-1
Honmachi, Shibuya-ku, Tokyo 151-0071 Japan
TEL: +81-3-6383-3561 (reception)
Date of establishment:
February 8, 2005
Capital:
2,971 million yen (As of June 14, 2013)
Number of employees:
31 (As of March 31, 2013)
History:
Shortly after its founding in February 2005, Chiome Bioscience Inc. concluded a
collaboration agreement with RIKEN (The Institute of Physical and Chemical Research)
to commercialize its leading technology, the ADLib
®system. After launching research
activities, Chiome Bioscience Inc. concluded a collaboration agreement with Chugai
Pharmaceutical Co., Ltd., which led to new business projects, including research support
services for antibody drugs based on the ADLib
®system.
03,000,000 2011/12 2012/1 2013/6 6,000,000 9,000,000 12,000,000 15,000,000 0 2,000 4,000 6,000 8,000 10,000 (¥) (Shares)
Chiome Bioscience Stock Turnover Chiome Bioscience Stock Price
( splits: 1 2)
