Healios Kk · TSE:4593

Healios Kk — FY2015 3Q Earnings Presentation

56 slides from Healios Kk's earnings presentation, March 2016

1. Slide 1: FY2015 3Q Financial Results

   FY2015 3Q Financial Results 0 Copyright © HEALIOS K.K. All rights reserved.

2. Slide 2: Overall Highlight

   Overall Highlight Development of iPSC regenerative medicine (Age-related macular degeneration) Expansion to 3D organ Future business direction (Liver) 1 Copyright © HEALIOS K.K. All rights reserved.

3. Slide 3: Contents

   Contents 1 Company Overview P3 2 Business Outline P10 3 Future Business Directions P36 4 Expansion to 3D Organ (Liver) P39 5 Financial Highlights P50 2 Copyright © HEALIOS K.K. All rights reserved.

4. Slide 4: 1. Company Overview

   1. Company Overview 3

5. Slide 5: Company Roots: About Us

   Company Roots About Us Company Name HEALIOS K.K. World Trade Center Building 15F Head Office 2-4-1 Hamamatsucho Minato-ku, Tokyo Japan 105-6115 Kobe KIMEC Center Building 9F Kobe Research 1-5-2 Minatojima-minamimachi Chuo-ku, Kobe Institution Hyogo Japan 650-0047 Number of Employees 42 (As of end of

6. Slide 6: Company Roots

   Company Roots How it was founded  Started business to establish treatments for age-related macular degeneration and determined to build up a pharmaceutical company which can provide treatments for intractable diseases.  Founded Aqumen Biopharmaceuticals K.K. (later transferred business to Healios)

7. Slide 7: Company History and Social Trends

   Company History and Social Trends Pioneer of iPSC regenerative medicine development Patent licensing agreement Retina Institute Japan entered with iPS Academia Japan established Joint research on organ bud started with Yokohama City (currently Healios) Patent licensing agreement University entered w

8. Slide 8: Mission Statement

   Mission Statement “To be the change in an ever evolving world through enrichment of living” 7 Copyright © HEALIOS K.K. All rights reserved.

9. Slide 9: Two Business Fields

   Two Business Fields Compound Medicine Field iPSC Regenerative Medicine Field ▼ Ophthalmology Surgery Support Agent ▼ RPE cells originated from iPS cells BBG250 Under Development On Sale  On sale in Europe  iPS cells → Produce normal RPE cells  Proceeded with treatments with business  Replace the

10. Slide 10: Expanding Sales Area of Ophthalmology Surgery Support Agent BBG250

    Expanding Sales Area of Ophthalmology Surgery Support Agent BBG250 Further sales growth inside and outside EU  Sales areas: Expands to 73 countries and regions（As of October 2015）  Total sales: Approx. 120,000 units（FY2014 performance）  63.1% of ophthalmologists in the world reply BBG250 to be th

11. Slide 11: 2. Business Outline

    2. Business Outline Step 1 Treat AMD (Age-Related Macular Degeneration) with iPS cells Step 2 About AMD and Profitability of RPE Cell Medicine Step 3 Strategy for Placing RPE Cell Medicine on the Market 10

12. Slide 12: Transition to iPSC Regenerative Medicine

    Transition to iPSC Regenerative Medicine Technological development from low molecular drug to antibody drug, iPSC regenerative medicine, etc. (Technological development） Low molecular drug Antibody drug iPSC regenerative medicine (Time) 11 Copyright © HEALIOS K.K. All rights reserved.

13. Slide 13: Concept of iPSC Regenerative Medicine

    Concept of iPSC Regenerative Medicine Make “Regular Cells” from iPS Cells nerve cell myocardial cell Cell Transplantation Induction Treatment iPS cells pancreatic cell hepatocyte cell 12 Copyright © HEALIOS K.K. All rights reserved.

14. Slide 14: Mechanism of iPS Regenerative Medicine

    Mechanism of iPS Regenerative Medicine Replace damaged cells with regular cells Tissue (cells) Damaged iPSC Regenerative Medicine Replace Damaged Tissue (cells) by Aging, Disease or Target Cells made from iPS cells with regular cells Accident Replacement Patient Recovery of Organ Function 13 Copyrig

15. Slide 15: Success Rate of Organ Transplantation

    Success Rate of Organ Transplantation High Possibility to Succeed with Development of Technological Innovation Survival Rate after Surgery (organ) 100% pancreas 96.0% 91.1% heart 90% 91.9% kidney 80% 80.6% liver lung 72.3% 70% 67.7% intestine 60% 1 2 3 4 5 (years after transplantation) (note) the tr

16. Slide 16: Roadmap of Regenerative Medicine (including cell medicine)

    Roadmap of Regenerative Medicine (including cell medicine) It is expected that regenerative medicine will reach cartilage, eye, and internal organs 2050 (trillion yen) others Scale of Domestic Regenerative Medicine (each organ) 2.5 trillion yen 2.5 cancer immunity blood 2.0 pancreas liver kidney 1.5

17. Slide 17: First Target

    First Target Aim toward Treatment of Age-Related Macular Degeneration (AMD) as a First Step Example Symptoms of Age-Related Macular Degeneration Aging of RPE (retinal pigment epithelial) cell is considered the cause. (source) excerpted from homepage of Japanese Ophthalmological Soc. 16 Copyright © H

18. Slide 18: 2. Business Outline

    2. Business Outline Step 1 Treat AMD (Age-Related Macular Degeneration) with iPS cells Step 2 About AMD and Profitability of RPE Cell Medicine Step 3 Strategy for Placing RPE Cell Medicine on the Market 17 Copyright © HEALIOS K.K. All rights reserved.

19. Slide 19: Explanation of AMD Pathological Condition

    Explanation of AMD Pathological Condition AMD causes RPE Cells to degenerate, which will damage functions Regular Macular Part Developed Dry AMD Immunity Barrier Maintained → Visual Cell Degenerative Disease → Dry AMD Retinal Pigment Epithelial Cell (RPE) Wet AMD Destruction of Immunity Barrier → In

20. Slide 20: Pathological Condition of AMD

    Pathological Condition of AMD AMD emerges with aging and is most prominent in caucasians Incidences of age-related macular degeneration with age 16% Caucasians affected 14% more than other races 12% Caucasian 10% Black Hispanic 8% Others 6% 4% 2% 0% 50～54 55～59 60～64 65～69 70～74 75～79 80～ (source) N

21. Slide 21: Estimated Number of AMD Future Patients in Serious Cases in US

    Estimated Number of AMD Future Patients in Serious Cases in US Expected to Increase over Medium to Long Term as Society Ages （1,000） 6,000 5.44 million 5,000 total caucasian black hispanic others 4,521 4,000 3.66 million 3,115 3,000 2.07 million 1,850 2,000 1,000 446 178 240 132 247 228 92 76 51 0 2

22. Slide 22: Number of AMD Patients

    Number of AMD Patients Number of both Wet and Dry patients (including mild cases) US Japan Others The Number of AMD Patients 10,000,000 9,230,000 13,000,000 The Number of AMD Patients in Serious Cases 2,000,000 690,000 2,600,000-3,220,000 Wet-Patients in 1,000,000-1,500,000 630,000 1,300,000-1,950,0

23. Slide 23: Market Scale of AMD

    Market Scale of AMD Annual Sales of Medicinal Treatments of Wet: 831.6 billion yen. No Medicine for Dry Medicin Condition e/Effect Year Total US Japan Others Anti- VEGF 2013 363.6 billion yen 38.0 billion yen 294.7 billion yen 696.3 billion yen Medicine/ Wet Restraint of New Blood 2014 414.1 billion

24. Slide 24: Changes in Vision

    Changes in Vision Good vision can be maintained with early treatment RPE transplantation (single) Vision） RPE transplantation (Prediction) Continuous administration of anti-VEGF medication Anti-VEGF medication Administration Not administered discontinued * The purpose of this illustration is to prom

25. Slide 25: Treatment Subjects for Wet AMD

    Treatment Subjects for Wet AMD Patients recurring within 1 Year, which is the case of approx. 92% of Wet AMD Patients, are the candidates for treatment. Recurrence frequency after receiving anti-VEGF medication No Relapse in 12 months 8% Present Treatment Subjects: Approx. 92％ Relapse in 12 months 3

26. Slide 26: One-Year Follow-Up Results of World's First Clinical Study

    One-Year Follow-Up Results of World’s First Clinical Study Results of 1-Year follow-up assessed to be good Clinical study September 12, 2014: 1st transplantation “Clinical Study on Autologous Transplantation of iPSC-Derived RPE Cell Sheets for Wet AMD” Main follow-up report  The results were good t

27. Slide 27: Guide to Medicine Price – Approach from Medical Expense of Existing Health Care

    Guide to Medicine Price – Approach from Medical Expense of Existing Health Care Anti-VEGF Medicine mostly Continues From the Beginning of the Treatment to Death Annual Medical Expense Annual Recommended Unit Price of Anti-VEGF Annual Medical Expense Medication Protocol 170,000 yen 1,020,000 yen 6 Ti

28. Slide 28: Guide to Drug Prices – Emerging Medicines

    Guide to Drug Prices – Emerging Medicines Drug Prices of Emerging Medicines and Medical Expenses are Very Costly Examples Autologous Cultured Epidermis “Jace” Hemoglobinuria Medicine １piece: 300,000yen × Covered by 「Soliris」 Insurance until 40 pieces One Bottle: 570,000yen ＝Total Amount for Treatmen

29. Slide 29: 2. Business Outline

    2. Business Outline Step 1 Treat AMD (Age-Related Macular Degeneration) with iPS cells Step 2 About AMD and Profitability of RPE Cell Medicine Step 3 Strategy for Placing RPE Cell Medicine on the Market 28 Copyright © HEALIOS K.K. All rights reserved.

30. Slide 30: Autologous and Allogeneic Transplantation

    Autologous and Allogeneic Transplantation We Handle Cross-Regenerative Medical Treatment , with High Profit Margins iPSC Regenerative iPSC Regenerative Medicine Medicine （Autologous） (Allogeneic) Patient A Donor Cell Cell Extraction Extraction Mass Production High Profit Cultivation Cultivation Indu

31. Slide 31: Development System of RPE Cells

    Development System of RPE Cells Built Up a Strong Partnership with Japanese Companies with Globally Leading Component Technology Technical Valuation Intellectual Production Non-Clinical Trial Clinical Trial Sales （estimation） Property iPS Academia Nikon Japan Healios Healios Shin Nippon Healios Heal

32. Slide 32: Project System

    Project System Arranged Domestic Value Chain by Cooperation with Sumitomo Dainippon Pharma Co., Ltd Development Production Marketing Sales Can Build Up Developing, Sales and Manufacturing in Japan Institution Medical (※) Healios SighRegen SighRegen Healios 6.8 billion yen by Collaborative Secured Pe

33. Slide 33: Historical Alleviation of Regulations

    Historical Alleviation of Regulations Japanese Government Revises Regulations to Put Japan at the Forefront Process of the Development So Far Clinical Research Clinical Trial Approval Sales Confirm Effectiveness and Safety Development Process of Introducing Early Approval System After-sales Effectiv

34. Slide 34: Development Schedule

    Development Schedule Japanese Clinical Trials ”in a short time +10 patients” with Conditional Approvals Development Pre-Clinical Apply- On the Field Code Indication Market Clinical Test Approve Progress Status Test Market iPSC Regenerative HLCR011 Wet AMD Japan Ongoing Pre-Clinical Test Medical Fiel

35. Slide 35: Our Experienced Team for Development

    Our Experienced Team for Development Lineup to Develop in Japan, US, and Europe Ophthalmology Expert Expert in Age-related Macular Degeneration President & CEO Director Management of Development Field Al Reaves Tadahisa Kagimoto  Led global clinical programs for  Succeeded in Developing BBG Visudy

36. Slide 36: Deal with Development Risk

    Deal with Development Risk Ready to build global alliance (Stage of Company Development） Build global alliance US/Europe RPE In Japan, collaboration with Sumitomo Dainippon Pharma Clinical Research by Institute of Physical and Chemical Research Japan RPE Clinical Research (Time) 35 Copyright © HEALI

37. Slide 37: 3. Future Business Directions

    ３．Future Business Directions 36 Copyright © HEALIOS K.K. All rights reserved.

38. Slide 38: Future Business Directions Outline

    Future Business Directions Outline Steadily proceed several pipelines focusing on the growth of the iPSC regenerative medicine area Carry out research development activities for starting clinical studies in 2017. In particular, focus efforts on manufacturing preparations at manufacturing Regenerativ

39. Slide 39: Future Business Directions Topics

    Future Business Directions Topics Facilitating pipelines for practical application of 3D organs (liver) Carry out research development activities for starting clinical studies in 2017. In particular, focus efforts on manufacturing preparations at manufacturing Regenerative medicine RPEs in Japan sub

40. Slide 40: 4. Expansion to 3D Organs (Liver)

    ４．Expansion to 3D Organs (Liver) 39 Copyright © HEALIOS K.K. All rights reserved.

41. Slide 41: Strategy From Now On

    Strategy From Now On Further Expansion when Three-Dimensional Organs Become Possible Early Stages Germination Term Growth Phase Organ Eye Rebuild Organ including Skin Three-Dimension Cartilage iPS *Allogeneic Transplantation *Mass Cultivation Skin, Cartilage *Autologous Transplantation 1990 2000 201

42. Slide 42: Facilitating Pipelines in Liver Area

    Facilitating Pipelines in Liver Area Department of Regenerative Medicine, Yokohama City University Graduate School of Medicine Joint Research Agreement in Organ Regenerative Medicine Leading authority of organ regeneration Prominent researcher of human organ construction Department of Regenerative M

43. Slide 43: Development Status of Three-Dimensional Organ

    Development Status of Three-Dimensional Organ Successfully created liver organ bud by cocultivating 3 types of cells iPS cell of a Human Vascular precursor cell Mesenchymal endothelial cell stem cell organ bud transplantation therapy (origin of organ) Cell Transplantation mice （Source）Japan Science

44. Slide 44: Survival Rate of Liver Failure Model Mouse

    Survival Rate of Liver Failure Model Mouse Survival rate improves significantly in transplantation experiments Process in which organ formed from organ bud links mouse ‘s vascular network autonomously Treatment effects of liver organ bud transplantation using human iPS cells 100 Liver organ bud tran

45. Slide 45: Metabolic Liver Disease in Newborns

    Metabolic Liver Disease in Newborns Yokohama City University planning to start clinical study in 2019 Target Metabolic liver disease “urea cycle defect,” etc. Urea cycle defect Disease caused by congenital abnormality of enzyme functioning in metabolic pathway (urea cycle) which detoxifies ammonia i

46. Slide 46: Marketability (Newborns Metabolic Liver Disease)

    Marketability (Newborns Metabolic Liver Disease) Estimated market size of metabolic liver disease in newborns Total US Japan Europe Number of patients Approx. 160 Approx. 30 Approx. 230 Approx. 420 (year) Treatment costs (Annual) Enzyme replacement 30–50 million yen therapy Estimated annual 6–11.5 b

47. Slide 47: Expansion of Marketability (Alternative Treatment for Replacing Liver transplantation)

    Expansion of Marketability (Alternative Treatment for Replacing Liver transplantation) Prospecting R&D for alternative treatment for liver transplantation Liver transplantation Total US Japan Europe Number of patients undergoing Approx. 6,000 Approx. 400 Approx. 4,000 Approx. 10000 treatment (Annual

48. Slide 48: Towards Practical Application of 3D Organ (Liver)

    Towards Practical Application of ３D Organ (Liver) Aiming for early realization of肝臓疾患に再生医療 regenerative medicine for liver disease patients Need to produce mass volume of cells compared to RPE Mass cell culture technique of GMP grade such as mesenchymal stem cell Mass cell culture Fundamental tech

49. Slide 49: Acquired Three Competitive Advantages

    Acquired Three Competitive Advantages Acquired Core Position in New Industries and Rapidly Advancing Further Experience and Deep Understanding of Transplantation Treatment  Knowledge on medical scene and applicable diseases ＝ Unmet medical needs× Determine technological superiority surpassing exist

50. Slide 50: Summary of Main News Follow-Up

    Summary of Main News Follow-Up Pre Clinical Study Pre Clinical Study （Pharmaceutical study） Clinical Study Done Marketing Regenerative medicine Submissi RPEs in Received parent cell MCB MCB on of clinical Administration to Approval Appr for clinical production storage WCB production application oval

51. Slide 51: 5. Financial Highlights

    5．Financial Highlights 50 Copyright © HEALIOS K.K. All rights reserved.

52. Slide 52: Statement of income

    Statement of income （Million yen） 3Q FY2015 FY 2015 3Q FY2014 YoY change Reasons for increase/decrease Previous Revised forecast forecast Reaction to appropriating milestone income of 200 related to Sales 259 76 ▲183 RPE cells products in precious 73 95 period Operating Sales dropped ▲183（Above） inc

53. Slide 53: Balance sheet

    Balance sheet （Million yen/%） December 31, September 30, 2015 2014 YoY change Main reasons for increase/decrease Current assets 2,064 9,604 7,540 Cash and deposit +7,599 (65.1%) (88.9%) Non-surrent 1,107 1,194 86 assets (34.9%) (11.1%) Total assets 3,171 10,799 7,627 (100.0%) (100.0%) Current 475 1,

54. Slide 54: Appendix: Explanation of Terms

    Appendix: Explanation of Terms iPSC Regenerative Medicine Form of treatment with human tissue equivalent functions produced by differentiating iPS cells. Age-related Macular Degeneration (AMD) Degeneration in the macula (located at the center of the eye) resulting from aging. Distortion and/or failu

55. Slide 55: Important Note on Future Events, etc.

    Important Note on Future Events, etc. Descriptions on future events, etc. in this document include Healios’ assumptions, prospects, etc. based on information which could be acquired at the time this document was presented. For this reason, actual performance, development progress, etc. may differ fr

56. Slide 56: Copyright © HEALIOS K.K. All rights reserved.

    55 Copyright © HEALIOS K.K. All rights reserved.

Healios K.K. — FY2015 3Q Earnings Presentation on 6ix