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Message from Our CEO

Today, on October 31, 2017, we have announced the results for the first nine months of fiscal year 2017 and a capital and business alliance with Shionogi & Co., Ltd (hereinafter referred to as “Shionogi”). Regarding the details of financial results, we hope that you can see the financial report disclosure.

During the sudden change in the business environment since January 2017, We have been pursuing next-generation biopharmaceutical in-house development business and contract manufacturing business of biopharmaceuticals, etc., utilizing R & D and manufacturing facilities of Yokohama Laboratory, Akita Laboratory and Akita Plant, based on the new business policy “Regarding future business policies: Transformation of business models from large scale production to specialized in review stages of CMC development and industrialization” disclosed on February 14, 2017, and the new medium-term management plan disclosed on February 22, 2017.

In terms of “Next Generation Biopharmaceuticals In-house Development Project”, in addition to individual existing and new in-house developed pipelines, we had been consulting with a number of operating companies that have synergistic effects in business strategy for our business, facilities, technology and know-how. This time, we have decided to conclude a capital and business alliance agreement with Shionogi. As a result of this capital and business alliance, we have acquired a business partner consistent with business strategies that can jointly promote business and to secure necessary R & D funds, especially in pursuing next-generation biopharmaceutical in-house development projects. It is first step towards realizing our business objective and improving our corporate value. We believe that we will be able to improve our company's medium- and long-term corporate value and to meet the expectations of our shareholders, as a result of making this alliance successful furthermore.

Regarding business partnership, Shionogi has strengths in the field of infectious diseases and drug discovery of small and medium molecules, and has been promoting strengthening the platform of new drug discovery. Shionogi also has been considering entering to vaccine business in the domain of infectious diseases and strengthening the pipeline as well. This time, Shionogi got interested in our various knowledge, know-how, and technology concerning infectious disease prevention vaccine, especially followings.

  1. External personnel network which consists of key opinion leaders of domestic research institutes etc.
  2. Recombinant protein antigen and vaccine design construction which is combined adjuvant formulation of pharmaceuticals and drug delivery technology.
  3. Design for clinical study trials
  4. Various data on approval application handling business regarding R & D
  5. Experience and know-how for CMC development and GMP production of influenza vaccine drug substance

As the first phase, the companies will jointly conduct maintenance of basic technology related to core drug discovery in promoting the development of a logical vaccine based on antigens, adjuvants and drug delivery technology that we have been proceeding in our “Next Generation Biopharmaceuticals In-house Development Project”, and the companies will conduct basic research by adding a new pipeline to each of several pipelines of our “Next Generation Biopharmaceuticals In-house Development Project”. In the second phase, based on the results of basic research, from the stage when it is judged that certain results are obtained in the maintenance of basic technology related to drug discovery, the companies will select joint development candidate products, and will promote research, development, application, and launching of each development candidates, using technology established through the development of basic technology.

In promoting business partnership, it is essential to solve financial problems and to secure research and development funds. Through this capital alliance with Shionogi, we will secure necessary research and development funds during the assumed period as the first Phase by issuing new shares and convertible bond type stock acquisition rights to Shionogi, as third-party allocation.

From now on, we will concentrate management resources on consultation with Shionogi and have to make the alliance successful. Since January this year, we had been trying to develop our business with limited resources; however, we will expand necessary R&D personnel and manufacturing facilities, and will achieve results, in order to achieve steady results in the first phase.

On the other hand, in terms of UMN-2002 (recombinant norovirus VLP single vaccine, hereinafter referred to as “UMN-2002”), the joint research agreement with Daiichi Sankyo Company, Limited. has been terminated. Thanks to the joint research agreement with National Institute of Biomedical Innovation, Health and Nutrition (hereinafter referred to as “NIBIOHN”), as announced on June 26, 2017, we have acquired new adjuvant technology and formulation, and will be able to accumulate the development know-how of logical vaccine. From the above, we are expecting to be able to contribute to the alliance with Shionogi. In addition, since some projects which have possibility of shift to in-house development have been also growing up among contracted projects, we are also expecting that they will be development candidates under the alliance with Shionogi. Including the candidates described, we are reviewing our current pipelines and adding new pipeline and stopping existing pipelines as well. UMN-0501, UMN-0501, and UMN-0901 licensed by Protein Sciences Corporation have been also reviewed including whether to continue license itself.

In terms of progress of contract manufacturing business such as biopharmaceuticals in the third quarter, although acquiring orders were delayed in the first quarter due to the timing of clients’ budget, we have steadily received orders since the second quarter. We have completely achieved to require 4 orders against 4 targets in current fiscal year at the moment. On the other hand, as for new projects, we have not obtained the progress yet, although we have already submitted two quotations in the first quarter, against 3 targets in current fiscal year at the moment. In the future, regarding contract manufacturing business such as biopharmaceuticals, we will receive mainly orders that contribute to the alliance with Shionogi.

On the financial aspect, at the general shareholders meeting on March 30, 2017, we had an approval for a resolution on the reduction of capital and capital reserve and disposal of retained earnings. Capital and capital reserve after capital reduction is 217 million yen respectively. Also, since a net loss of 95 million yen has recorded in the third quarter, net assets has totaled 276 million yen, which has declined by 95 million yen comparing to the end of the second quarter. We believe that net assets will surely maintain positive, avoiding excessive debt at the end of this fiscal year by issuance of third-party allocation of new shares through business alliance with Shionogi this time and receiving compensation for providing Shionogi with our unique technical information etc.

We apologize again for causing inconveniences to shareholders and stakeholders, since we were not able to establish business, as a pillar of our business, although we had been preceding until January 2017, regarding both domestic supply and US export of Flublok drug substance. This time, with Shionogi as a business partner, we have an opportunity to improve the development the next generation biopharmaceuticals including infectious disease prevention vaccine, and will strive to make confidence restore. Regarding the medium-term management plan, taking account of alliances, we would like to announce it on our disclosure according to the end of fiscal year 2017.

We appreciate your continued support and understanding in the future.

*CMC:  Chemistry, Manufacturing and Control

October 31, 2017
Tatsuyoshi Hirano
Chairman and CEO

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