Interaction and Interchange
Annual Report 2013 For the year ended March 31, 2013
VISIONFor the Benefit of All Humankind
A healthcare innovator creating drugs that are 100% effective
Achieve a revolutionary therapeutic effect by delivering therapeutic antibodies optimized to
individual patients
Create technologies capable of discovering antibodies that can be
administered to people in only a few weeks
Offer a complete substitute for vaccines with the fully human ADLib® system
Our goal for 2023:the ultimate
made-to-order medicine
Our goal for 2014:establishment of
a fully human ADLib® system
Our goal for 2018:countermeasuresfor pandemic diseases
Dealing with my family’s suffering from
diseases and the medical treatment
options available to them, I have
serious doubts about current medicines
that bring limited or poor outcomes,
and even severe side effects or on
occasion some type of subsequent
complication. Being invented in the
RIKEN Research Institute in Japan, the
ADLib® system is a drug discovery
technology platform that quickly
discovers a diverse array of antibodies
against antigens that were difficult or
impossible to obtain using conventional
methods. Our ultimate goal is to attain
100% therapeutic effectiveness through
the rapid generation of therapeutic
antibodies with superior therapeutic
effects and negligible side effects.
Mission“Interaction and interchange” are key business principles at CHIOME. A major element of our business strategy is therefore to form relationships and alliances with a large number of businesses and institutions. At CHIOME our aim is to develop a unique international service based on technology for diversifying genetic information while fostering interchange among a diverse array of people and ideas. We seek to meet the diverse needs of clinicians everywhere through masterful use of our proprietary technology.
C o n t e n t s
VISION: For the Benefit of All Humankind 1
A Personal Letter to Our Shareholders 2
STRENGTH: Unique Value 5
Unique Business Model 6
Exclusive Technology 7
VOICES of Academia Partners 8
Proven Partnership 9
At a Glance 10
Six-Year Financial Summary 12
Management’s Discussion & Analysis 13
Corporate Information 16
Stock Information 17
Chiome
Chiasma -ome
“Chiome” (pronounced as “kai-ohm”) is a fusion word
from “Chiasma” and “-ome.” The “chi” (pronounced as
“kai”) of Chiome is the “chi” of “Chiasma.” “Chiasma” is
the point of contact between paired chromatids during
meiosis, resulting in a cross-shaped configuration. It is
the cytological manifestation of crossing over,
representing the blending of genes and the birth of a
new generation.
The “-ome” of Chiome is the same as the “-ome” of
“Genome” and “-ome” of “Proteome,” which carries the
meaning of “collectivity.” The name Chiome therefore
signifies “Exchange,” “Diversity,” “Sustainability” and
“Fusion.”
1
A Personal Letter to Our Shareholders
Dispensing with the formulaic approach to messages from senior management, I would like to take a few minutes of your time to deliver a personal letter to current and potential shareholders, whom I fervently hope will form the majority of readers. Taking care not to blind you with the science that so vitally underpins Chiome Bioscience’s operations, my intention is simple: to paint a jargon-free picture of the human aspects involved and to touch on just a few key financial indicators. More scientific and financial details can easily be found elsewhere in this report and on our website. By getting back to basics, I would just like to reiterate who we are, what we do, why we do it, and—most importantly—why you should certainly continue to place your valued investments with us or add our name to your portfolio.
Who We AreHaving marked only our eighth company anniversary in
February 2013, we employ a young and dynamic biotech
venture team of 31 dedicated personnel here at our
headquarters and research laboratories in central
Tokyo. A source of that dynamism and a salient feature
is the combination of business acumen and distinguished
science backgrounds provided by our eight-strong
leaders.
A technology-driven ethical health care innovator,
Chiome Bioscience is imbedded with a corporate
culture in which innovation, inspiration, and inquiring
minds thrive in equal measure.
What We DoA bioscience company generally conjures up images of
a different kind of culture, one being produced on glass
dishes by people in white lab coats. While long ago it
became fashionable for companies to trumpet some
prized facet as being “in our DNA”—the amino acids that
have been described as the building blocks of life—the
world-leading drug discovery technologies we possess
are inextricably linked with the real DNA that is in each
and every one of us. In Chiome Bioscience’s case, the
secrets of success really do lie in our DNA.
We have already charted an ambitious yet realistic
10-year course toward a world of made-to-order drugs
in a revolutionized medical system. Using our
proprietary, patent-protected ADLib® system, we are
working to combine DNA from different sources in the
rapid creation of highly effective drugs. These drugs
will become powerful weapons in the fight against a
number of diseases that are afflicting the human race
right now.
In the shorter term, the indications are that in 2014 we
will be in the position to create and quickly administer
human antibodies, the substances normally produced by
our blood to ward off illness and disease. Set for 2018, the
next milestone will be the use of the ADLib® drug discovery
platform to replace vaccines in pandemic control.
Why We Do ItAs scientists, we derive great satisfaction from the
ADLib® system’s capabilities that allow us to see
results and thus where the problems lie. Above all, we
want to display management capabilities that lead to
success as a business.
On a deeply personal note, many of you reading this
will know of someone who is currently experiencing
the effects of some debilitating disease. Having been at
Chiome Bioscience since its inception, I myself retain
particularly poignant memories of my disappointment
at the state of medicine at the time of my mother’s
illness and of having to pay for treatment that was
ultimately ineffective. Those memories are a driving
force behind the work I am doing today.
While we remain earnest about and dedicated to
every facet of our business, on the brighter side of our
operations, we are firm believers that work should be
fun. Thinking outside the box and staying one step
ahead, even to the point of occasional eccentricity, can
often provide the wellspring for innovation. In this
regard, we are looking forward to the advances that we
will be making for the sake of society at large in the
years ahead.
The Key Part You PlayAs you would expect, our painstaking research is highly
labor and cost intensive, hence the need to share the
burden with other organizations.
Our work involves a chain of crucial partnerships
that could be described as being similar to the chainlike
form that DNA itself takes. The close-knit Chiome
Bioscience team is linked into a number of alliances—
involving close collaboration with major pharmaceuti-
cal companies, the Japanese government and
academia—that are interacting to facilitate the
end-user partnerships between doctors, medical
teams and above all their patients.
First listed on the Tokyo Stock Exchange Mothers Index
in December 2011, our shareholders’ investments
2 3
STRENGTHUnique Value
Our value is derived from providing gratification to people
Source of
Values
Growing Market
Exclusive Technology
(ADLib® System)
Unique Business
Model
Multiple Earning Points
Strong Client Base
Proven Partners
We will then commence and add impetus to the second
stage, the creation of innovative drug pipelines. The
third and final stage calls for us to be a prime mover in
what is nothing less than a medical revolution: the rapid
provision of optimal antibodies customized to the needs
of individual patients.
In specific terms, in three years’ time we anticipate
recording net sales of ¥4.3 billion from three revenue
streams, having added and speedily developed the
concomitant Licensing Out Platform Technology segment
(¥2.9 billion) to the existing Drug Discovery Alliance (¥1.0
billion) and Lead Antibody Licensing (¥0.4 billion)
segments.
The targets outlined in the business plan cover the
following four perspectives:
R&D
Financialandcustomer
Internalcontrolsandpersonneldevelopment,and
Socialcontribution
In ConclusionI sincerely hope these few words have served to
reinforce your sense of what Chiome Bioscience is all
about and the key role that you can play in ultimately
saving lives.
I would urge you to either get involved or deepen
your involvement in our ultimately altruistic enterprise.
Thank you very much for your time.
June 27, 2013
provide a vital resource that helps bind the entire chain.
We would, however, prefer that our shareholders buy
into Chiome Bioscience not for short-term profit but
because they fully understand the nature and
significance of what we are trying to achieve over the
long term.
The Way ForwardAfter three years of growth, our two-segment net sales
of ¥324.1 million for the fiscal year ended March 31,
2013, represented a 48.8% decrease compared with the
¥633.2 million of the previous fiscal year. However, this
result should be weighed against the ¥309.7 million in
expenses incurred in our Drug Discovery Alliance
business and a massive 73.9% increase in R&D
expenses. We are forecasting net sales to bounce back
to ¥740 million in the current year and be that much
closer to recording our first overall operating profit.
Having lauded the unique benefits of our superb
ADLib® system, there remains a great deal of work to
be done before we can bring to fruition even the
short-term goal of the full generation of human
antibodies in the next year. Leveraging the special
feature that produces the ADLib® system’s rapid
results, it is our avowed intention to show a steady
performance.
Following the announcements of our antibody
acquisition technology and our practical successes
thus far, we have garnered rave responses from our
alliance partners and investors alike.
The development of human antibodies forms an
exciting short-term target in our new, recently launched
medium-term business plan, which will run for the next
three years and end on March 31, 2016.
Under the banner of working for the people of the
world who are eagerly awaiting new medicines, we are
targeting a three-stage switch to a high-value-added
business model. Already well advanced, the first stage
involves the creation of sustainable new drug discovery
technologies based on a range of genetic information. Masa Fujiwara, D.V.M
Chief Executive Officer
Antibodies are naturally occurring drugs that exist in everyone’s bodies. If a technology to produce antibodies existed, it would change medicine forever. As a researcher, I intuitionally understand the potential of this game-changing technology. The ADLib® system is an antibody discovery technology that can rapidly generate a diverse array of antibodies against antigens that are difficult to obtain by conventional methods. Conventional drugs were developed principally based upon the statistical concept and attitude that drugs cannot be consistently effective for all people. However, if a tailored therapeutic antibody which is ideally suited for an individual patient can be generated by the advanced ADLib® system, then personalized medicine in a mature sense — 100% therapeutic effectiveness - will become reality.
4 5
Unique Business Model
Three Core Businesses
Lead Antibody Licensing
Drug Discovery Alliance
Licensing Out Platform Technology
Exclusive Technology
Based on alliances with pharmaceutical companies, the ADLib® system is deployed to generate
antibodies for the development of therapeutics candidates. Chiome Bioscience provides antibodies
tailored to the needs of its partners, who then analyze the functions of the antibodies and examine
their potential to become future drugs.
Chiome Bioscience licenses the ADLib® system to pharmaceutical and diagnostic companies, and
allows them to generate antibodies through their own effort.
Chiome Bioscience discovers first-in-class therapeutic antibody candidates for its own discovery
purpose, against targets discovered from research collaborators including universities and public
institutions. Chiome Bioscience then licenses these lead antibodies to pharmaceutical companies
after having evaluated those antibodies for their therapeutic potential. Licensing at an early
stage reduces Chiome Bioscience’s exposure to risk in later development stages, while securing
compensation in the form of upfront fees, milestone payments and royalties.
Three business lines centered on the ADLib® system
Earnings model for each business
Eyeingrobustgrowthintheantibodydrugmarket,globalpharmaceuticalcompanieshavebeenplowingresourcesintothedevelopmentofantibodydrugs.ChiomeBioscience’sADLib®systemisanexcellenttechnologyforgeneratingantibodiesfortherapeuticuse.
Chiome Bioscience has acquired basic patents for the
ADLib® system in major markets including Japan, China,
the U.S. and Europe, as well as related patents in Japan
and other countries. Chiome Bioscience has an exclusive
worldwide right to commercialize the ADLib® system.
The ADLib® system has piqued the interest of major
pharmaceutical companies around the world. Chiome
Bioscience has been working with these companies in the
three following business models.
Antibody drug development typically takes 6.5 to 9 years
from discovery research to market launch following clinical
trials. Chiome Bioscience is focusing on the drug discovery
stage, the most upstream part of the drug development
process, aiming to earn revenue in the early stage. By
operating three business models based on the ADLib®
system, Chiome Bioscience can generate revenue by stable
earnings and milestone payments at each stage of the value
chain, from drug discovery research to market launch.
The ADLib® system and its main features
Shift to a high-value added business model :Long-term business strategy
Accelerate the shift from a “technology devel-opment-centered” to a “drug discovery-cen-tered” strategy
Lead Antibody Licensing (antibody drug development)Licensing Out Platform TechnologyDrug Discovery Alliance
Time
DT40 cells TSA treatment
Activates recombination
Antibody selection:
30 minutes
Magnet
Antigen
Magnetic beads
Cultivation for 1 week
Acquisition ofspecific monoclonal lgM antibodies
Provide antibodies
in about 10 days
ADLib®
SN
Feature #1: Cell-based diverse antibody libraryTrichostatin A (TSA) activates the antibody gene diversification mechanism in the DT40 cells, and then a diversified, cell-surface displayed antibody library is generated. The antibody library can be used on a regular basis.
Feature #2: Rapid screening of antibodies specifically bind to the targetMagnetic beads coated with a specific antigen are introduced into a cell-based antibody library, and antibodies that bind to the target antigen are harvested. These steps are accomplished in only 30 minutes. The harvested antibody-expressing cells are then cultivated. The avian antibodies obtained by the ADLib® system can be converted to human antibodies, which can be further developed as drug candidates.
Feature #3: Application to tough antigens The ADLib® system can generate a variety of antibodies against antigens for which antibodies are difficult to obtain with conventional methods, such as toxins, pathogens, and self-antigens. For example, ADLib® axCELL, one of the applications of the ADLib® system, is a successful method in obtaining antibodies against multiple-trans-membrane proteins including G-Protein-Coupled Receptor (GPCR). GPCR is a protein family that is thought to be important drug targets, but yet remain difficult to obtain antibodies using conventional methods.
TheADLib®systemisagame-changing,antibodygenerationplatformprovidingdiversity,speedandapplicationtotoughantigens,threeproblemsthathadpreviouslybeenviewedasdifficulttoovercome.Theseadvanceshavecaughttheattentionofantibodydrugdiscoverycompaniesaroundtheworld.
Toward a fully human ADLib® system
Further technological innovation
Patents obtained in major markets around the world
As an upgrade of the ADLib® system, Chiome Bioscience has
been developing a fully human antibody library that would
allow human antibodies to be obtained, instead of avian
antibodies that must be humanized by protein engineering.
Homologous recombination has been confirmed to occur in
both the heavy and light chains in human immunoglobulin
genes, and also the expression of membrane-bound and
secreted human IgG has been confirmed. In order to develop
a fully human ADLib® system for efficient antibody screening,
Chiome Bioscience has been focusing on developing a
prototype library and completed it. If development proceeds
smoothly, we expect to generate a fully human ADLib®
system for commercial use in 2014, which would allow for the
generation of human antibodies in about 10 days.
In order to discover high-quality lead antibodies, Chiome
Bioscience is promoting joint technology development in
alliances with companies around the world that have
cutting-edge technologies. For example, Chiome
The basic patent of the ADLib® system has been issued in
China in 2007, Japan in 2008, and the U.S. and Europe in
2010. In addition, Chiome Bioscience has filed related
patents inside and outside of Japan. Chiome Bioscience has
an exclusive worldwide right to commercialize the ADLib®
system technology.
Title of the invention: Method of Enhancing Homologous
Recombination of Somatic Cells and Method of
Constructing Specific Antibody
Chiome Bioscience and RIKEN each hold 50% of the
patent rights
Bioscience’s alliance with Biotecnol, Inc. in the U.S. has
given it access to Tribody technology, which contributes to
the development of antibody drugs with higher efficacy. A
Tribody can recognize up to three different antigens in a
single molecule. This makes it possible to develop antibody
drugs with multiple mechanisms, such as the ability to
attack cancer cells while overcoming disease resistance of
some patients.
Sale
s
Alliance with state-of-the art technologies
Royaltiesfrom
clientsCompletion of fully
human ADLib®
present
Create pipelines continuously
Accelerate the shift to a high value-added company
6 7
Proven Partnership
Advantages of having alliances with many companies and organizations
WithpatentsonitsADLib®systemfiledinmajormarkets,ChiomeBiosciencehelpspeopleleadhealthylifestylesthroughtechnologicalinnovationandthedevelopmentofantibodydrugsinallianceswithcompaniesaroundtheworld.
Voices of Academia Partners
Chiome Bioscience does not out-license drug candidates
as its main business model. Accordingly, we enter
contracts with multiple companies and multiple contracts
with one company. Upgrades to the ADLib® system have
made it possible to generate antibodies against antigens
for which antibodies have been difficult to obtain using
conventional technologies. We plan to run our businesses
When I was researching neurobiology, I conjectured that Semaphorin 3A (SEMA3A) plays a broad and critical role after noticing that it was prevalent not only throughout the nervous system, but also in the lungs and other organs. I decided to obtain some SEMA3A antibodies and pursue this research further, but with the antibodies available at the time, I has issues with their specificity and sensitivity. Unfortunately, I was unable to produce the antibodies on my own using conventional methodologies. After going through this process of trial
In a bid to effectively and efficiently solve challenges,
Chiome Bioscience partners with companies and
academic institutions that specialize in fields requiring
fundamental and advanced expertise, such as clarifying
the diversification mechanism of the ADLib® system and
3. Alliances related to technological development
Partner Contract
ChugaiPharmaceuticalCo.,Ltd. JointresearchintoantibodyproductionusingtheADLib®system
ChugaiPharmaceuticalCo.,Ltd. Contract-basedresearchintoantibodyproductionusingtheADLib®system
FivePrimeTherapeutics,Inc. Contract-basedresearchintoantibodyproductionusingtheADLib®system
ChugaiPharmabodyResearchPte.Ltd. Workrelatedtothecalibrationofessentialresearchmaterialsfortheefficientdevelopmentofantibodydrugs
1. Alliances with drug discovery companiesOur alliances based on the ADLib® system support drug discovery and antibody drug creation at our clients via their own R&D.
in a sustainable fashion by continuing to upgrade the
ADLib® system.
Chiome Bioscience has also partnered with academic
institutions and public organizations, and with companies
and organizations that have related technologies. This
approach reduces risk in the drug discovery business,
which requires long periods of time for an outcome to
materialize, while building multiple promising product
pipelines. Our close relationships with academia also
facilitate the creation of product pipelines.There are 99 failures for every breakthrough in technology. A sizeable amount of upfront investment is necessary from the R&D stage to commercialization, because learning from a large number of mistakes is an essential part of the development of new technologies. Fortunately, Chiome Bioscience received grants from the Ministry of Education, Culture, Sports, Science and Technology, Japan Science and Technology Agency (JST) and New Energy and Industrial Technology Development Organization (NEDO) to sustain its efforts to improve the maturity of core technologies and commercialize the system. The market for antibody drugs has been expanding steadily. Corporations around the world are rushing to
discover new drugs in response to the pressing need to develop medicines that can treat cancer, because one out of two people are likely to get cancer, and the population of elderly people is growing in societies around the world. The ADLib® system’s ability to quickly create antibodies for an array of diseases, including cancer, has garnered considerable attention around the world. With the development of a fully humanized ADLib® system on the horizon, we are steadily advancing toward Chiome Bioscience’s vision when it was founded of practically realizing the ultimate in made-to-order drugs with 100% efficacy for all patients, thanks to the limitless possibility of the ADLib® system.
and error for more than 10 years, I heard that a venture company called Chiome Bioscience was building a monoclonal antibody fabrication system. When I had an opportunity to actually use the ADLib® system, I was astounded to see it produce a viable sample of functional antibodies in about 10 days. Through industry-academic collaboration, I hope Chiome Bioscience will make interesting new discoveries in areas that others have not looked into, and lead to the development of new drugs.
Partner Contract
UniversityofTokyo,TakahashiLab Productionofantibodiesagainstmembraneproteintargetsasindicationsofdiabetesandcancer.
JapaneseFoundationforCancerResearch Productionofantibodiesagainstantigenswithspecificexpressions,suchasforbreastcancer.
ShizuokaCancerCenterProductionofantibodiesagainstfirst-in-classtargetsbelievedtobeindicationsofseveraltypesofcancerinthehighunmetneedscategory.
NationalCancerCenterInJuly2012,beganproductionofantibodiesagainstfirst-in-class targetsbelieved tobe indicationsofseveraltypesofcancer.
2. Alliances with academia, etc.Chiome Bioscience aims to expand operations through
alliances with academia, which may lead to the acquisition
of target antigens and technological innovations. We
contribute to research by providing antibodies against
specific antigens. If antibodies demonstrate efficacy in
disease-model animals, we jointly file for a patent with the
academic institution and acquire commercialization
rights.
Chiome Bioscience is currently researching the drug
efficacy of anti-SEMA3A antibodies against targets that
cause blood poisoning together with Yokohama City
University. We also engage in joint research with the
University of Tokyo, the Japanese Foundation for Cancer
Research, the Shizuoka Cancer Center and the National
Cancer Center to license out lead antibodies.
analyzing the level of antibody diversification. In 2012,
Chiome Bioscience partnered with Biotecnol of the U.S.
and now uses its Tribody technology to further research
into the production of high-value-added antibody drugs.
Chiome Bioscience’s groundbreak-ing antibody production technology, the ADLib® system, is the outcome of my basic research into gene recombination at RIKEN (The Institute of Physical and Chemical Research).
I was astonished by the power of the ADLib® system. Antibodies that were impossible to produce with 10 years of effort can now be obtained in as few as 10 days.
KunihiroOhtaProfessor, Graduate School of Arts and Sciences The University of TokyoExecutive Director (outside) of Chiome Bioscience Inc.
YoshioGoshimaProfessor,
Molecular Pharmacology and Neurobiology
Graduate School of MedicineYokohama City University
8 9
At a Glance
Drug Discovery Alliance Lead Antibody Licensing Licensing Out Platform Technology
Summary Chiome Bioscience partners with pharmaceutical companies and other institutions to jointly research antibodies for the development of ethical drugs. Antibody research is also undertaken on a contract basis.
Net sales: ¥318,810,000 (down 49.2% year on year)
Gross profit: ¥199,423,000 (down 52% year on year)
Chiome Bioscience prepares novel antibodies as candidates for therapeutic drugs and out licenses them at an early stage to pharmaceutical companies.
Chiome Bioscience licenses the ADLib® system to pharmaceutical companies, allowing them to use the ADLib® system for their own R&D purposes.
Net sales: ¥5,317,000 (unchanged year on year)
Gross profit: ¥5,290,000 (up 23% year on year)
Strength This business offers a diverse range of earnings opportunities as Chiome Bioscience enters into alliances with multiple companies.
In addition to supporting clients in drug discovery, Chiome Bioscience engages in its own R&D to develop therapeutic antibodies.
By licensing out its proprietary drug discovery platform technology on a non-exclusive basis, Chiome Bioscience is able to generate earnings on the same scale as that of its alliance agreements.
Developments New contract entered into with Chugai Pharmabody Research Pte. Ltd.
Research underway with clients including Chugai Pharmaceutical Co., Ltd. and Glaxo Group Limited
Stepping up marketing to sign on new clients with the full-fledged commercialization of the ADLib® system based on a chimeric antibody library.
Successfully obtained humanized antibody for the anti-SEMA3A antibody, and confirmed drug efficacy in immune systems of animal disease models.
Entered into a contract with the National Cancer Center, and drug discovery research was launched.
Extended joint research contracts with the Takahashi Lab in the University of Tokyo. Strengthening alliances in discovery research with the Japanese Foundation for Cancer Research and the Shizuoka Cancer Center.
Out-licensed the ADLib® system to Fujirebio Inc. for R&D into reagents used for clinical testing and diagnosis.
Negotiating and conducting technological evaluation verification testing with several companies in Japan and overseas.
Earnings Models Upfront fees are collected as alliances are formed at the early research stage
Periodical research fees throughout the contract period in accordance with the alliance agreement
Upfront fees for the commercial license of the lead product at the outcome of the alliance
Milestone payments based on development outcomes by the licensee
Royalty income is received as a percentage of sales of the licensee’s antibody drug
Upfront fees are collected as alliances are formed at the early research stage
Lump-sum fees are received on conclusion of the development contract depending on the outcome of the alliance agreement
Milestone payments are received based on development outcomes by the licensee
Royalty income is received as a percentage of sales of the licensee’s antibody drug
Upfront fees are collected when licensing contracts are signed
Technology access fees are received while the licensee uses the technology
Milestone payments are received based on development outcomes by the licensee
Royalty income is received as a percentage of sales of the licensee’s antibody drug
Launch of an international joint project with Biotecnol, Inc.In January 2013, Chiome Bioscience entered into a co-development and
exclusive option agreement with Biotecnol, Inc. This international joint
project has been getting underway for the evaluation, non-clinical trial
and clinical development of therapeutic antibodies and will combine
Chiome’s ADLib® system and Biotecnol’s Tribody technology to
generate Tribody molecules (multi-specific T-cell engager antibodies)
for cancer treatment.
Merit award received for industry-academia-government collaboration by the Minister of Education, Culture, Sports, Science and TechnologyChiome Bioscience received a merit award from the Minister of
Education, Culture, Sports, Science and Technology in commendation
of its involvement in collaboration among industry, academia and
government. Sponsored by the Cabinet Office and various government
ministries, this award recognizes the advancements made possible
with the ADLib® system in the in vitro generation of a diverse array of
antibodies against antigens over a short time period of about ten days,
and the successful preparation of monoclonal antibodies against lipids
and evolutionarily conserved proteins that had been difficult to obtain
using conventional methods.
Progress building a fully humanized ADLib® systemIn addition to the observation of homologous recombination in antibody
light chain and heavy chain genes, Chiome Bioscience has confirmed
that gene conversion occurred between pseudogenes and functional
genes in the variable domains of both the light chains and heavy chains
in the same cell. Chiome Bioscience also confirmed the expression of
membrane-bound and secreted human IgG on the same cell. R&D
efforts successfully completed the prototype in June 2013.
Generation of high-affinity antibodiesChiome Bioscience has developed technology that improves the affinity
of antibodies obtained through direct ADLib® screening by optimizing
conditions for their acquisition. This technology also eliminates the
need for a diversification step during drug processing, thereby
considerably shortening the time required to prepare high-affinity
antibodies to around three weeks.
TOPICS:
10 11
Six-Year Financial Summary Management’s Discussion & Analysis
Thousands of YenThousands of U.S. Dollars
2008 2009 2010 2011 2012 2013 2013
(For the year ended March 31)
Net sales ¥ 34,207 ¥161,818 ¥380,815 ¥ 463,184 ¥ 633,197 ¥ 324,127 $ 3,446
Selling, general and administrative expenses
− − 420,227 495,570 427,035 617,874 6,569
Including research and development expenses
− − 209,752 245,407 177,981 309,437 3,290
Net loss (277,255) (204,617) (164,400) (180,233) (44,417) (426,890) (4,538)
Cash used in operating activities
¥ - ¥ - ¥ 4,006 ¥(195,289) ¥ (48,867) ¥ (373,258) $ (3,968)
Cash used in investing activities
- - (264,687) (85,664) (3,813) (114,786) (1,220)
Cash provided by financing activities - - 269,617 383,420 419,269 463,473 4,927
Net loss per share (Yen and U.S. dollars)
¥ (119.96) ¥ (78.22) ¥ (62.83) ¥ (63.38) ¥ (12.11) ¥ (101.94) $ (1.08)
Shareholders’ equity per share (Yen and U.S. dollars) (151.67) (229.89) (281.95) (285.29) 253.04 228.34 2.43
(As of March 31)
Capital stock ¥517,000 ¥517,000 ¥554,500 ¥779,500 ¥1,027,996 ¥1,213,090 $12,898
Shareholders’ equity and subscription right to shares
617,228 412,611 323,211 592,978 1,045,552 1,037,894 11,035
Total assets 729,279 660,861 865,735 876,017 1,265,866 1,296,734 13,787
Ratio of R&D expenses to operating revenue (%)
- - 55.1 52.9 28.0 95.4 -
Equity ratio (%) 84.6 62.4 37.3 67.7 82.6 76.3 -
(¥94.05 to U.S. $1)
Thousands of Yen
2013 2012 YOY Change%
Operating revenue 324,127 633,197 (48.8)
Cost of sales, selling, general and administrative expenses 737,288 640,463 15.1
Research and development expenses 309,437 177,981 73.9
Other 427,850 462,482 (7.5)
Operating loss (413,160) (7,266) -
Ordinary loss (424,813) (42,904) -
Net loss (426,890) (44,417) -
In fiscal 2012, the year ended March 31, 2013; operating revenue
declined 48.8% compared with the previous year to ¥324,127
thousand. Despite the extension of its contract research agreement
with Chugai Pharmaceutical Co., Ltd. in the first quarter, and the
execution of a new agreement with Chugai Pharmabody Research
Pte, Ltd. (CPR), a Singapore-based Chugai Pharmaceutical
subsidiary, in the Drug Discovery Alliance business, this downturn
in operating revenue was largely attributable to the Company’s
inability to fully cover delays in securing projects through to the
second quarter resulting from the effects of contract amendments
Drug Discovery AllianceDuring the fiscal year under review, Chiome Bioscience witnessed
positive developments in its research and business undertakings
with several licensees. In addition to the joint research contract and
extension of its research agreement with Chugai Pharmaceutical
Co., Ltd., Chiome Bioscience entered into a new agreement with
CPR. At the same time, the Company concluded a joint research
agreement with Biotecnol, Inc., a U.S.-based company that has
developed the unique Tribody technology, which generates multi-
specific antibodies, and continued to develop ties with the U.K.-based
GlaxoSmithKline group and several academic institutions.
Harnessing the competitive advantage of the Company’s ADLib®
system, which draws on its IgG chimera antibody library, currently
entering full-fledged practical application, Chiome Bioscience is
engaging in marketing activities that are designed to secure
large-scale contracts with several pharmaceutical companies.
Despite each of the aforementioned factors, operating revenue
in the Drug Discovery Alliance business declined ¥309,069 thousand
compared with the previous year to ¥318,810 thousand. Gross profit
in this business fell ¥216,046 thousand year on year to ¥199,423
thousand.
from the third quarter and beyond. While Chiome Bioscience took
steps to contain expenses wherever possible, the Company
witnessed an upswing in research and development expenditures
as it channeled in-house resources toward the development of a
fully human ADLib® System. This was consistent with the drop in
external projects. As a result, Chiome Bioscience incurred an
operating loss of ¥413,160 thousand, up ¥405,893 thousand year on
year. The Company’s ordinary loss climbed ¥405,893 thousand to
¥424,813 thousand and the net loss grew ¥382,472 thousand to
¥426,890 thousand.
Lead Antibody LicensingFocusing on its ongoing anti-SEMA3A antibody research with
Yokohama City University, Chiome Bioscience continues to draw on
its R&D results to negotiate with numerous pharmaceutical
companies in Japan and overseas. In advancing these negotiations,
the Company is working to develop a first-in-class therapeutic
antibody. In another major development, Chiome Bioscience
partnered with the National Cancer Center to begin joint research
into new therapeutic antibodies targeting cancer-specific molecules
owned by the Center. The Company has also extended the term of its
joint research agreement with a research laboratory led by Dr.
Shinichiro Takahashi at the Graduate School of Agriculture and Life
Sciences, the University of Tokyo, and entered into an agreement
with the Shizuoka Cancer Center to search for therapeutic
antibodies. As a part of ongoing efforts to uncover and obtain new
therapeutic antibodies, Chiome Bioscience is strengthening its
collaborative ties with academic and public research institutes
including the Japanese Foundation for Cancer Research.
There was no operating revenue or earnings in this segment
for the fiscal year under review.
Results by Business Segment
Operating Revenue
Overview of Operating Results
12 13
Management’s Discussion & Analysis
Licensing Out Platform TechnologyChiome Bioscience has licensed the ADLib® system to Fujirebio Inc.,
which continues to use the system to conduct research and engage
in the development of reagents for application in diagnosis.
Negotiations regarding agreements for technological assessment
are also under way with several Japanese and overseas pharma-
The current status of Chiome Bioscience’s research and
development activities is presented briefly as follows.
Practical application of the IgG Chimera antibody libraryChiome Bioscience has successfully developed over 80 chimera
antibody libraries with improved diversity and quality. Through the
Drug Discovery Alliance business and multiple joint research
projects with academia aimed at developing proprietary lead
antibodies, the Company has successfully applied its chimeric
antibody library to obtain antibodies for several antigenic proteins.
In this regard, the chimeric antibody library is fast becoming the
platform standard for obtaining antibodies.
Building a fully human ADLib® systemCurrently, Chiome Bioscience is introducing human antibody genes
into the DT40 cells in order to build a fully human antibody library
that is capable of obtaining human antibodies, not avian antibodies.
Successful development of a fully human ADLib® system is likely to
have a significant impact on the development of therapeutic
antibodies.
The Company had originally set the goal of both antibody and
pseudo-gene locus conversion into human genes and the
development of a homologous recombination fully human antibody
library prototype to be realized by the end of March 2013. In order to
bridge the gap between a prototype that offers diversified antibody
genes and practical application, Chiome Bioscience recognizes the
need for prudent development. Accordingly, the Company has put in
place increasingly stringent criteria for the establishment and
screening of a prototype pushing back the completion date to the
end of June 2013. Chiome Bioscience has finally verified the
expression of membrane-bound and secreted-type human
antibodies, and gene conversion occured in a single cell by adopting
new methods in the introduction of genes in an effort to ensure the
definitive practical application of a fully human ADLib® system.
The Company has successfully completed a prototype that is
capable of expressing diverse antibodies.
Obtaining functional antibodiesAs for the anti-SEMA3A antibody, which is discovered in the
collaborative research with Yokohama City University, Chiome
ceutical companies interested in licensing the ADLib® system.
As a result, operating revenue in this segment totaled ¥5,317
thousand, an increase of ¥0 thousand from the previous fiscal
year. Gross profit increased ¥991 thousand year on year to ¥5,290
thousand.
Bioscience confirmed the efficacy of both chimeric and humanized
antibodies on mouse model-based tests for immunological and
infectious diseases, more specifically, lipopolysaccharide
(LPS)-induced sepsis model. Moreover, tests clearly indicate the
therapeutic efficacy of the anti-SEMA3A antibody to substantially
improve the survival rates of patients even as a sole regimen.
Chiome Bioscience filed a patent application on February 6, 2013
and continues to engage in full-fledged marketing activities with the
aim of out licensing the antibody to pharmaceutical companies in
Japan and overseas.
In addition, Chiome Bioscience is making steady progress with
its joint research to generate new therapeutic antibodies targeting
cancer-specific molecules discovered by the National Cancer
Center, the development of new antibodies with a research
laboratory led by Dr. Shinichiro Takahashi at the University of Tokyo,
new therapeutic antibodies targeting cancer-specific molecules
with the Shizuoka Cancer Center, and endeavors with the Japanese
Foundation for Cancer Research. By bolstering joint-research with
multiple universities and public research organizations, Chiome
Bioscience is further reinforcing its ability to obtain new therapeutic
antibodies.
Obtaining high affinity antibodiesChiome Bioscience is engaging in research in an effort to isolate
high affinity antibodies from a growing number of cells in the ADLib®
library. To this end, the Company is working to enhance the
technological capabilities of its ADLib® system.
In this context, Chiome Bioscience is witnessing steady
progress in a variety of activities including the development of
methods to enrich high affinity cells, techniques to efficiently isolate
antibodies by improving screening methods, and a method to select
diversified libraries based on library diversification analysis by
next-generation sequencing machine. At the same time, the
Company has integrated each of the aforementioned improvements
and is establishing a discovery process of high affinity antibodies in
the internal antibody discovery projects. As a result, Chiome Bioscience
has successfully put in place the general protocols for discovery of
high affinity antibodies going forward. Looking ahead, the Company
will incorporate these methods into the overall operating processes
for developing therapeutic antibodies. This is expected to
substantially enhance antibody development efficiency.
Research and Development
Total assets stood at ¥1,296,734 thousand as of March 31, 2013, up
¥30,868 thousand compared with the end of the previous year.
Total liabilities totaled ¥258,840 thousand, a year-on-year
increase of ¥38,527 thousand. This was largely attributable to the
upswing in loans payable of ¥47,915 thousand mainly reflecting the
refinance of long-term loans payable.
Net assets totaled ¥1,037,894 thousand, down ¥7,658 thousand
compared with the previous year-end. Principal movements
included the drop in retained earnings of ¥426,890 thousand on the
back of the Company’s net loss for the period. In March 2013, Chiome
Bioscience issued its seventh series subscription rights. As a result,
new share warrants climbed ¥49,044 thousand. Accounting for the
exercise of new share warrants, the total of the Company’s common
stock and capital reserve increased ¥370,188 thousand.
Financial Position
Cash and cash equivalents as of the end of the period stood at
¥988,535 thousand, down ¥24,550 thousand.
Net cash used in operating activities was ¥373,258 thousand.
The principal movements were loss before income taxes of ¥424,813
thousand, depreciation and amortization of ¥55,455 thousand, and
changes in accrued consumption taxes of ¥28,701 thousand.
Net cash used in investing activities amounted to ¥114,786
thousand. During the fiscal year under review, the major components
were increase in lease deposits and others of ¥71,985 thousand and
purchases of property and equipment of ¥42,801 thousand relating to
the relocation of the Company’s head office and research laboratory.
Net cash provided by financing activities came to ¥463,473
thousand. The primary cash inflows were the increase in issuance
of shares of common stock in connection with the Company’s
Seventh Series of Share Warrants and the exercise of warrants
totaling ¥415,558 thousand as well as the increase in long-term
loans payable of ¥150,000 thousand representing the refinancing of
loans payable.
Cash Flows
Chiome Bioscience engages in substantial anticipatory investment,
which is recorded largely as research and development expenditure.
This is essential in securing ongoing breakthroughs in its R&D
activities. To date, the Company has reported successive operating
losses and accordingly is required to procure the necessary
financing to fund its working capital and business activity needs,
research and development expenditure, and capital investment. In
order to address this requirement, Chiome Bioscience undertook a
third-party allotment of its shares on March 4, 2013. As a result, the
Company issued 426,000 share of common stock in the form of
stock warrants to Milestone Capital Management, LLC. A portion of
these share warrants has already been exercised with a total of
¥261,560 thousand raised as of March 31, 2013.
All share warrants were exercised as of May 1, 2013 with the
total amount of funds procured reaching ¥3,776,598 thousand. This
has in turn had a dilutive effect of 10.01% on the total amount of the
Company’ issued and outstanding shares as of February 15, 2013.
Funds Procurement
Chiome Bioscience has continued to incur net losses since its
establishment. The Company is yet to pay a cash dividend. Recognizing
the need to engage in research and development into the future,
Chiome Bioscience will continue to place priority in securing the
necessary funds. As a result, the Company does not expect to pay a
cash dividend for the foreseeable future.
Despite these current conditions, management has positioned
the return of profits to shareholders as a key task and commitment.
Looking ahead, Chiome Bioscience will then work steadfastly toward
the payment of cash dividends and return of profits to shareholders
while taking into consideration its financial position and operating
results.
Returning Profits to Shareholders
14 15
Corporate Information (As of June 27, 2013) Stock Information (As of March 31, 2013)
Name: Chiome Bioscience Inc.Total authorized shares: 16,536,000
Total outstanding shares: 4,330,600
Number of shareholders: 6,147
Stock listing: Tokyo Stock Exchange, Mothers (Market of high-growth and emerging stocks)
Securities code: 4583
Share registrar: Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo, 100-0005
Annual shareholders’ meeting: June
Mailing address and Sumitomo Mitsui Trust Bank, Limited
telephone number: 2-8-4, Izumi, Suginami-ku, Tokyo, 168-0063
The toll-free service of the transfer agent (Japan only)
(0120-782-031)
For Further Information: Investor Relations Section
E-mail: [email protected]
Upgrading IR website contentsStock price / Turnover of common stock
To provide disclosure of a
broad range of information
about the Company that is
useful to all stakeholders,
we are working to upgrade
and expand the contents of
our website.
http://www.chiome.co.jp/english/ir/
Major shareholders: Masa Fujiwara 272,600 6.29
Kunihiro Ohta 240,000 5.54
Keiichi Sasaki 189,000 4.36
Masahiro Amazutsumi 131,000 3.02
Fast Track Initiative, Inc. 125,000 2.88
Matsui Securities Co., Ltd. 123,400 2.84
Hidetaka Seo 122,600 2.83
FUJIREBIO INC. 100,000 2.30
Rakuten Securities, Inc. 84,200 1.94
Naoto Nakamura 79,700 1.84
Business: Research and development
centered on the ADLib®
system, our proprietary
drug discovery platform
technology.
Board of directors: ChiefExecutiveOfficer Masa Fujiwara, M. Agr., D.V.M.
ExecutiveDirectors Keiichi Kiyota, M.B.A. (Executive Director of Business Administration)
Shigeru Kobayashi, M.E. (Executive Director of Business Development)
ExecutiveDirectors(*) Kunihiro Ohta, Ph.D.
Tsutomu Kawaguchi, Ph.D.
Audit&SupervisoryBoard Yasuhiro Tsuji, Ph.D.
Members(*) Masashi Iwaki
Noriko Sawai, Attorney at Law
Yoshiaki Asahi (*) outside
Address: Headquarters, Research Laboratories
Sumitomo Fudosan Nishi-shinjuku Bldg. No.6, 3-12-1
Honmachi, Shibuya-ku, Tokyo 151-0071 Japan
TEL: +81-3-6383-3561 (reception)
Date of establishment: February 8, 2005
Capital: 2,971 million yen (As of June 14, 2013)
Number of employees: 31 (As of March 31, 2013)
History: Shortly after its founding in February 2005, Chiome Bioscience Inc. concluded a
collaboration agreement with RIKEN (The Institute of Physical and Chemical Research)
to commercialize its leading technology, the ADLib® system. After launching research
activities, Chiome Bioscience Inc. concluded a collaboration agreement with Chugai
Pharmaceutical Co., Ltd., which led to new business projects, including research support
services for antibody drugs based on the ADLib® system.0
3,000,000
2011/12 2012/1 2013/6
6,000,000
9,000,000
12,000,000
15,000,000
0
2,000
4,000
6,000
8,000
10,000(¥)(Shares)
Chiome Bioscience Stock TurnoverChiome Bioscience Stock Price
( splits: 1 2)
Number of shares Percentage of total shares (%)
16 17
Chiome Bioscience Inc.http://www.chiome.co.jp/english/