Consolidated Financial Results for the Nine Month Period Ended September 30, 2021 (IFRS)

Consolidated Financial Results for the Nine Month Period Ended September 30, 2021 (IFRS)

			November 11, 2021
Company name:	Sosei Group Corporation		Listing: Tokyo Stock Exchange
Security code:	4565	URL: https://www.soseiheptares.com/
Representative:	Shinichi Tamura
Representative Executive Officer, CEO
Contact person:	Chris Cargill		Tel: [phone]
Executive Officer, CFO
Scheduled date of Quarterly Securities	November	Scheduled date of dividend	－
Report filing		11, 2021	payments:
Supplementary materials for financial	No
results:
	No
Financial results briefing session:

(Rounded million yen)

1．Consolidated Results for the 9 month period ended September 30, 2021 (from January 1, 2021 to September 30, 2021)

1. Consolidated Operating Results (cumulative) (Percentages are shown as year-on-year changes)

Net profit

Total

Net profit before

attributable to

Revenue

Operating income

Net profit

comprehensive

income taxes

owners of the

income

parent company

Million

％

Million

％

Million

％

Million

％

Million

％

Million

％

9 month period ended

yen

yen

yen

yen

yen

yen

3,590

(19.2)

(4,225)

－

(4,152)

－

(1,825)

－

(1,825)

－

2,094

－

September 30, 2021

9 month period ended

4,443

(42.8)

(1,217)

－

(1,478)

－

(1,642)

－

(1,642)

－

(3,319)

－

September 30, 2020

Earnings per share - basic

Earnings per share - diluted

Yen

Yen

9 month period ended

(22.50)

(22.50)

September 30, 2021

9 month period ended

(21.03)

(21.03)

September 30, 2020

1. ConsolidatedFinancial Position

			Equity attributable to owners of	Ratio of equity attributable to
	Total assets	Total equity	owners of the parent company to
			the parent company	total assets
	Million yen	Million yen	Million yen	%
At September 30, 2021	88,956	53,773	53,773	60.4
At December 31, 2020	76,465	52,381	52,381	68.5

2. Dividends

			Dividends per share
	End Q1	End Q2	End Q3	End Q4	Total
	Yen	Yen	Yen	Yen	Yen
FY2020	-	0.00	-	0.00		0.00
FY2021	-	0.00	-
FY2021 (E)				0.00		0.00

(Note) There is no change in the dividend forecast from the previous disclosure.

3. Forecast for the year from January 1, 2021 to December 31, 2021

We continue to focus on expanding our drug discovery business and remain well positioned to capitalize on growth opportunities. Our SBDD platform and highly productive drug discovery engine has generated multiple new exciting drug candidates, and we will continue to take steps to increase partnered and co-investment activity to ensure all programs are rapidly advanced in a

capital efficient manner. At the same time, we will invest in new technologies, tools and capabilities to maintain our competitive edge and bring forward an exciting pipeline of next- generation programs in areas of high unmet medical need.

The Group expects 2021 to be a year of increased investment in R&D and in strategic growth initiatives, including taking steps to secure an acquisition of a revenue-generating business to support our medium-term plan for corporate expansion. The Group is making increased R&D investments this year in the preclinical and clinical advancement of its portfolio of lead muscarinic agonist compounds for schizophrenia and other neurological disorders, following their reversion to in-house programs from AbbVie in January 2021. The Group's current intention is to partner the portfolio of muscarinic agonist programs in the near term, which if successful, will have the impact of shifting the clinical trial costs and risks associated with these neurology programs to a well-capitalized global partner. The Group expects any partner to be able to accelerate late-stage development of these programs and support the Group's vision to bring these novel medicines to patients sooner. Furthermore, the Group is in advanced discussions with a leading global charitable foundation to secure grant funding to advance the SARS-CoV-2 Mpro inhibitor program

• targeting rapid development of a single agent without the need for co-dosing with other anti- viral therapies.

In line with recent years, our strategy remains the same, and in our underlying drug discovery business we will continue to target a sustainable balance of resources and capital in the pursuit of growth in corporate value:

• Forecast cash R&D expenses in the underlying drug discovery business in the range of JPY 5,000 to JPY 5,750 million1 (increased from previously guided range of JPY 4,000 to 5,000).
  o The change to the guided range reflects increased investment in high-valuein-house programs and the acceleration of development associated with the regained muscarinic agonist programs.
• Forecast cash G&A expenses in the underlying drug discovery business in the range of JPY 1,800 to JPY 2,300 million2 (unchanged).
• We expect to receive upfront payments related to new partnerships.
• We expect to receive milestone payments from existing drug discovery and development partnerships.
• We will continue to invest in technologies, tools and capabilities that complement and future- proof our drug discovery platform, as well as advance next-generation candidates; all while strongly managing our cost base.
• We will continue to explore a potentially transformative acquisition to secure long-term revenue growth.
• We will expand our drug candidate discovery and early development capabilities into new target classes.
• We will continue to explore late-stage clinical assets to in-license and develop for the Japanese

market.

The Group has a strong cash runway into 2024 to fund its drug discovery and early-stage development activities.

• The assumed FX rate of USD:JPY 106
  2 The assumed FX rate of USD:JPY 106

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* Notes

1. Changes in the number of significant subsidiaries for the nine-month period ended September 30, 2021 (changes of specified subsidiaries affecting the scope of consolidation): None
2. Changes in accounting policies, changes in accounting estimates

1. Changes in accounting policies required by IFRS: None
2. Changes due to changes in accounting policies other than those of item 1: None
3. Changes in accounting estimates: None

1. Number of common shares issued

1. Number of shares issued at period end (including treasury shares)
2. Number of treasury shares at period end
3. Average number of shares in issue in period

At September 30,	2021	81,518,316	shares	At December 31, 2020	80,596,128	shares
At September 30, 2021	213	shares	At December 31, 2020	213	shares
9 month period ended	81,075,836	shares	9 month period ended	78,116,362	shares
September 30,	2021			September 30, 2020

• Quarterly consolidated financial results reports are not subject to audit.
• Explanation regarding the appropriate use of forecasts of business results and other points to be noted Note concerning forward-looking statements: The financial forecast is based on judgements and estimates that have been prepared on the basis of information available as of the time of disclosure of this material. The actual business results may differ materially from the forecasts due to various factors.

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• Contents of Attached Materials

1. Analysis of Operating Results and Financial Position	5
1)	Analysis of operating results	5
2)	Analysis of financial position	13
3)	Earnings forecast	14
2. Consolidated Financial Statements and Primary Notes (IFRS)	15
1)	Interim Condensed Consolidated Balance Sheet	15
2) Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income	16
3)	Interim Condensed Consolidated Statement of Changes in Equity	17
4) Interim Condensed Consolidated Statement of Cash Flows	18
5)	Notes to Interim Condensed Consolidated Financial Statements	19

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1. Analysis of Operating Results and Financial Position

1. Analysis of operating results

The Group is a science and technology-led company, specializing in drug discovery and early-stage drug development. Our mission is to make a significant contribution to improving the quality of life and health of people around the world. Our vision is to become one of Japan's global biotechnology and drug discovery champions.

During the nine months ended September 30, 2021, the Group continued to advance its drug discovery and early-stage development pipeline, as well as enhance its proprietary StaR® ("stabilized receptor") and aligned technologies, and Structure-based Drug Design ("SBDD") platform.

Our business model is focused across three core areas to create value; (i) supporting our existing partnerships with major global pharmaceutical companies, (ii) advancing R&D with innovative technology companies and venture funds, and (iii) signing new high-value partnerships based on successful in-house drug discovery and early-stage development of new candidates.

As of September 30, 2021, the Group had over 20 programs in total ongoing in discovery, with multiple in-house and partnered programs currently in preclinical/clinical trials3,4.

Due to the Group's renewed focus on small molecules and therapeutic antibodies, peptide discovery programs, which include HTL0030310 (an SSTR agonist), GLP-1 antagonist and Dual GLP- 2/GLP-1 agonist, have been set aside for academic or industrial partnerships and will not be progressed any further by the Group in-house on a fully funded basis.

Supporting new and existing partnerships with major global pharmaceutical companies

The Group continued to make good progress with its partners and retained COVID-19 safety measures to ensure R&D continuity and productivity, regardless of the relaxing of Government guidelines in the U.K. in July 2021. All research and development activity continues to move forward productively.

Pfizer partnership

On May 19, 2021, the Group announced it had been notified by Pfizer that the first subject in a clinical trial had been dosed with PF-07258669, a new drug candidate nominated from the multi- target drug discovery collaboration between the two companies. Achievement of this milestone triggered a payment of US$5 million to Sosei Heptares. PF-07258669 was nominated for advancement by Pfizer in December 2019 generating a US$3 million milestone payment at that time. Pfizer nominated three distinct clinical candidates from the collaboration with the Group during 2019, all of which are now progressing in Phase 1 clinical trials. These candidates have also now been disclosed by Pfizer as:

• PF-07081532(an oral GLP1 receptor agonist for Type 2 Diabetes Mellitus and Obesity)
• PF-07054894(a CCR6 antagonist targeting Inflammatory Bowel Disease) and

• Includes Imaradenant (AZD4635) for multiple solid malignancies, HTL0016878 for neurological diseases, HTL0018318 for neurological diseases (voluntarily suspended), HTL009936 for neurological diseases, PF-07081532 for T2DM/Obesity, PF-07054894 for Inflammatory Bowel Disease, PF- 07258669 for Anorexia, BHV3100 for neurological diseases, TMP301 for neurological disorders, and HTL0030310 for endocrine disorders.
  4 Phase 2 trial of HTL0018318 for DLB in Japan remains under voluntary suspension and has been withdrawn. The Group may resubmit a new clinical trial notification for HTL0018318 (or another novel M1 agonist) to the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) in the future, pending the outcome of an ongoing analysis and studies into toxicology findings.

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