Sosei : Consolidated Financial Results for the Three Months Ended March 31, 2021 (IFRS)

Consolidated Financial Results for the Three Months Ended March 31, 2021 (IFRS)

			May 12, 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]
COO and CFO
Scheduled date of Quarterly Securities	May 12, 2021	Scheduled date of dividend	－
Report filing		payments:
Supplementary materials for financial	No
results:
	No
Financial results briefing session:

(Rounded million yen)

1．Consolidated Results for 3 month period ended March 31, 2021 (from January 1, 2021 to March 31, 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

％

yen

yen

yen

yen

yen

yen

3 month period ended

1,207

3.9

(1,238)

－

(1,054)

－

(1,153)

－

(1,153)

－

(2,228)

－

March 31, 2021

3 month period ended

1,162

(62.9)

(445)

－

(500)

－

(746)

－

(746)

－

(3,019)

－

March 31, 2020

Earnings per share - basic

Earnings per share - diluted

3 month period ended

Yen

Yen

(14.28)

(14.28)

March 31, 2021

3 month period ended

(9.69)

(9.69)

March 31, 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 March 31, 2021	79,373	55,017	55,017	69.3
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	-
FY2021 (E)		0.00	-	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 strategic growth initiatives, including seeking an acquisition of a revenue-generating business to support our medium-term plan for corporate expansion. Like that of 2020, 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 4,000 to JPY 5,000 million1 (unchanged).
• 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 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 2023 to fund its drug discovery and early-stage development activities.

* Notes

1. Changes in the number of significant subsidiaries for the three-month period ended March 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

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 March 31, 2021	80,830,128	shares	At December 31, 2020	80,596,128	shares
At March 31, 2021	213	shares	At December 31, 2020	213	shares
3 month period ended	80,721,439	shares	3 month period ended	77,106,576	shares
March 31, 2021			March 31, 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.

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

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• Contents of Attached Materials

1. Analysis of Operating Results and Financial Position	4
1)	Analysis of operating results	4
2)	Analysis of financial position	10
3)	Earnings forecast	11
2. Consolidated Financial Statements and Primary Notes (IFRS)	12
1)	Interim Condensed Consolidated Balance Sheet	12
2) Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income	13
3)	Interim Condensed Consolidated Statement of Changes in Equity	14
4) Interim Condensed Consolidated Statement of Cash Flows	15
5)	Notes of Interim Condensed Consolidated Financial Statements	16

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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 three months ended March 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 development of new candidates.

As of March 31, 2021, the Group had over 20 programs in total ongoing in discovery, with 13 in preclinical development, and multiple in-house and partnered programs currently in clinical trials3,4.

Supporting new and existing partnerships with major global pharmaceutical companies

The Group continued to make good progress with its partners and has implemented measures to ensure R&D continuity and productivity under the new conditions imposed as a result of the COVID-19 situation. This is most notable with Takeda and Genentech, where our work on these respective research and development collaborations has been prioritized and continues to move forward productively.

Our other out-licensed programs are being advanced exclusively by our partners, such as with AstraZeneca, Pfizer, and AbbVie, whilst progress is ongoing, some delays have been experienced as a result of the global COVID-19 situation.

Advancing R&D through co-investments with innovative technology and venture funds

The Group continued to make significant progress with its technology and venture partners.

On January 12, 2021, the Group and PharmEnable, a UK drug discovery company, announced they had entered a collaboration to apply their respective technologies to drive novel drug discovery against a challenging G protein-coupled receptor ("GPCR") target associated with neurological diseases. The collaboration will combine the Group's world-leadingGPCR-focused SBDD platform, which has fully structurally enabled the GPCR target, providing detailed structural insights and an assessment of tractability, with PharmEnable's proprietary advanced artificial intelligence (AI)- enabled and medicinal chemistry technologies (ChemUniverse and ChemSeek) to identify novel, highly specific drug leads for further development. PharmEnable's approach identifies three- dimensional (3D) drug candidate hits with improved specificity compared with traditional

• Includes 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, 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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screening methods and allows the company to take on particularly challenging biological targets, such as "peptidergic" GPCRs, which have proved difficult to drug using existing approaches. The natural agonist ligand of a peptidergic GPCR is a large, complex peptide and is often very difficult to block with a small molecule, particularly one that has properties suitable for development as a therapeutic agent for neurological disease. Under the agreement, the companies will jointly conduct and share the costs of the discovery and development program and will co-own any resulting products.

On February 1, 2021, the Group and Metrion Biosciences, a specialist UK-based ion channel CRO and drug discovery company, announced they had entered into a strategic technology collaboration where for the first time the Group will apply its world-leading SBDD expertise and platform to ion channels. The collaboration aims to demonstrate the potential of the Group's SBDD technologies to address disease-associated ion channels and work towards establishing a leadership position in this area, in a similar way that it has done for GPCRs. As a first step, the Group and Metrion will combine their respective capabilities in a drug discovery program to identify novel, highly specific drug leads for further development against a single ion channel associated with neurological diseases. Metrion will contribute intellectual property, know-how and use of screening models for the nominated ion channel target. The Group will have exclusive, full global rights to all molecules identified and directed to the targets for development.

On February 16, 2021, the Group noted the announcement from Centessa Pharmaceuticals ("Centessa") about its launch as a novel asset-centric pharmaceutical company designed and built to advance a portfolio of highly validated programs. In conjunction with its launch, Centessa completed the merger of 10 private biotech companies ("Centessa Subsidiaries") that would each continue to develop its assets with oversight from the Centessa management team. Centessa was founded by specialist life science venture capital firm Medicxi and raised $250 million in an oversubscribed Series A financing from a group of blue-chip investors. Centessa's asset-centric R&D model applied at scale has assembled best-in-class or first-in-class assets, each of which is led by specialized teams committed to accelerate development and reshape the traditional drug development process. With its unique operational framework, Centessa aims to reduce some of the key R&D inefficiencies that classical pharmaceutical companies face because of structural constraints. Each Centessa Subsidiary team is asset-focused, in that it prosecutes a single program or biological pathway, with leadership provided by subject matter experts who are given a high degree of autonomy to advance each program. With a singular focus on advancing exceptional science, combined with proprietary capabilities, including structure-based drug discovery and design, the subsidiary teams enable Centessa to potentially develop and deliver impactful medicines to patients. Orexia Therapeutics ("Orexia"), a new entity comprising Orexia Limited and Inexia Limited, which were created in February 2019 by the Group and Medicxi, was merged into Centessa. Orexia is developing oral and intranasal orexin receptor agonists using structure-based drug design approaches. These agonists target the treatment of narcolepsy type 1, where they have the potential to directly address the underlying pathology of orexin neuron loss, as well as other neurological disorders characterized by excessive daytime sleepiness. The Group continues to provide research services to Orexia and its equity holding in Orexia was converted into a proportional shareholding in Centessa.

Investing in our in-house discovery and early development programs to generate new candidates for partnering

The Group continued to make significant investments in its pipeline, as it advanced multiple discovery candidates and early development programs. The Group's ongoing in-house Phase I

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