Sosei : Consolidated Financial Results for the FY2021 (IFRS)

Consolidated Financial Results for the FY2021 (IFRS)

																			February 10, 2022
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:	Christopher Cargill													Tel: [phone]
Executive Officer, CFO
Scheduled date of annual general meeting	March 24, 2022		Scheduled date of dividend payments:	-
Scheduled date of security report filing			March 24, 2022
Supplementary materials for financial results:	Yes
Financial results briefing session:					Yes
1. Consolidated results for the year ended December 31, 2021									(Rounded million yen)
(1) Consolidated operating results								(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 yen	%		Million yen	%		Million yen	%	Million yen	%	Million yen	%	Million yen	%
Year ended	17,712		100.3		3,775	306.8			433	(73.3)		475		(67.9)	475	(67.9)	5,081	668.7
December 31, 2021
Year ended		8,842		(9.1)		928	141.7			1,622	203.7	1,479		3.3	1,479	3.3	661	(72.1)
December 31, 2020
		Earnings per share -		Earnings per share -	Ratio of net income to				Ratio of net income		Ratio of operating
			equity attributable to		before income taxes to
				basic					diluted		income to revenue
								owners of the parent					total assets
				Yen					Yen			%					%			%
Year ended				5.86					5.80			0.9					0.5			21.3
December 31, 2021
Year ended				18.77					18.59			3.0					2.4			10.5
December 31, 2020

(Note) Share of gain (loss) of associates accounted for under equity method: 50 million yen for the year ended December 31, 2021; and (356) million yen for the year ended December 31, 2020.

(2) Consolidated financial position

			Equity attributable to	Ratio of equity	Equity per share-
			attributable to owners
	Total assets	Total equity	owners	attributable to owners
	of the parent company
			of the parent	of the parent
			to total assets
	Million yen	Million yen	Million yen	%	Yen
At December 31, 2021	96,985	56,926	56,926	58.7	698.32
At December 31, 2020	76,465	52,381	52,381	68.5	649.92

(3) Consolidated cash flows

	Cash flows from operating	Cash flows from investing	Cash flows from financing	Cash and cash equivalents
	activities	activities	activities	at the end of the year
	Million yen	Million yen	Million yen	Million yen
Year ended	7,095	278	11,123	60,087
December 31, 2021
Year ended	4,672	(150)	20,278	40,008
December 31, 2020

2. Dividends

Dividends per share

Ratio of dividend to

Total amount

Dividend payout

equity attributable to

End Q1

End Q2

End Q3

End Q4

Total

of dividends

ratio (consolidated)

owners of the parent

company (consolidated)

Yen

Yen

Yen

Yen

Yen

Million yen

%

%

FY2020

ʷ

0.00

ʷ

0.00

0.00

ʷ

ʷ

ʷ

FY2021

ʷ

0.00

ʷ

0.00

0.00

ʷ

ʷ

ʷ

FY2022 (E)

ʷ

0.00

ʷ

0.00

0.00

ʷ

－ 1 －

3. Forecast for the twelve month period from January 1, 2022 to December 31, 2022

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 for in-house progression into early clinical development, and we will continue to take steps to maintain partnered and co-investment activity to ensure programs are 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 2022 to be a year of continued incremental investment in strategic growth initiatives, including seeking an acquisition of a revenue-generating business to support our medium-term plan for corporate expansion. Like that of 2021, 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 R&D expenses in the underlying drug discovery business in the range of JPY 5,750 to JPY 6,750 million1 (2021 actual: JPY 5,931 million).
• Forecast G&A expenses in the underlying drug discovery business in the range of JPY 3,750 to JPY 4,250 million2 (2021 actual: JPY 3,940 million).
• 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 seek out 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 seek out 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.

* Notes

1. Changes in the number of significant subsidiaries in the twelve months ended December 31, 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

• Previous Guidance was calculated on a cash cost basis. Guidance for 2022 and beyond will be calculated on a financial statements disclosure basis which includes non-cash costs such as depreciation, amortization and share based payments. The assumed USD:JPY FX rate in 2022 is 109.
  2 The Previous Guidance was calculated on a cash cost basis. Guidance for 2022 and beyond will be calculated on a financial statements disclosure basis which includes non- cash costs such as depreciation, amortization and share based payments. The assumed USD:JPY FX rate in 2022 is 109.
• • 2 －

(3) Number of common shares issued

1) Number of shares issued at period end	At December 31, 2021	81,518,316	shares	At December 31, 2020	80,596,128	shares
(including treasury shares)
2) Number of treasury shares at period	At December 31, 2021	213	shares	At December 31, 2020	213	shares
end
3) Average number of shares in issue in	Year ended	81,187,311	shares	Year ended	78,737,535	shares
the period	December 31, 2021	December 31, 2020

• The Tanshin, including the consolidated financial statements presented within it, is not subject to audit.
• Explanation regarding the appropriate use of our forecast and other points to be noted

(Note concerning forward-looking statements)

The financial forecast is based on judgments and estimates that have been prepared on the basis of information available as at the time of disclosure of this material. The actual business results may differ materially from the forecasts due to various factors.

The Company is scheduled to hold a webinar presentation for all existing and potential investors as well as sell-/buy-side analysts which will consist of a presentation followed by a Q&A session on February 10, 2022.

Presentation slides will be made available through the investor section of the Company's Home Page.

－ 3 －

○ Contents of Attached Materials
1. Analysis of Operating Results and Financial Position	5
1)	Analysis of operating results	5
2)	Analysis of financial position	15
3)	Analysis of cash flows	15
4)	Forecast Guidance	16
2. Basic policy on selection of accounting standards	16
3. Consolidated financial statements and primary notes (IFRS)	17
1)	Consolidated statement of financial position	17
2) Consolidated statement of comprehensive income	18
3)	Consolidated statement of changes in equity	19
4)	Consolidated statement of cash flow	20
5)	Notes to the consolidated financial statements	21
	5.1 Notes related to going concern assumptions	21
	5.2 Change in accounting policy	21
	5.3 Operating segments	21
	5.4 Earnings per share	22

－ 4 －

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 year ended December 31, 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 clinical development of our candidates.

As of December 31, 2021, the Group had over 20 programs in total ongoing in discovery, with multiple in-house and partnered programs currently in preclinical/clinical studies3,4.

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.

Regaining of worldwide rights to muscarinic agonist programs

On January 5, 2021, the Group announced it regained the worldwide rights to its muscarinic agonist programs including all assets in development under the program, together with all associated intellectual property licensed by the Group to Allergan, and all clinical and preclinical data generated under the partnership. The program was licensed to Allergan in April 2016, and Allergan was acquired by AbbVie in May 2020. This decision to return worldwide rights was based on business decisions regarding AbbVie's pipeline strategy and not on any efficacy, safety or other data related to the collaboration programs. The muscarinic program was re-partnered with Neurocrine Biosciences in November 2021 (see later comment).

• Clinical trials: HTL0016878 for neurological diseases, PF-07081532 for T2DM/Obesity, PF-07054894 for Inflammatory Bowel Disease, PF-07258669 for Anorexia, and TMP301 for neurological disorders; BHV3100 for neurological diseases; Preclinical trials: M1 agonist for neurological diseases, M1/M4 dual agonist for neurological diseases, GPR35 agonist for Inflammatory Bowel Disease, KY1051 for immuno-oncology, GPR52 agonist for neurological diseases, EP4 antagonist for immuno-oncology, EP4 agonist for Inflammatory Bowel Disease, and H4 antagonist for atopic dermatitis.
  4 Due to the Group's policy to focus resources on programs with greater potential, HTL0018318 for neurological diseases (voluntarily suspended), HTL009936 for neurological diseases, and HTL0030310 for endocrine disorders will not be prioritized for development at this time. In addition, imaradenant (AZD4635) for multiple solid malignancies was removed by AstraZeneca from its clinical development pipeline in the third quarter 2021.
• • 5 －