Oncolys BioPharma : Non-consolidated Financial Results for the Fiscal Year Ended December 31, 2024

Note: This document has been translated from a part of the Japanese original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Non-consolidated Financial Results

for the Fiscal Year Ended December 31, 2024

[Japanese GAAP]

February 7, 2025

Company name: Oncolys BioPharma Inc.

Stock exchange listing: Tokyo Stock Exchange

Code number: 4588

URL: https://www.oncolys.com

Representative: Yasuo Urata, President & CEO

Contact: Kohei Hata, Executive Officer

Email: [email protected]

Scheduled date of Annual General Meeting of Shareholders: March 27, 2025

Scheduled date of commencing dividend payments: ―

Scheduled date of filing annual securities report: March 28, 2025

Availability of supplementary briefing material on financial results: No

Schedule of financial results briefing session: Scheduled (for analysts)

(Amounts of less than one million yen are rounded down.)

1. Financial Results for the Fiscal Year Ended December 31, 2024 (January 1, 2024 to December 31, 2024)

(Reference) Equity: As of December 31, 2024: ¥2,744 million As of December 31, 2023: ¥1,459 million

3. Financial Results Forecast for the Fiscal Year Ending December 31, 2025 (January 1, 2025 to December 31, 2025)

Financial results forecast is not disclosed due to the difficulty of making reasonable estimates. For details,

please see "1. Overview of Business Results, etc. (4) Future Outlook" on page 3 of the supplementary material.

* Notes:

1. Changes in accounting policies, changes in accounting estimates and retrospective restatement
2. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
3. Total number of issued shares (common shares)
4. 1. Total number of issued shares at the end of the period (including treasury shares): December 31, 2024: 24,961,600 shares
      December 31, 2023: 19,717,100 shares
   2. Total number of treasury shares at the end of the period:

December 31, 2024: 101,238 shares

December 31, 2023: 88,738 shares

3) Average number of shares during the period:

Fiscal year ended December 31, 2024: 21,831,246 shares

Fiscal year ended December 31, 2023: 17,797,360 shares

* These financial results are outside the scope of audit by certified public accountants or an audit corporation.

• Explanation of the proper use of financial results forecast and other notes(Note regarding forward-looking statements, etc.)

The earnings forecasts and other forward-looking statements herein are based on information available to the Company at the time of the release of these materials and certain assumptions deemed reasonable, and do not represent a commitment from the Company that they will be achieved. In addition, actual financial results, etc. may differ significantly due to a wide range of factors. For the assumptions used in forecasting financial results and notes regarding the use of financial forecasts, please see "1. Overview of Business Results, etc. (4) Future Outlook" on page 3 of the supplementary material.

1. Basic Policy on Profit Distribution and Dividends for the Fiscal Year Under Review and Next Fiscal Year
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1. Overview of Business Results, etc.

(1) Overview of Business Results for the Fiscal Year Under Review

The Japanese economy during the fiscal year ended December 31, 2024 showed signs of recovery, with the Bank of Japan deciding to raise interest rates for the first time in 17 years, against a backdrop of factors such as the pick-up in inbound tourist demand and historic wage hikes, mainly at major companies. On the other hand, the unstable situation in the global economy is expected to persist, with the Ukraine war becoming protracted and uncertainty rising due to changes of government in various countries, including the U.S. presidency.

Under these circumstances, the Company has been pursuing a vision of "Providing new options to future cancer treatments, and leaving our footprint in the history of cancer treatment through those achievements," thus striving to increase managerial efficiency and actively expand research, development and licensing activities.

In particular, the Company is promoting research, development, and licensing activities with a focus on OBP- 301 virotherapy for cancer. Having been granted "SAKIGAKE designation" for regenerative medicine products for OBP-301 by the Ministry of Health, Labour and Welfare, the Company completed a "Phase II clinical trial in combination with radiation therapy for esophageal cancer (OBP101JP trial)." The results of this clinical trial were presented in October 2024 at the 62nd Annual Meeting of the Japan Society of Clinical Oncology held in Fukuoka. Following repeated discussions with the Pharmaceuticals and Medical Devices Agency (hereinafter "PMDA") regarding the application for approval of OBP-301, it was agreed to make the transition to the SAKIGAKE comprehensive evaluation consultation. We will begin the SAKIGAKE comprehensive evaluation consultation in the first half of 2025. After undergoing an examination of the contents, including the post-marketing clinical trial plan, we plan to submit an application for approval in the fiscal year ending December 31, 2025.

Regarding our domestic business, in February 2024, we signed an agreement with FUJIFILM Toyama Chemical Co., Ltd. (hereinafter "FUJIFILM Toyama Chemical") to collaborate in OBP-301 sales and established a supply chain for OBP-301 from Henogen SA (in the Thermo Fisher Group, Belgium), the manufacturer, to medical institutions. We are now promoting various consultations regarding a sales system after products are launched in the market. Furthermore, we have applied to the Tokyo Metropolitan Government to obtain approval for the manufacture and sale of regenerative medical products.

Meanwhile, in the U.S., we have established a joint development system for OBP-301 and pembrolizumab, and the Company and Merck Sharp & Dohme LLC. (hereinafter "MSD") equally share research and development expenses for a Phase II investigator-initiated clinical trial for the treatment of gastric cancer in patients who are receiving second-line treatment. The safety and preliminary efficacy findings of the Phase I investigator-initiated clinical trial using OBP-301 in combination with chemoradiotherapy for esophageal cancer were presented at the American Society of Clinical Oncology Gastrointestinal Cancers Symposium in January 2025. In addition, in December 2024, we concluded a license agreement with Medigen Biotechnology Corp. (hereinafter "Medigen") in Taiwan for sales rights in Taiwan.

Concerning LINE-1 inhibitor OBP-601, Transposon Therapeutics, Inc. (hereinafter "Transposon") is conducting clinical trials at its own full expense based on a license agreement.

For details of the Company's activities, please refer to "5. Supplemental Information (1) Research and Development Activities."

For the fiscal year ended December 31, 2024, net sales were ¥31,384 thousand (net sales of ¥63,038 thousand in the previous fiscal year), and operating loss was ¥1,681,403 thousand (operating loss of ¥1,929,986 thousand in the previous fiscal year). In addition, the Company recorded foreign exchange gains of ¥43,775 thousand, and other items as non-operating income, as well as share acquisition rights issuance costs of ¥7,202 thousand, share issuance costs of ¥10,394 thousand, and other items as non-operating expenses. Ordinary loss was ¥1,663,911 thousand (ordinary loss of ¥1,913,816 thousand in the previous fiscal year). The Company also recorded an impairment loss of ¥17,104 thousand on the devices, etc., used in the warehouses where the Company stores OBP-301, as an extraordinary loss. As a result, net loss was ¥1,684,778 thousand (net loss of ¥1,938,505 thousand in the previous fiscal year).

(2) Overview of Financial Position for the Fiscal Year Under Review

1. Status of Assets, Liabilities and Net Assets
   Assets at the end of the fiscal year under review were ¥3,198,858 thousand (56.8% increase compared with

the end of the previous fiscal year), owing partly to an increase in cash and deposits. Liabilities were ¥446,649 thousand (21.2% decrease compared with the end of the previous fiscal year), owing partly to a decrease in

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accounts payable ˗ other. Net assets were ¥2,752,209 thousand (86.7% increase compared with the end of the previous fiscal year), owing to capital increase through issuance of new shares, loss incurred and other factors.

1. Status of Cash Flows
   Cash and cash equivalents at the end of the fiscal year under review were ¥2,165,918 thousand (68.2% increase

compared with the end of the previous fiscal year). Cash flows for the fiscal year under review were as follows.

(Cash flows from operating activities)

Net cash flows used in operating activities were ¥2,020,088 thousand (a cash outflow of ¥1,336,922 thousand in the previous fiscal year). This is primarily attributable to loss before income taxes of ¥1,681,015 thousand and impairment losses of ¥17,104 thousand, an increase in advance payments - other of ¥198,366 thousand, an increase in accounts receivable - other of ¥50,506 thousand, and a decrease in accounts payable ˗ other of ¥141,352 thousand.

(Cash flows from investing activities)

Net cash flows used in investing activities were ¥4,705 thousand (a cash outflow of ¥5,392 thousand in the previous fiscal year). This is primarily attributable to purchase of property, plant and equipment of ¥3,519 thousand.

(Cash flows from financing activities)

Net cash flows provided by financing activities were ¥2,879,444 thousand (a cash inflow of ¥1,142,542 thousand in the previous fiscal year). This is primarily attributable to proceeds from issuance of common shares of ¥2,890,817 thousand, proceeds from long-term loans payable of ¥100,000 thousand, repayments of long-term loans payable of ¥94,444 thousand and repayments of lease obligations of ¥11,925 thousand.

(3) Overview of Cash Flows for the Fiscal Year Under Review

Equity ratio: Equity/Total assets

Equity ratio based on fair value: Total market value of shares/Total assets

Interest-bearing liabilities to cash flows: Interest-bearing liabilities /Cash flows

Interest coverage ratio: Cash flows/Interest payments

(Note 1) Total market value of shares was calculated by multiplying the closing price on the fiscal year-end date by the number of outstanding shares on the fiscal year-end date (excluding treasury shares).

(Note 2) Operating cash flows are used as cash flows.

(Note 3) Interest-bearing liabilities include all liabilities recorded on the balance sheets for which interests are paid.

(Note 4) Figures are not presented as operating cash flows were negative.

(4) Future Outlook

The Company still has a small stable revenue base, and our financial results fluctuate greatly depending on the presence or absence of milestone revenue payments generated from our distribution partnership agreement for OBP-301, achieving the development event of LINE-1 inhibitor OBP-601 by Transposon, and that company's IPO, M&A and other corporate action that generates milestone revenue payments.

For these reasons, we believe that it is difficult to calculate an appropriate and reasonable figure for the earnings forecast at this time due to the many undetermined factors that will affect our business performance, and therefore, we refrain from disclosing the forecast. In addition, since the Company manages its performance annually, the Company omits the description of its earnings forecasts for the second quarter (cumulative).

(5) Basic Policy on Profit Distribution and Dividends for the Fiscal Year Under Review and Next Fiscal Year

As a research and development based venture, the Company has focused on upfront investments of business capital, etc., and has yet to distribute profits. However, the Company recognizes the return of profits to shareholders to be an important issue for management and will determine its dividend policy that takes the operating results of each fiscal year into account, while considering further strengthening of the management

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foundation and the enhancement of internal reserves in preparation for further proactive business development. In accordance with this basic policy, dividend distributions are not scheduled for the fiscal year under review or the next fiscal year.

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2. Management Policies

(1) Basic Policy on Management

The Company conducts a research- and development-oriented business as a biotech company for drug discovery and promotes the development and commercialization of novel drugs for cancer virotherapy, drugs for the treatment of serious infectious diseases and other drugs. In particular, we aim to grow as a virus drug discovery company focusing on the fields of "virotherapy for cancer," primarily the oncolytic virus OBP-301 and the next- generation oncolytic virus OBP-702, as well as "drugs for the treatment of serious viral infectious diseases," mainly OBP-2011 for the treatment of viral infectious diseases. Furthermore, OBP-601, a drug which utilizes the mechanism of a nucleoside reverse transcriptase inhibitor and that was developed as a treatment for HIV infection, is being repositioned as a LINE-1 inhibitor, and is being developed by Transposon under license as a treatment for intractable neurological diseases.

Until now, the Company's business model has been to develop drug pipelines up to the initial clinical trial stage, and then license the pipelines to pharmaceutical companies for further development and marketing in exchange for contractual lump-sum payments, milestone revenue, royalty revenue, etc. Going forward, however, in addition to the license-type business model described above, the Company will pursue the development of OBP-301 in Japan according to a pharmaceutical company-type business model, in which we obtain the required manufacturing and marketing approvals by ourselves.

We intend to move away from a business model based solely on license income that depends on the management policies of major pharmaceutical companies, and transform the Company itself into a hybrid business model that combines a "pharmaceutical company-type business model that provides a steady revenue stream by supplying pharmaceutical products as a manufacturer and distributor" and a "license-type business model."

The basic policy of the Company is to provide essential drug discovery services such that "without Oncolys, there will be trouble for the medical field, and thus the patients," and the Company will contribute to early solutions to the challenges faced by the medical field.

(2) Target Business Indicators

The Company is a research- and development-based biotech company involved in drug discovery, and profits are typically expected to increase when pipelines that are currently in development are placed on the market and we begin receiving commercial drug formulation and supply revenues and royalty revenues from marketing partners and license agreement counterparties. Therefore, the Company considers that its research and development expenses necessary to obtain Proof of Concept (POC) in the clinical trials, which is a measure of the product value of the pipeline, are an important business indicator. At the present stage, while striving to maximize the value of pipelines for expanding contractual lump-sum payments from licensees and marketing agreement partners and milestone revenue and reducing financial risks, the Company aims to achieve early-stage stability and profitability.

(3) Medium- to Long-term Management Strategies

The basic strategy of the Company involves achieving efficient progress from pre-clinical to clinical trials and building a fabless management model utilizing outsourcing, with focus placed on hiring and cultivating personnel specializing in project management of drug discovery research and development. The Company's management strategy has been to maximize the value of its pipeline by achieving rapid progression to the next stage in development, conclude licensing agreements with major pharmaceutical companies and biotech companies on better conditions, and use the funds from licensing partners to advance the development of new drugs. Moving forward, we would like to develop not only such a license-based management strategy, but also a pharmaceutical company-type business scheme which involves obtaining approval for new drugs in-house and selling them through distribution partners.

In this way, the Company intends to develop its business in a hybrid fashion. Depending on the status of each pipeline and the target region, the Company would choose between a license-type business model in which the Company earns contractual payments, milestone revenue, and royalty revenues after products are launched in the market, and a pharmaceutical company-type business model in which the Company obtains its own manufacturing and sales approval and manufactures commercial drug formulations, thereby generating drug formulation revenues from its drug-formulating marketing partners. Going forward, the Company will continue to work on rapid progression to the next stages in development of pipelines, and endeavor to construct a foundation of continuous revenue by implementing revenue models from multiple pipelines.

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(4) Issues to be Addressed

The following important issues are initiated in the organizational strategy of the Company.

a. Promoting the corporate philosophy

The vision of the Company is to "provide new options for future cancer treatments and leave its footprint in the history of cancer treatment through those achievements." We are on an endless quest for medical "innovation." To this end, we spare no efforts in our diligent studies of the medical sciences. One could say we are on an adventure to accomplish big things with a small number of people. We aim to challenge ourselves in projects that big companies cannot. We are focused on how many lives we can save, rather than on how much profit can be made, and we believe this mindset will bring us profit in turn. We share this mindset not only with management and employees, but also with our shareholders. We commit ourselves to transparency in management and regular information disclosure. We aspire to contribute to society, and fully comply with all laws and regulations governing our company's behavior. We consider it important for our management to promote our corporate philosophy among our officers and employees and build an organization that flexibly and enthusiastically executes management strategies based on this corporate philosophy. To this end, we have formulated a code of conduct which embodies this corporate philosophy, and together with instructing officers and employees to comply with this code of conduct, we proactively create opportunities for top management to speak to our officers and employees about our corporate philosophy. On top of that, we are building an organization that places primary importance on the unified sharing of information by the research and development department and business development department. In addition, the management department that manages internal resources is constantly aware of the will of our stakeholders and ensures thorough compliance. Furthermore, the internal audit department serves to enhance monitoring functions, starting with promotion of the corporate philosophy and the code of conduct.

b. Securing and cultivating personnel

The personal growth of each officer and employee is an essential element to the growth of the Company. In order to realize this, the Company actively promotes the recruitment and cultivation of personnel. In particular, as the Company's research, development and business activities are conducted both domestically and internationally, it is important to cultivate human resources with English skills and an international perspective. Utilizing internal and external networks, the Company seeks to recruit personnel who have reliable technique, abilities, and ambitions to grow, in addition to cultivating personnel through OJT and various training programs to enhance the team structure. The Company also endeavors to improve financial results assessments and share- based remuneration systems in order to maximize the speed and quality of business operations.

c. Strengthening research and development structures

The research and development of the Company has covered the whole process from the search and invention of prospective pharmaceuticals to pre-clinical trials and initial clinical trials (i.e., proof of concept). The main role of the Company has been to act as a bridge between the pre-clinical and clinical stages (i.e., translational research), and conduct manufacturing and quality control of investigational drugs to promote these research and developments. In addition to these activities, we will also strengthen our pharmaceutical system, which handles liaison work with the Ministry of Health, Labour and Welfare, and our quality assurance operations, which manage and control manufacturing and sales. Therefore, it is an important issue to secure and cultivate personnel who take responsibility as project leaders engaging primarily in planning and progress management for research and development, as well as persons experienced in the pharmaceutical business and quality assurance operations. The Company has its research and development system both in Japan and overseas. The Company strives to enhance collaboration with the clinical development department of a wholly-owned subsidiary Oncolys USA Inc. (hereinafter "Oncolys USA"). Furthermore, along with incorporating advanced technologies and improving technological levels through joint research and development with global medical and research institutions, the Company actively utilizes outsourcing partners and endeavors to construct low-cost and high-level research and development structures.

d. Strengthening business development department

The Company defines its business fields as the field of virotherapy for cancer using genetically modified virus formulations and therapeutic drugs for serious viral infectious diseases, aiming for the commercialization of exceedingly unique virus drug discovery for this industry. Therefore, the Company will secure and cultivate talent that possesses both business skills and abundant scientific knowledge and strengthen its network with pharmaceutical companies around the world. Furthermore, by enhancing collaboration with our subsidiary in the United States, Oncolys USA, the Company aims to generate numerous joint development and licensing

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opportunities with pharmaceutical companies overseas and construct business development structures that can contribute to increasing its cash flows.

e. Outsourcing strategies

In the Company business that revolves around outsourcing, efficiency improvement is an important issue. In order to strengthen relationships with outsourcing companies such as CROs (Contract Research Organizations) and CDMOs (Contract Development and Manufacturing Organizations) in securing necessary and sufficient research, development, and manufacturing capabilities, the Company instructs the whole organization to ensure a dedicated contact system through making regular visits, etc. Also, in order to ensure ideal outsourcing structures at all times, the Company will search secondary contractors and build relationships so that operations do not become dependent on any specific company in each business field.

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