financial results · genome editing technology (crispr/cas9) declined because of market change by...

Financial Results for the Fiscal Year 2017

ending March 2018

November 21, 2017 TRANS GENIC INC.

～ For Healthy and Affluent Lives of People Around The World ～

http://www.transgenic.co.jp

Note: This material includes forward-looking statements based on assumptions and beliefs in light of the information currently available to

management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of

factors including adverse economic conditions, delays in new product launch, pricing and product initiatives of competitors, the inability of

the company to market existing and new product effectively.

Copyright© TransGenic Inc. All Rights Reserved.

Ⅰ. Overview of Consolidated Financial Results for FY2017-2Q

Ⅱ. Consolidated Business Forecast for FY2017

Ⅲ. Business Topics

Ⅳ. Current Status of Research and Development

1

Table of Contents

2 Copyright© TransGenic Inc. All Rights Reserved.

Ⅰ. Overview of

Consolidated Financial Results

for FY2017-2Q


Unit：thousand yen FY2016-2Q FY2017-2Q Change

Net sales 985,669 855,183 ▲130,486

Cost of sales 674,472 630,180 ▲44,291

Gross profit of sales 311,196 225,002 ▲86,194

SG&A expenses （R&D expenses）

307,731 （25,137）

306,407 (28,500）

▲1,324 （3,362）

Operating profit 3,465 ▲81,404 ▲84,870

Ordinary profit ▲19,449 ▲89,997 ▲70,548

Net profit attributable to shareholders of parent company

▲22,730 ▲73,334 ▲50,604

Sales and profit decreased with declined backlog of unfilled orders. However revenue is

expected to be offset with the sales and orders in 2nd half.

Declined sales in CRO business made an effect on the gainings, however the revenue will recover by the sales in the 2nd half.

Non-operating revenues and expenses was improved because non-operating costs was reduced by decreased equity in losses.

Final loss was reduced compared with the amount of ordinary loss due to tax effect accounting based on surplus management.

Overview of Consolidated Financial Results

Consolidated Financial Results Highlight of FY2017-2Q


751

985 855

1,538

1,317

1,554

0

500

1,000

1,500

FY2015 FY2016 FY2017

1st half 2nd half

（forecast）


Consolidated Financial Results of FY2017-2Q: Consolidated Net Sales

Sales amount of 1st half decreased 13.2%

compared with last year

Transition of consolidated net sales in the past 3 years

（million yen）

Consolidated net sales in 1st half declined due to

decreased backlog of unfilled orders.

However, sales in 2nd half will make it possible to attain budget target.



Consolidated Financial Results of FY2017-2Q :Consolidated Operating Profit

Transition of consolidated operating profit

in the past 3 years （million yen）

-133

3

-81

183 150

281

-200

-100

0

100

200

300

400

FY2015 FY2016 FY2017

1st half 2nd half

Consolidated operating profit

decreased 84 million yen over previous

year

Operating profit decreased because of the declined sales

amount in the 1st half. However, the revenue in the

2nd half is expected to recover.

（forecast）


Sales amount Operating profit/loss

The number of order received of genetically engineered mouse production service using genome editing technology (CRISPR/Cas9) declined because of market change by the popularization of this technology.

The dependence on public research institutions has to be overcome. Enhancement of the business activities for companies and establishment of mouse model business are needed.

Genomics Business

Overview of Sales Revenue

Performance Summary： Genomics Business

182,125

131,627

0

50,000

100,000

150,000

200,000

FY2016-2Q FY2017-2Q

(thousand yen)

52,627

-7,681 -10,000

10,000

30,000

50,000

70,000

FY2016-2Q FY2017-2Q

(thousand yen)


Sales amount Operating profit

Decreased backlog of unfilled orders (▲170 million yen) had an effect on the sales in the 1st half (▲115 million yen). However, the revenue is expected to recover in the 2nd half with steady order acquisition.

Earnings is expected to grow in 2nd half. Profit-earning business structure has been established.

CRO Business

Overview of Sales Revenue Performance Summary: Contract Research Organization Business

82,156

15,591

0

20,000

40,000

60,000

80,000

100,000

FY2016-2Q FY2017-2Q

(thousand yen) (thousand yen)

485,576 370,084

0

100,000

200,000

300,000

400,000

500,000

600,000

FY2016-2Q FY2017-2Q



Sales amount of direct-to-costumer service and cancer genome diagnostic service

increased due to demand expansion.

Orders for molecular pathological analysis service as clinical trial-supporting service for pharmaceutical companies are running smoothly.

In consequence, sales and profit increased considerably, and turned into the black in the 1st half.

Advanced Medical Business


Performance Summary: Advanced Medical Business

123,482 160,723

0

50,000

100,000

150,000

200,000

FY2016-2Q FY2017-2Q

-43,723

4,437

-50,000

-40,000

-30,000

-20,000

-10,000

0

10,000

FY2016-2Q FY2017-2Q

(thousand yen) (thousand yen)



Utmost importance was put on the preservation of high quality service, in consequence, sales amount decreased slightly despite steady sales of pathological diagnostic service.

It takes some to instill self-sampling HPV testing service into the market. Continuous effort to raise awareness of this service is needed.

Failure of budget attainment in self-sampling HPV testing service led to decreased sales amount and operating loss in the 1s half.

Pathological Diagnostics Business


Performance Summary: Pathological Diagnostics Business

202,736

193,823

0

50,000

100,000

150,000

200,000

FY2016-2Q FY2017-2Q

(thousand yen)

6,371

-4,983

-10,000

-5,000

0

5,000

10,000

FY2016-2Q FY2017-2Q

(thousand yen)


Ⅱ. Consolidated Business Forecast

for FY2017

Copyright© TransGenic Inc. All Rights Reserved. 11

unit：thousand yen FY2016

（result） FY2017

（forecast） change Note

Sales amount 2,302,908 2,410,000 104.7%

Genomics 420,148 Making up the poorly

performing business with

successful business, and

aiming to budget

attainment

In need of Responding to market changes

CRO 1,150,505 Making an effort to redeem in 2nd half

Advanced medical 356,587 Direct-to customer service and next generation sequencing led the sales

Pathological diagnosis 399,294 Assumed to remain unchanged

Reconciliation ▲23,626 ▲20,000

Operating expense (R&D expense)

2,148,960 (48,015)

2,210,000 (51,290) 102.8％ Responding to sales increase

Operating profit 153,948 200,000 129.9%

Ordinary profit 88,272 170,000 192.6% Increased drastically due to reduced equity in losses.

Net profit attributable to shareholders of parent company

80,694 110,000 136.3%

Consolidated Business Forecast for FY2017

Sales of CRO business and Advanced medical business will make up for unprofitable Genomics business, and enable full-year budget attainment.


Ⅲ. Business Topics


Establishment of the New Company (TG Business Service: TGBS)

Launching business succession/regeneration project utilizing the business acquisition know-how obtained from 8 years experience

85‘ 90 ‘ 95 ‘ 00 ‘ 05 ‘ 10 ‘ 15 ‘ 17 ‘ (Jan.-Sep.)

（※Reference “M&A Trend Data” by RECOF corporation）

■Domestic M&A ■Outbound M&A by Japanese companies ■Inbound M&A by foreign companies

M&A statistics by cases Current situation of business succession

30% of incorporated companies: planning to go out of business 70% of Individually owned business : planning to go out of business

（※Reference: “The current situation and issues regarding business succession” by The Small and Medium Enterprise Agency

Condition of business succession/regeneration market

New Drug Research Center Inc.

Medifom Inc. GeneticLab Co., LTD. Primmune Inc.

CRO business SMO business Pathological diagnostics

business

Distribution of research reagents

Advanced medical business

Medical Chemistry Pharmaceutical

Co., Ltd.

Sugar chain-related

business

Genomics Business

TRANS GENIC Inc.

TG Business Service

Business successions・M&A

Equity method affiliated companies

Consolidated subsidiaries

Company A

Company B

・・・

Consolidated sub-subsidiaries

Decided 12.4%

Undetermined 21.8%

Too soon to Determine 15.9%

Going out of business 50.0%


Business Topics

Fifth Issuance of Share Options

350 million of share options (amount of funds: 2,225 million yen) were issued in order to raise funds for M&A in life science field (unexecuted) and business succession/regeneration project (launching soon)

①Day of allotment October 27, 2017

②Number of issuable shares （Number of share options）

350 million （3,500）

③Allottee Merrill Lynch Japan Securities Company, Limited

④Amount of funds 2,225 million yen

⑤Exercise price and condition for amendment

Exercise price: 90% of the closing price of TRANS GENIC’s common stock at the trading day immediately before the effective day of the exercising share options Minimum exercise price: 444 yen

⑥Restrictions of the exercise ・Appointment of exercising share option by TRANS GENIC ・Suspension of exercising share option by TRANS GENIC

⑦Features and disadvantages

（Features) ・Flexible fund-raising ・Maximum dilution 23.94% ・Increasing amount of fund-raising when stock prices go up （Disadvantage）・A period of time to procurement is needed depending on market environment ・Possibility to dip from fund-raising when decline in stock

【Overview】


Ⅳ. Current Status of

Research and Development


Overview of Research & Development Pipeline

開発パイプライン状況：モデルマウス系統

Target gene

KO or Tg Phenotype

analysis Validation

Distribution CRO

Approx. 2 years Approx. 2 years

ER stress indicator mouse

Oxidation stress indicator mouse

Inflammation indicator mouse

RIKEN

Mouse model with humanized liver

Kumamoto Univ.

TRANS GENIC

Available for sale

Gunma Univ.

Gunma Univ.

Development of

mouse model strains ※In-house Development or

Technological introduction from external research institutions

Already in practical use Recombination at ROSA26 locus

Development of genetic engineering technology CRISPR/Cas9 method

Mouse model of dementia

Behavioral and

Medical Sciences

Research Consortium

Mouse model of

psycho‐neurologic disease AIST

UMAI mouse Kanazawa Medical Univ.

Technology transfer in progress

Mouse model of Alzheimer’s disease

Osaka City Univ.

Mouse model of obesity

suppressing TRANS GENIC

Mouse model of NASH Contract service

Univ. of Tokyo

Mouse model of breast cancer

Mouse model of Eveningness

Kyushu Univ.

AIST

Mouse model of

atopic dermatitis

Hyogo College

of Medicine Mie Univ.

Available for sale

Available for sale

Contract service

Available for sale

Available for sale

Available for sale

Pathological condition indicator mouse

Mouse model of Central nervous System diseases

Mouse model of metabolic syndrome


Status of the Development Pipeline： Mouse Model Strains



Status of the Development Pipeline: Antibody/ Diagnostic Agent/ Therapeutic Agent

Target

identification Antibody

production Utility

verification Assay system

establishment

Licensing& Clinical

development

Market launch

Approx. 3 years Approx. 2 years～

Development/application of antibody product Develop the product from external

research institutes

Mid

term

S

hort te

rm

Liver cancer marker

Launched onto the market in Japan, 7-nation Asia and 4-nation Europe

Cancer marker for Urine sample

Kyushu Univ. Etc.

Pancreatic cancer marker

National cancer center

Urological cancer marker Juntendo Univ.

In progress to launch (domestic diagnostic company, Techno Medica）

*Under negotiation with

potential licensees

*Accumulating additional data

*Assay kit available for sale

Assay kit in preparation

※Collaborative research with IBL

※Clinical trial at Chinese company

in progress

※Exclusive license agreement with Chinese company

※ Exclusive license agreement with Chinese company

Clinical depression marker AIST Assay kit in preparation

Follicle Function Marker St. Marianna

Univ. Antibody in preparation

Abbott

Autoimmune disease marker

Medical chemistry pharmaceutical

Breast cancer marker Medical chemistry pharmaceutical

Under Consideration for utility

Under Consideration for utility


Research and Development Topics in FY2017

Article on pathological condition indicator mouse technology was published in Scientific Reports

Licensing Product/service Academic Conference/Articles

TG affiliates ※1 GeneticLab ※2 Medical chemistry pharmaceutical ※3 New drug research center

Collaborative research

Contract cancer clinical sequencing service was launched※1

Apr.

Jun.

Patent Licensing Agreement on Diacetylspermine as early cancer marker was concluded

Licensing agreement on mouse model of Alzheimer’s disease was concluded

“Sugar chain of exosome-analyzing service” was launched ※2

Collaborative research and development agreement on Alzheimer’s disease remedy was concluded

Collaborative research and development agreement on antibody to functional glycopeptide was concluded※2

Jul.

Licensing agreement on mouse model of neuropsychiatric disease was concluded※3 Contract non-clinical test service for central nervous system disease using genetically engineered mice was launched

Sales agency agreement on contract service of cancer clinical sequencing analysis was concluded※1

Aug.

Civic Forum “Stop! Cervical cancer” was held ※1

Oct.

others

Exclusive licensing agreement on mouse model of NASH was concluded Nov.


Jun. 2006

Apr. 2010

Nov. 2010 Sep. 2015

Jun. 2009 Nov. 2014

Apr. 2015

Sep. 2015

Jul. 2008

Feb. 2009

Apr. 2009

Jan. 2010

Mar. 2010

Apr. 2010

Apr. 2011

Sep. 2011

Dec. 2011 Sep. 2012

Dec. 2016

『JP3816512 』 granted in Japan

『US7,700,741 』 granted in USA

『JP4608432 』 granted in Japan （diagnosis for early stage cancer）『US9134313 』 granted in USA (diagnosis for early stage cancer)

Cancer marker in urine：

measurement system for

cancer diagnosis using

urine sample

『JP4319700 』 granted in Japan

『US8883972 』 granted in USA

Pancreatic cancer marker：

Antibody and its diagnostic

application

『JP5716257 』 granted in Japan New bile duct cancer marker

『JP5800176 』 granted in Japan Technology for high-level

protein expression system

Bio

mark

er-re

late

d te

ch

nolo

gie

s

『ZL2003801028324』granted in China

『AU2003277620』granted in Australia

『EP1559318』granted in Europe

『JP4426728』granted in Japan

『KR941905』granted in Korea


『US7,919,674』granted in USA

『ZL200710193915.9 』granted in China

『HK1124363B』 granted in Hong Kong


ＧＡＮＰ® mouse

technology

『US9644026 』 granted in USA New lung cancer marker

『AU778719 』 granted in Australia

『US7,312,075 』 granted in USA

『EP1201759』 granted in Europe

『ZL00812904.5』 granted in China

『HK1048830B』 granted in Hong Kong

『JP4664554』 granted in Japan

『ZL200510084464.6』granted in China

『US8,722,408』granted in USA

Apr. 2005

Dec. 2007

Mar. 2010

Jun. 2010

Dec. 2010

Feb. 2011

Apr. 2013

Apr. 2014

Exchangeable gene- trap mouse technology

『JP5899388』 granted in Japan Mar. 2016 Organ-humanized mouse

Mou

se –

rela

ted

te

ch

nolo

gie

s

Our Intellectual Property

Current Status of Major Patent


～ For Healthy and Affluent Lives of People Around The World ～

http://www.transgenic.co.jp

financial results · genome editing technology (crispr/cas9) declined because of market change by...

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