last update 3-d matrix | 7777 · 1/26/2016 · 3-d matrix | 7777 | r shared research report last...

LAST UPDATE【2016/01/26】

3-D Matrix | 7777 |

Research Report by Shared Research Inc.

Shared Research Inc. has produced this report by request from the company discussed in the report. The

aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide

an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data

and findings. We will always present opinions from company management as such. Our views are ours

where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and

feedback. Write to us at [email protected] or find us on Bloomberg.

R

mailto:[email protected]

3-D Matrix ＞ Executive summary

02/89

www.sharedresearch.jp

3-D Matrix | 7777 |

R

Shared Research Report


INDEX

Executive summary --------------------------------------------------------------------------------------------------- 3 Key financial data ----------------------------------------------------------------------------------------------------- 4 Recent updates --------------------------------------------------------------------------------------------------------- 5

Highlights ----------------------------------------------------------------------------------------------------------------------- 5 Trends and outlook --------------------------------------------------------------------------------------------------- 8

Quarterly trends and results ----------------------------------------------------------------------------------------------- 8 Full-year company forecasts --------------------------------------------------------------------------------------------- 11 Medium-term outlook----------------------------------------------------------------------------------------------------- 14

Business ----------------------------------------------------------------------------------------------------------------- 17 Business description ------------------------------------------------------------------------------------------------------- 17 Main business segments-------------------------------------------------------------------------------------------------- 19 Main development pipeline --------------------------------------------------------------------------------------------- 22 Main business partners --------------------------------------------------------------------------------------------------- 36 R&D System ------------------------------------------------------------------------------------------------------------------ 37 Group companies ---------------------------------------------------------------------------------------------------------- 40 Strengths and weaknesses ----------------------------------------------------------------------------------------------- 43 Market and value chain --------------------------------------------------------------------------------------------------- 44 Strategy ------------------------------------------------------------------------------------------------------------------------ 47

Historical financial statements ----------------------------------------------------------------------------------- 48 Earnings results (for reference purposes) --------------------------------------------------------------------------- 50 Income statement ---------------------------------------------------------------------------------------------------------- 56 Balance sheet ---------------------------------------------------------------------------------------------------------------- 58 Statement of cash flows -------------------------------------------------------------------------------------------------- 60

Other information ---------------------------------------------------------------------------------------------------- 61 History -------------------------------------------------------------------------------------------------------------------------- 61 News and topics ------------------------------------------------------------------------------------------------------------ 63 Major shareholders --------------------------------------------------------------------------------------------------------- 82 Dividends and shareholder benefits ---------------------------------------------------------------------------------- 82 Top management ----------------------------------------------------------------------------------------------------------- 83 Employees -------------------------------------------------------------------------------------------------------------------- 83 Glossary ------------------------------------------------------------------------------------------------------------------------ 84 Company profile ------------------------------------------------------------------------------------------------------------ 88

3-D Matrix ＞ Executive summary

03/89


3-D Matrix | 7777 |

R



Executive summary

Medical technology company that develops, manufacturers, and markets a self-assembling peptide technology

3-D Matrix is a medical technology company that develops, manufacturers, and markets a self-assembling peptide

technology originally created at the Massachusetts Institute of Technology (MIT).

The key features of the company’s business:

◤ MIT holds the underlying patent for the self-assembling peptides that are the basis of 3DM’s products. The

Company has an exclusive global license from MIT for this technology that includes rights of development,

manufacture, and marketing of applications that use these self-assembling peptides.

◤ Self-assembling peptides have two main advantages over competing medical products currently on the market.

Firstly, as they are produced by chemical synthesis, there is no risk of viral or other types of contamination that can

occur in goods derived from living organisms. Secondly, they can be mass-produced in a homogenous fashion.

◤ These characteristics potentially lend themselves to large-scale use in surgery (as absorbable localized hemostatic

agents and mucous membrane protuberance agents) and in the regenerative medicine field (as alveolar bone

reconstruction agents).

◤ 3DM’s business model attempts to minimize risks particular to medical product start-ups. Specifically, the products it

develops are categorized as ‘medical devices’ rather than ‘pharmaceuticals’. Consequently, the duration from

application to approval is shorter and costs are lower compared to drug development. (See the Business section for

details.)

Trends and outlook

In FY04/15, 3DM reported operating revenue of JPY100mn (JPY107mn in FY04/14), an operating loss of JPY1.9bn

(operating loss of JPY1.5bn in FY04/14), a recurring loss of JPY1.8bn (recurring loss of JPY1.5bn in FY04/14), and a net loss

of JPY2.0bn (net loss of JPY1.5bn in FY04/14).

For FY04/16, the company projects operating revenue between JPY783mn~JPY2.9bn (JPY100mn in FY04/15). Other

projected ranges are an operating loss of JPY2.0bn to a profit of JPY24mn (operating loss of JPY1.9bn in FY04/15), a

recurring loss of JPY2.0bn to profit of JPY16mn (recurring loss of JPY1.8bn in FY04/15), and a net loss of JPY2.0bn to a

profit of JPY11mn (net loss of JPY2.0bn in FY04/15). (See Trends and outlook.)

3DM’s medium-term management plan for the period through FY04/18 targets operating revenue of JPY9.9bn, operating

profit of JPY3.0bn, recurring profit of JPY3.0bn, and net income of JPY2.3bn.

Strengths and weaknesses

Shared Research believes that the three strengths of 3DM are its promise of the core self-assembling peptide technology,

differentiated business model and large potential market. Its three weaknesses include its commercial success being

dependent on outside partners, dependence on third party core patents with relatively short lives, and potential human

resources bottlenecks. (See Strengths, weaknesses for details.)

3-D Matrix ＞ Key financial data

04/89


3-D Matrix | 7777 |

R



Key financial data

Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.

Income Statement FY04/10 FY04/11 FY04/12 FY04/13 FY04/14 FY04/15 FY04/16(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Est.Operating Revenue 402 158 1,107 32 107 100 783～2,877

YoY - -60.6% 599.5% -97.1% 234.7% -6.9% -Operating Expenses 467 641 753 1,031 1,626 2,003

YoY - 37.2% 17.5% 36.9% 57.6% 23.2%Operating Profit -65 -482 354 -999 -1,518 -1,903 -1,996～24

YoY - - - - - - -OPM - - 32.0% - - - -

Recurring Profit -60 -510 310 -978 -1,524 -1,795 -2,004～16YoY - - - - - - -RPM - - 28.0% - - - -

Net Income -61 -534 309 -978 -1,525 -1,995 -2,005～11YoY - - - - - - -Net Margin - - 27.9% - - - -

Per Share Data (JPY; adjusted for stock splits)Number of Shares (thousands) 13,568 15,168 18,355 18,936 19,876 21,438EPS -4.5 -35.2 18.4 -52.6 -77.8 -94.9 -93～0.56EPS (fully diluted) - - 17.3 - - -Dividend Per Share - - - - - - Book Value Per Share 86.0 75.1 156.3 53.7 146.2 281.8Balance Sheet (JPYmn)

Cash and Equivalents 544 589 1,758 2,033 2,641 5,137 Total Current Assets 594 666 2,501 2,484 3,593 6,204

Tangible Fixed Assets, net 7 6 88 107 103 94 Other Fixed Assets 19 22 30 47 86 118 Intangible Assets 578 505 437 383 339 393

Total Assets 1,198 1,199 3,055 3,020 4,121 6,809 Accounts Payable 12 16 22 48 92 139 Short-Term Debt - - - - - -

Total Current Liabilities 31 49 112 913 958 409 Long-Term Debt - - - - - -

Total Fixed Liabilities - 0 55 42 29 18 Total Liabilities 31 49 167 955 988 428 Net Assets 1,167 1,150 2,888 2,066 3,133 6,382

Interest-Bearing Debt - - - - - - Cash Flow Statement (JPYmn)Operating Cash Flow -28 -434 -131 -647 -1,680 -1,905Investment Cash Flow -13 -18 -100 -56 -83 -126Financing Cash Flow 573 498 1,400 983 2,360 4,511Financial RatiosROA -6.3% -44.6% 14.5% -32.2% -42.7% -36.5%ROE -6.6% -46.3% 15.4% -39.9% -61.8% -44.0%Equity Ratio 97.4% 95.0% 93.9% 67.3% 70.5% 90.4%

3-D Matrix ＞ Recent updates

05/89


3-D Matrix | 7777 |

R



Recent updates

Highlights

On January 26, 2016, Shared Research updated the report following interviews with management.

On January 25, 2016, 3-D Matrix Ltd. announced that it had obtained approval to register locally absorbent hemostatic

material PuraStat® as a medical product in Thailand.

The company’s subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd. (3DMA) received notification from the Thailand

regulatory authority, the Thai Food and Drug Administration (Thai FDA), that the product was approved for registration as

a medical device on January 25, 2016.

As the approval was for the CE marking that does not require clinical trials to be conducted in Thailand, local sales of the

product are now possible. 3DMA had already entered into a partnership with Daewoong Pharmaceutical Co., Ltd.

(Daewoong) in Q1 FY04/16 for the sales and marketing of absorbable local hemostat PuraStat® in Thailand. With

registration for the product approved, Daewoong is expected to start initial product shipment in Q4 FY04/16, and begin

marketing the product from the start of FY04/17.

Presently, the company does not expect this to impact its full-year earnings forecasts for FY04/16.

On January 22, 2016, the company announced that it had obtained approval to register locally absorbent hemostatic

material PuraStat® as a medical product in Australia.

The company’s subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd. (3DMA) received notification from the Australia

regulatory authority, Therapeutic Goods Administration (TGA), that the product was approved for registration as a

medical device on January 22, 2016.

As the approval was for the CE marking that does not require clinical trials to be conducted in Australia, local sales of the

product are now possible. 3DMA had already entered into a partnership with Maquet Australia Pty Ltd (Maquet) for the

sales and marketing of absorbable local hemostat PuraStat® in Australia on October 5, 2015. With registration for the

product approved, Maquet is expected to begin marketing PuraStat in Q4 FY04/16.

Presently, the company does not expect this to impact its full-year earnings forecasts for FY04/16.

On January 5, 2016, 3-D Matrix Ltd. announced that a patent for a three-dimensional cell culture scaffold, exclusively

licensed to the company by the Massachusetts Institute of Technology (MIT), had been granted in Canada.

The company announced that a patent filed by MIT regarding a self-assembling peptide technology, exclusively licensed

to the company by MIT, had been granted in Canada. The patent concerns the bone andcartilage and skin regeneration


06/89


3-D Matrix | 7777 |

R



fields in which the company is currently conducting research.

It specifically concerns a three-dimensional scaffold comprised of self-assembling peptide, which is built around cells,

chemoattractants, etc., and the methods of forming it when those cells are chondrocytes, fibroblasts, neuronal cells,

epidermal cells, endothelial cells, pancreatic cells, liver cells, bone marrow cells, and embryonic stem cells. It also covers

the application of this technology in tissue regeneration for treating or preventing defects in cartilage, the epidermal

lining, the endothelial lining, connective tissue (ligaments and tendons), nervous tissue, as well as treating conditions

such as arthritis.

The company is working to form business partnerships for the distribution and out-licensing of wound healing material

(TDM-511), already an approved product in the US, and dental bone void filler (TDM-711), currently undergoing clinical

trials in the US, after FY04/17. The patent filed by MIT (regarding the three-dimensional scaffold and its application in

tissue regeneration) has already been granted in the US, EU, and Japan, and is expected to reinforce the license held by

the company due to covering a wide range of applicable cell types. It also fortifies the company’s own patents for

self-assembling peptide technology, and it is expected to contribute to business partnerships and out-licensing

agreements in the future. Further, it is also projected that it will provide protection of rights in areas considered for

pipeline development in the future, such as bone/cartilage regeneration material, currently being researched for clinical

application as part of the Center of Innovation (COI) project at the University of Tokyo (joint research between Professor

Tsuyoshi Takato and the University of Tokyo Graduate School of Medicine).

Although the announcement is expected to enhance the value of joint research and the company’s intellectual property

in FY04/17 onward, it is not expected to have an impact on company earnings in FY04/16.

On December 28, 2015, the company announced that its subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd., concluded

an exclusive sales and marketing agreement with Transmedic Pte Ltd. for sales of the company’s absorbable local

hemostat PuraStat® in Singapore, Malaysia, and Brunei.

Based on this agreement, 3-D Matrix Asia Pte. Ltd. will grant an exclusive sales and marketing license for the company’s

absorbable local hemostat PuraStat® to Transmedic in Singapore, Malaysia and Brunei.

This agreement will allow for the expansion of commercial sales to medical institutions in these three countries through

Transmedic’s marketing network. Along with Indonesia, Thailand, Philippines, and Vietnam where 3D-Matrix has already

obtained exclusive agreements from other local distribution partners, its marketing network will now cover all major

markets in Southeast Asia. Regulatory requirements for sales of the product have been completed in Singapore, Malaysia,

and Brunei. Commercial sales will start soon and are expected to contribute the group’s revenues.

This agreement is already accounted for in the firm’s full-year forecast, and while only a minor impact on full-year earnings

is expected, the company plans to quickly disclose information if there is a significant earnings impact.

On December 15, 2015, the company announced 1H earnings results for FY04/16; see the results section for details.


07/89


3-D Matrix | 7777 |

R



On November 4, 2015, the company announced that it obtained product registration in Brazil for absorbable

hemostat TDM-621(“PuraStat®” ).

Subsidiary 3-D Matrix Europe SAS has received notification that medical device product registration approval in Brazil has

been granted by the Brazilian regulatory body, Agência Nacional de Vigilância Sanitária (ANVISA).

As clinical testing in Brazil is not necessary to gain CE marking there, it used this to apply for product registration on

August 11, 2015. With registration approved, it will now be able to start product sales in Brazil. The company is currently

selecting a the local partner to distribute “PuraStat®” with plans to start sales by the end of this fiscal year. The company

does not expect a significant impact on its full-year earnings.

For corporate releases and developments more than three months old, please refer to the News and topics

section.

3-D Matrix ＞ Trends and outlook

08/89


3-D Matrix | 7777 |

R



Trends and outlook

Quarterly trends and results

Source: Shared Research based on company data. Figures may differ from company materials due to differences in rounding methods. Forecasts based on most recently released figures.

Q2 FY04/16 results

▶ Operating revenue: JPY53mn (JPY0mn in previous year)

▶ Operating loss: JPY980mn (operating loss of JPY1b in previous year)

▶ Recurring loss: JPY978mn (recurring loss of JPY985mn in previous year)

▶ Net loss: JPY931mn (net loss of JPY1.1bn in previous year)

Operating revenue came from EU and Asian sales of hemostatic agent TDM-621 and an upfront payment for a sales and

marketing partnership in Asia. Sales in EU and South America lag behind plans, but pre-marketing activities in the EU such

as offering samples are yielding results, and hospitals have begun placing orders. As such, the company remains on track

to meet estimates for the year considering current results and plans for the second half of the year. R&D and other

expenditures remained within levels outlined by the company in its full-year forecast.

In addition, 3-D Matrix booked JPY48mn in extraordinary income as it made gains on share option reversal when rights

holders lost their rights through retirement from the stock option system.

Hemostatic agent (TDM-621) Status in Japan

In Japan, after 3-D Matrix withdrew its application l to manufacture and sell this pipeline product in the domestic market

in March 2015, and resumed consultation with the Pharmaceuticals and Medical Devices Agency (PMDA) for a clinical

trial to scientifically verity its efficacy. The company had been planning to launch clinical trials during the first half of this

year, but more time than expected is required to finalize details of the trial protocol, including factors such as size and

evaluation methods. Consultations with the PMDA are also ongoing, so the company will submit a trial plan notification

during this period and continue efforts to begin the trial in Q1 FY04/17.

Quarterly Performance (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 % of FY FY Est.Operating Revenue 0 0 0 100 47 53 - 783～2,877

YoY - - - -6.9% - - 685.7%R&D Expenses 141 422 603 816 167 341

YoY -3.7% 49.2% 40.9% 36.3% 18.1% -19.1%SG&A Expenses 297 583 911 1,185 354 631

YoY 33.6% 31.5% 35.0% 15.8% 19.0% 8.2%Operating Profit -438 -1,005 -1,514 -1,903 -519 -980 - -1,996～24

YoY - - - - - - -OPM - - - - - - -

Recurring Profit -471 -985 -1,423 -1,795 -477 -978 - -2,004～16YoY - - - - - - -RPM - - - - - - -

Net Income -635 -1,148 -1,588 -1,995 -453 -931 - -2,005～11YoY - - - - - - -NPM - - - - - - -

FY04/16FY04/15 FY04/16


09/89


3-D Matrix | 7777 |

R



Overall planning must take into consideration the status of consultations in Q3 and beyond. The company will carefully

study the effects of these consultations in Q3 and Q4, and incorporate any changes into the plan going forward.

Status in Europe

In Europe, the company is simultaneously pursuing both direct sales through sales agents and contracts with potential

distributors. The company is concluding contracts with sales agents in each country. These agents are brokers with their

own relatively small-scale sales networks. Meanwhile, distributors are larger companies with sales networks throughout

Europe and the capacity to run their own sales promotions. According to the company, there are only a limited number of

hospitals in Europe which perform surgical operations that would use their absorbable localized hemostatic agent. This

means that pursuing direct sales through sales agents should lead to increased sales volume. The company also plans to

accelerate sales volume growth through concluding sales contracts with distributors targeting all of Europe, as these

distributors possess sales networks throughout the region and are capable of running promotions.

The hemostatic agent received European CE marking certification in January 2014. As part of pre-marketing activities, the

company is accumulating clinical results from prominent doctors and medical institutions in major countries such as

Germany, France, and the UK. Sales began in the UK and Germany by December 2015, and started via sales agents in

France, Switzerland, and Spain in Q2.

The company continued negotiating sales agreements with three potential European sales partners in Europe in Q2, and

plans to conclude sales agreements by the end of Q3.

Status in Asia

The company has applied for medical device registration and has begun preparing for sales in Asian countries using the

CE marking system (Singapore, Indonesia, and South Korea).

In Q1, the company concluded an agreement with Daewoong Pharmaceutical Co., Ltd. (Daewoong) of Korea for

exclusive sales and marketing rights in the ASEAN region (Thailand, Vietnam, and the Philippines), and received related

one-time payments. The company is now negotiating with sales partners in Singapore and Malaysia to expand into those

markets. Meanwhile, it began sales in Indonesia, Hong Kong, and other regions during the current term. The company

plans to initiate sales in the ASEAN region by FY04/17, and concluded a sales agreement with Maquet Australia Pty Ltd

(Maquet) of Australia in Q2 to break into the Oceana region. Macquet has already applied for product registration in

Australia, and the company plans to begin sales in the country in FY04/17 after registration approval in the current term.

Status in South America

The company received product registration approval in Columbia in Q1, as other South American countries such as Brazil

and Mexico also use the CE marking system. Plans are proceeding steadily, with registration approval in Brazil obtained in

November 2015 and approval in Mexico expected in the second half of this year. Product sales will be delayed due to the

focus placed on review for product registration in the first half of the year. However, the company has already begun

negotiations with sales partners in Brazil and Mexico, and plans to conclude a sales agreement in Mexico to coincide with

registration approval. Sales are therefore expected to begin in the second half of this year.

Status in the US

In the US, the company has been consulting with the Food and Drug Administration (FDA) regarding protocols in order

to start clinical trials in the US. Plans are to start these trials in Q1


10/89


3-D Matrix | 7777 |

R



Mucous membrane protuberance material The company started a clinical study in December 2014. However, in February 2015, it decided to voluntarily and

temporarily discontinue the study in order to explore test methods for more evident efficacy and for product

development. The company aims to restart the study by end Q3 FY04/16 and, as of December 2015, there were no

changes to its development plan up to placing the product on the market. As of December 2015, the company is

preparing its European application.

Alveolar bone regenerator In clinical trials in the US, the company completed treatment and observations of 15 patients during the first pilot study,

collecting good results and data in terms of bone formation. After the FDA approved the trial protocols for a second pilot

study, the company moved onto the next clinical trial phase in Q1. Notwithstanding time-consuming observations to

confirm the process of bone formation, 3-D Matrix will stay on development track to roll out the product. As of December

2015, the company is preparing its European application.

Wound-healing agent In October 2014, 3-D Matrix submitted a 510(k) premarket notification to the US Food and Drug Administration (FDA),

which was approved in February 2015, allowing for the start of sales. The company expects increased therapeutic effects

in combination with other pharmaceuticals (antibiotics, anticancer drugs, and hyaluronic acid) and as of Q2, it is working

on commercialization with higher added value for the fields of skin burn treatments, skin cancer treatments, and cosmetic

surgery. In the company’s 1H FY04/16 results briefing, it was mentioned that its US subsidiary, 3-D Matrix, Inc., is

preparing for sales of the wound-healing agent as a standalone product. Finally, as of December 2015, the company is

preparing its European application.

Other In other areas, 3-D Matrix is collaborating with the National Cancer Center on treatment for “triple negative” breast

cancer with nucleic acid medicine that targets the RPN2 gene. The company is providing siRNA nucleic acid medicine

that uses the self-assembling peptide A6K as a drug-delivery system (DDS). In Q1, the National Cancer Center started

physician-led clinical trials with the new siRNA nucleic acid medicine TDM-812 (RPN2siRNA/A6K compound), jointly

developed by the Center and 3-D Matrix. These physician-led clinical trials are targeted at treatment-resistant breast

cancer patients who have tumors that can be felt from the surface of the body, and are the first such physician-led clinical

trials to be administered in humans.

In 2010, 3-D Matrix began collaborative research with the New Energy and Industrial Technology Development

Organization (NEDO), an incorporated administrative agency. The title of the research is “Research and Development of

Next-Generation Alternative Vital-Function Technologies / Research and Development of Next-Generation Regenerative

Medicine Technologies / Development of Autonomous Regeneration Device for Regenerating Tissue in Vivo with a Small

Number of Cells.” The company is also providing its self-assembling peptide as scaffolds for cartilage regeneration.

For details on previous quarterly and annual results, please refer to the Historical financial statements section.


11/89


3-D Matrix | 7777 |

R



Full-year company forecasts



For FY04/16, the company projects operating revenue between JPY783mn~JPY2.9bn (JPY100mn in FY04/15). Other

projected ranges are an operating loss of JPY2.0bn to a profit of JPY24mn (operating loss of JPY1.9bn in FY04/15), a

recurring loss of JPY2.0bn to profit of JPY16mn (recurring loss of JPY1.8bn in FY04/15), and a net loss of JPY2.0bn to a

profit of JPY11mn (net loss of JPY2.0bn in FY04/15).

Operating revenue

The company expects the bulk of operating revenue to be derived from sales of absorbable local hemostatic products

(JPY582mn–JPY675mn), and one-time payments under contracts and milestone payments (JPY176mn–JPY2.2bn). The

company also anticipates JPY25mn from sales of other products. By region, the company anticipates absorbable local

hemostatic product sales of JPY316mn–JPY409mn in Europe and JPY266mn in Asia/South America.

With regard to the calculation of contractual one-time payments for absorbable local hemostatic agents, management

says it considers a number of different calculation methods, including practices at other companies and comparisons with

its own past results. Using its past results in Japan and Asia as a base, the company also takes into consideration the

product value, market size, expected market share, and risk in the country/region in question.

FY04/16 Company Forecasts(JPYmn) 1H Act. 2H Act. FY Act. FY Est.Operating Revenue - 100 100 783～2,877CoGS - - 2

CoGS / Operating Revenue - - 1.5%R&D Expenses 422 394 816 1,024SG&A Expenses 583 602 1,185Operating Profit -1,005 -898 -1,903 -1,996～24

YoY - - - -OPM - - - -

Recurring Profit -985 -811 -1,795 -2,004～16YoY - - - -RPM - - - -

Net Income -1,148 -846 -1,995 -2,005～11YoY - - - -

FY04/16FY04/15

FY04/16 Company forecasts of operating revenue breakdown FY04/15 FY04/16(JPYmn) FY Act. FY Est.Absorbable local hemostatic 54 758～2,850

Product sales 3 582～675One-time payments under contracts/milestone payments 51 176～2,175

Others 45 25Product sales 0 7One-time payments under contracts/milestone payments 45 18


12/89


3-D Matrix | 7777 |

R



Pipeline assumptions In FY04/16, 3-D Matrix will continue development in the surgery and regenerative medicine fields utilizing its

self-assembling peptide technologies with the aim of quickly realizing operating revenue through product sales.

In Japan the company is consulting with PMDA regarding clinical trial protocols with the aim of restarting clinical trials for

its absorbable local hemostat. It plans to conduct new clinical trials in Q1 FY04/17. Unlike the previous clinical trial, the

company will work with the Contract Research Organization (CRO) to improve the efficiency of the trials. Shared Research

believes the company conducted comparative trials in order to have an objective evaluation of the agent’s efficacy

(Shared Research observes that in general many clinical trials are conducted to objectively validate the efficacy of

pharmaceuticals and pharmaceutical devices). The company plans to resubmit its application in 2H FY04/16.

In Europe, the company is ready to start product sales through wholesalers/sales agents (specialized sales approaches for

each country) targeting prominent medical institutions in Germany, France, and the UK with the aim of generating

operating revenue. The plan is to launch sales targeting the entire EU by end-Q3 FY04/16 using sales partners

(candidates) that have sales channels and promotion functions covering the entire region. To this end, the company plans

to establish a new subsidiary in Holland that will collect clinical trial data and carry out marketing. Plans call for the new

subsidiary to expand sales by training sales agents to explain the product, particularly targeting 100 high-profile medical

institutions.

In Asia, the company will begin sales in Hong Kong and Indonesia in FY04/16. In Q1 FY04/16, the company concluded an

exclusive sales and marketing contract with DW of Korea to expand in the ASEAN region (Thailand, Vietnam, the

Philippines). In Q3 FY04/16, the company concluded an exclusive sales and marketing contract with Transmedic for

Singapore, Malaysia, and Brunei. Finally, the company formed a sales agreement with Maquet in Q2 FY04/16 for

marketing in Australia.

In the US the company is now in the protocol preparation stage and plans to launch clinical trials in FY04/16. In South

America, there are plans to launch product sales in countries such as Columbia, and Chile.

As for other products in its development pipeline, clinical trials for the alveolar bone regenerator are ongoing in the US.

Using those results, the company will then make ready to meet CE marking requirements in Europe. Clinical trials for its

mucous membrane protuberance material were suspended, but the company aims to restart these trials by end-Q3

FY04/16, while maintaining product advantages. In Europe, the company is awaiting approval of its product registration

application. 3DM's wound-healing agent has already been approved in the US and the company is now looking to get it

approved for sale in Europe. With the company having already expanded its sales channels for hemostatic agents in

Europe (as of June 2015), plans call for following up with sales other products through these same channels.

As for the joint project with the National Cancer Center, the center has started physician-led clinical trials, promoting

development in the drug-delivery system (DDS) field.

Projections for absorbable local hemostat In preparing its earnings forecasts the company assumes operating revenue of JPY582mn~JPY675mn from product sales of

absorbable local hemostats and JPY176mn~JPY2.2bn from upfront payments and milestone payments involving these

products.


13/89


3-D Matrix | 7777 |

R



The company plans to sell absorbable local hemostat products in those regions that adopt the CE marking system in

Europe, Asia, and South America. In Europe the main sales targets will be prominent medical facilities in Germany, France,

and the UK. In Asia the main sales targets will be Southeast Asian countries like Indonesia and Malaysia, while the main

targets in South America will be Columbia and Chile.

3-D Matrix expects a significant year-on-year increase in product sales. Its anticipated product sales of

JPY582mn~JPY675mn breaks down as roughly JPY266mn sales in Asia/South America and around JPY316mn~JPY409mn in

Europe. The main factors are sales through dealers in Europe, sales agents, and sales partners.

In Europe, the company is working out sales forecasts calculated based on marketing forecasts (market scale / forecasts)

obtained by the company through meetings with wholesalers and sales agents in Germany and the UK. For Asia and

South America, the company is setting sales forecasts calculated based on marketing forecasts derived from (1) rough

estimates for order volumes based on agreements with partners in Indonesia and (2) market scales / forecasts for

countries in Southeast Asia and South America (Malaysia, etc.).

3-D Matrix books upfront payments on its absorbable local hemostats associated with sales partnerships involving partner

candidates in Europe (negotiating). The company considered multiple methods for making this calculation including

comparisons with cases involving other companies and comparisons with its past results. Total upfront payments were

estimated based on past results in Japan and Asia, while taking into consideration market scales, product values, and

assumed shares / risks in the target regions.

The company is currently negotiating sales agreements with the aim of selling absorbable local hemostat in Europe.

Contracts were not completed during FY04/15. After the company proposed conditions following candidate partner due

diligence, there were items that required time to complete and a candidate partner’s group was reorganized and

business divisions were also reorganized. However, the company narrowed its list to three candidates and plans to

conclude contracts by end-Q3 FY04/16 along with compiling product evaluations and moving forward with negotiations.

The upper range of the company’s operating revenue forecasts for FY04/16 is JPY2.9bn. Upfront payments from sales

partnerships with candidate sales partners in Europe and product sales from such partnerships are projected at JPY2.1bn.

As such, working to reach the upper end of this target is a main condition for the conclusion of such agreements.

Expense forecast The company is projecting total R&D expenses of JPY1.0bn, up JPY208mn (25.5%) from the previous year. R&D expense

is the total for projects in each development pipeline. This mainly consists of clinical trial expense for absorbable local

hemostat (Japan / US), CE marking registration expense (each country worldwide), and clinical trial expense for alveolar

bone regenerator (US) and mucous membrane protuberance material (Japan). SG&A expenses were estimated based on

future business plans and by taking into account past amounts.


14/89


3-D Matrix | 7777 |

R



Medium-term outlook


Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods. Other includes alveolar bone regenerator, mucous membrane protuberance material, and the vascular embolization agent. The wound-healing agent is not included in targets. The company’s earnings forecasts for FY04/16 include a lower and an upper limit, in view of the possibility that one-time payments and product sales may be delayed until FY04/17 depending on progress and negotiations with sales partners of the locally absorbent hemostatic material in Europe.

Medium-term management plan

According to the company’s medium-term management plan, it plans to expand its operations via upfront payments,

milestone payments, and product sales from locally absorbent hemostatic material TDM-621 and other pipeline products

both in Japan and overseas.

FY04/17 (target) assumptions The company made estimates based on sales and upfront payments mainly for its absorbable local hemostat as well as

upfront payments for other products in its pipeline. Expectations are that its absorbable local hemostats will be sold in

Japan, in addition to those regions that adopt the CE marking system, specifically Europe, Asia, and South America. In

Europe these sales are expected to target prominent medical institutions in Germany, France, and the UK, as well as

customers in each EU country. Sales in Asia will mainly target Indonesia, Malaysia, and South Korea, while those in South

America will target Columbia, Chile, Brazil, and Mexico.

Product sales are estimated at JPY4.0bn, with Europe expected to account for roughly 55% of this amount. The company

makes sales projections and order estimates based on the estimates for the previous year and certain assumptions for (1)

sales in Europe through wholesalers/sales agents, (2) sales through sales partners, (3) CE marking registration for

products in South Korea, (4) CE marking registration for products in Brazil and Mexico, and (5) approval for

manufacturing / marketing in Japan.

3-D Matrix expects to win approval for manufacturing / marketing in Japan in 2H FY04/17. There are plans to restart

Medium-Term Plan FY04/15 FY04/16 FY04/17 FY04/18(JPYmn) Act. Est. Target TargetOperating Revenue 100 783～2,877 8,233 9,851R&D Expenses 816 1,024 1,544 1,643SG&A Expenses 1,185 - - -Operating Profit -1,903 -1,996～24 2,180 3,010Recurring Profit -1,795 -2,004～16 2,180 3,010Net Profit -1,995 -2,005～11 2,064 2,337

Revenues by Segment FY04/15 FY04/16 FY04/17 FY04/18(JPYmn) Act. Est. Target TargetLocally Absorbent Hemostatic Material 54 758～2,850 7,473 9,091

Product Sales 3 582～675 3,976 9,090Upfront, Milestone Payments 51 176～2,175 3,497 1

Others 45 25 758 758Product Sales 0 7 7 7Upfront, Milestone Payments 45 18 751 751


15/89


3-D Matrix | 7777 |

R



clinical studies taking into account consultations with PMDA, with the studies conducted by multiple institutions and

CRO. Moreover, the clinical studies and reviews should only take two-thirds the time required for the previous (canceled)

study as the previous study did not uncover any adverse events or other problems.

As for upfront payments on absorbable local hemostat agreements, the company estimates upfront payments from sales

partner candidates in the US (negotiations ongoing) and milestone payments tied to approval for domestic

manufacturing / marketing. Of the estimated JPY3.5bn in upfront payments for relevant hemostat products, roughly 70%

is from sales partners in the US and about 30% is from milestone payments in Asia and those tied to approval for domestic

manufacturing / marketing.

The projected JPY751mn in upfront payments for other products in its pipeline are mainly milestone payments for alveolar

bone regenerators and mucous membrane protuberance material.

FY04/18 (target) assumptions The company estimated sales, mainly for its absorbable local hemostats, and upfront payments for other products in its

pipeline. Expectations are that its absorbable local hemostats will be sold in those regions that adopt the CE marking

system, specifically Europe, Asia (including Oceania), South America, Japan, and the US. In Europe, these sales are

expected to target prominent medical institutions in Germany, France, and the UK, as well as customers in each EU

country. Sales in Asia will mainly target Indonesia, Malaysia, South Korea, and Australia, while those in South America will

target Columbia, Chile, Brazil, and Mexico.

Product sales estimates are based on estimated values up through the previous year, as well as sales forecasts and order

estimates that assume expanded sales in Europe, Asia, and Japan. These estimates also assume the start of new product

sales in the US from FY04/18.

The projected JPY751mn in upfront payments for other products in its pipeline are mainly milestone payments for alveolar

bone regenerators and mucous membrane protuberance material. As such, progress for its development plans /

negotiations is a precondition for reaching this projection.

Development targets for main pipeline products Absorbent topical hemostatic agent (TDM-621)

◤ Europe: The company received the CE Mark on January 14, 2014 and began sales from April 2015.

◤ The US: The company expects to start clinical trials in FY04/16.

◤ Japan: In March 2015, new clinical trials were decided. However, the company changed its plans and will later

resubmit its application for approval.

◤ Asia: Medical device registration approved in Singapore in September 2014 and in Indonesia in April 2015. An

application was submitted in South Korea in January 2015, with registration expected in FY04/16.

◤ South America: Approval for medical device registration obtained in July 2015 in Columbia, and in November 2015

in Brazil. Approval in Mexico is expected in FY04/16.

Mucous membrane protuberance agent (TDM-641)

Japan: Clinical trials began in December 2014. However, in March 2015 the company decided to temporarily halt the

trials because the tests failed to provide the strong evidence for the efficacy of the agent that had been expected from


16/89


3-D Matrix | 7777 |

R



previous trials. The company will seek to come up with a better method of testing.

Vascular embolization agent (TDM-631)

Japan: Aiming for pre-clinical trials in FY04/16, clinical trials in FY04/17, and approval for manufacturing / marketing and a

market launch in FY04/18.

Alveolar bone reconstruction agent (TDM-711)

The US: clinical trials began in February 2012. The goal is to receive approval for manufacturing and marketing, attain

national health insurance coverage, and launch the product in FY04/18.

Wound-healing agent (TDM-511)

United States and Europe: In October 2014, the company submitted a 510(k) premarket notification to the Food and

Drug Administration (FDA) with a view to sell the product as a medical device, and received approval in February 2015.

Note: In the US, premarket notification submissions for medical devices that are substantially equivalent to existing devices in safety and

effectiveness can be filed without clinical trials. This submission process is known as 510(k).

3-D Matrix ＞ Business

17/89


3-D Matrix | 7777 |

R



Business

Business description

3DM is a medical technology company that develops, manufacturers, and markets a self-assembling peptide technology

originally created at the Massachusetts Institute of Technology (MIT).

The key features of the company’s business are:

◤ MIT holds the underlying patent for the self-assembling peptides that are the basis of the 3DM’s products. The

Company has an exclusive global license from MIT for this technology that includes rights of development,

manufacture, and marketing of applications that use these self-assembling peptides.

◤ Self-assembling peptides have two main advantages over the medical products currently on the market they are

intended to compete with. Firstly, as they are produced by chemical synthesis, there is no risk of viral or other types

of contamination that can occur in goods derived from living organisms. Secondly, they can be mass-produced in a

homogenous fashion.

◤ These characteristics lend themselves to potentially large-scale use in surgery (such as absorbable localized

hemostatic agents and mucous membrane protuberance agents) and in the regenerative medicine field (as alveolar

bone reconstruction agents).

◤ 3DM’s business model attempts to minimize risks specific to medical product start-ups. Specifically, the products it

is developing are categorized as ‘medical devices’ rather than ‘pharmaceuticals’. Consequently, the duration from

application to approval is shorter and costs are lower compared to drug development.

Self-Assembling Peptide Technology

The human body is made up of proteins, the smallest unit of which is amino acids. Peptides are molecules composed of a

number of connected amino acids. Invented by Dr. Shuguang Zhang at MIT in 1992, self-assembling peptides are

composed of a (16 base) RADA sequence that is made up of three types of amino acids; Arginine (R), Alanine (A), and

Aspartic acid (D).

The peptides are suspended in an acidic solution, when this solution comes into contact with a neutral pH environment,

for example blood or a salt solution, the peptide molecules ‘self-assemble’ to create a gel formed of nanofibers. Once the

self-assembling peptides become gelatinous, they will not revert to a liquid state even if they returned to an acidic

solution. Moreover, ADME tests run on the self-assembling peptides have confirmed they do not accumulate in any

particular organ, but instead degrade into protease and are excreted from the body after approximately 30 days.

The gel that is formed is an environment similar to that for cells cultured in vivo and has a network structure similar to that

of an extracellular matrix, such as collagen. The company is exploiting these characteristics to create applications in a

variety of fields, including surgery, regenerative medicine, and drug delivery systems (DDS).

While MIT holds the patents, 3DM has an exclusive agreement with MIT for the basic patents for the self-assembling

peptide technology: PuraMatrix™ is its first-generation product that uses these self-assembling peptides.


18/89


3-D Matrix | 7777 |

R



PuraMatrix™

Source: Shared Research based on company data

Self-assembling peptides are non-biological molecules produced by chemical synthesis and have the following

characteristics:

◤ Safety: as self-assembling peptides are produced via chemical synthesis there is no risk of viral infection (as can

occur in biologically-derived molecules) or contamination from foreign elements.

◤ Homogeneity: mass production with practically identical levels of quality is possible.

◤ Ease of use: as a gel created from a solution, they are transparent and easy to handle.

◤ Development potential: application potential across a wide range of fields and in development as medical

devices.


19/89


3-D Matrix | 7777 |

R



Main business segments

The company reports only one business segment, Medical Products. However, this can be further broken down into the

Medical Products Development and Research Reagent Sales sub-segments.

Medical products development

In this sub-segment, the company develops medical devices and treatments for use in the fields of surgery, regenerative

medicine, and DDS (drug delivery systems) based on its self-assembling peptide technology.

The main development pipeline consists of:

◤ Surgical field: absorbable localized hemostatic agents, mucous membrane protuberance agents, and vascular

embolization agents

◤ Regenerative medicine field: alveolar bone reconstruction agents

3DM’s strategy has been to develop these applications in-house as medical devices and then to obtain manufacturing and

marketing approvals for them. Its sales strategy involves signing exclusive sales agreements with distributors domestically

and overseas.

In the field of regenerative medicine, 3DM has been conducting research into bone reconstruction (outside of the

alveolar bone space), cartilage and tendon regeneration, treatments for skin wounds, and cardiac muscle regeneration;

and looking to commercialize this research.

As for the DDS space, 3DM has been working to launch products that combine self-assembling peptides with a variety of

pharmaceuticals, with the peptides functioning as a carrier for the pharmaceutical agent. While it is also likely that

self-assembling peptides themselves can be developed to function as pharmaceutical agents, independently developing

this would be time consuming for the company. Instead it intends to license the technology out to third parties for this

purpose and generate licensing revenue from doing so.

The company is also using joint research and MTA agreements with universities and other research facilities to acquire

new self-assembling peptides application technologies.

Medical device development process The medical products that 3DM is focused on are categorized as ‘medical devices.’

The process for developing a new medical device or a pharmaceutical product follows the same sequence of basic

research, preclinical trials, clinical trials, and an application for a manufacturing and marketing approval. However, with

pharmaceuticals the clinical-trial stage requires a number of phases and generally speaking, involves a large number of

patients. As a result, the pharmaceutical development process tends to be long.

More specifically, for pharmaceutical development the clinical trials have three phases; in Phase I and II, researchers test

the drug/treatment on a small group of healthy people to evaluate its safety and effectiveness, while in Phase III they

administer it to a large group of patients who suffer from the disease or condition that it is intended to treat to confirm its

safety and effectiveness.


20/89


3-D Matrix | 7777 |

R



On the other hand, medical devices require a comparatively short development process of just one clinical trial phase.

The R&D process for medical devices can be summarized as follows:

Medical Device R&D Process


◤ Basic research: the company searches for potential medical device applications for its technologies and optimizes

product specifications.

◤ Preclinical trials: animal tests conducted to see if the product meets safety and efficacy standards.

◤ Clinical trials: human trials on sufferers conducted to see if the product meets safety and efficacy standards.

◤ Application for a manufacturing and marketing approval: an application is submitted to the relevant

regulatory body in each country, such as the Ministry of Health, Labour and Welfare’s Pharmaceuticals and Medical

Devices Agency (PMDA) and the Food and Drug Administration (FDA) in the US.

◤ Manufacturing and marketing approval: the relevant regulatory body issues an approval to the company.

◤ Inclusion in HIP/National Health Insurance schemes: in order to be covered by Japan’s national health

insurance scheme (HIP) or the relevant health insurance in other countries the product’s reimbursement price needs

to be calculated by the authorities. In Japan, the reimbursement value will set and the product included in HIP about

two to three months after the manufacturing and marketing approval is approved.

◤ Market launch: the product is manufactured and goes to market.

3DM’s main development pipeline consists of:

▶ Absorbable localized hemostatic agent (development code: TDM-621)

▶ Alveolar bone reconstruction agent (development code: TDM-711)

▶ Mucous membrane protuberance agent (development code: TDM-641)

▶ Vascular embolization agent (development code: TDM-631)

▶ Wound-healing agent (development code: TDM-511)

All of these are based on the same sequence of self-assembling peptides (RADA 16) as absorbable localized hemostatic

agent TDM-621. Clinical trials in humans are already underway for TDM-621 and no adverse effects were detected among

the 97 patients in the trial, as of June 2013. Given this, the key point for the other products appears to be not their safety

but rather their efficacy. According to the company, as long as efficacy is confirmed in clinical trials, the regulatory


21/89


3-D Matrix | 7777 |

R



approval appears likely.

Medical reagent sales

3DM sells self-assembling peptides product, PuraMatrix™, through its partner Corning Incorporated as a research reagent

to universities and other research facilities around the world. PuraMatrix™ is used in various medical applied studies and

types of therapy.

3DM is marketing the product as a research reagent in the hope that the researchers using PuraMatrix™ will develop new

commercially viable applications.


22/89


3-D Matrix | 7777 |

R



Main development pipeline

Development pipeline progress (locally absorbent hemostatic material TDM-621)


Development pipeline progress (others)


In consultations

In consultations

Taiwan

Australia

US

Japan

Brazil

Mexico

Columbia

Hong Kong

Chile

New Zealand

Singapore

Indonesia

Korea

Switzerland

France

UK

Italy

Spain

Austria

Preparing

EU

Selling productspossible with the CE

marking

Manufacturing,selling, and

registering productspossible with the CE

marking

Areas outside thescope of the CE

marking

Germany

Region Country Applying for approval to selland/or register the product

Approval obtained to selland/or register the product Clinical trials started Agreement concluded with

sales partner


23/89


3-D Matrix | 7777 |

R



As of June 2015, 3DM’s main pipeline products are an absorbable localized hemostatic agent, a mucous membrane

protuberance agent, an alveolar bone reconstruction agent, a wound-healing agent, and a vascular embolization agent.

Absorbable localized hemostatic agent (development code: TDM-621)

3DM is developing the absorbable localized hemostatic agent TDM-621 based on its RADA16 self-assembling peptide

technology. TDM-621 can be applied with a syringe to comparatively narrow openings where bleeding may occur during

surgery and can also be used in conjunction with an endoscope.

TDM-621 becomes pH-neutral when it comes into contact with bodily fluids, such as blood. The peptides then

self-assemble into nanofibers and become gelatinous. The gel perfectly coats the surface of the contact area, forming a

coating that physically seals the surface film and peripheral blood vessels. In aortal blood vessels, it produces blood

coagulation and hemostasis.

Overview of Hemostasis


No risk of infection with TDM-621; advantageous in different types of surgery Existing hemostatic agents are categorized as liquid types (fibrin glue) or sheet/powder types (fibrin and collagen). Fibrin

glue involves creating a paste out of blood-derivative fibrinogen. There are question marks over the safety of the products

currently in use as the use of blood preparation products carries the risk of infecting a patient with the hepatitis C virus.

Clearly, accidental hepatitis C infections of patients have the potential to morph into a major public healthcare issue.


24/89


3-D Matrix | 7777 |

R




TDM-621 has a number of advantages over existing hemostatic agents. First, there is no risk of infection. The majority of

hemostatic agents currently in use are synthesized from human or animal blood, such as from fibrinogens, while the raw

material for collagen is produced from the skin of animals. As these products are derived from living organisms, they carry

the risk of viral infection. In contrast, TDM-621 is chemically synthesized from amino acids and so carries no risk of viral

infection or contamination from unknown elements.

The medical use of biologically derived products is subject to strict controls:

◤ Informed consent. Patients (or their families) must receive an appropriate explanation about their use and risks

◤ Records of production and use must be kept

◤ Reports must be created verifying absence of infectious diseases in the products

As TDM-621 is chemically synthesized product, there is no infection risk. Apart from obvious healthcare and legal benefits,

this could also reduce administrative burden. In cases when biologically derived hemostatic agents are used, patients (or

their representatives) must sign off a consent form before the start of the surgery. When TDM-621 is used, no consent is

required. Infections transmitted during medical procedures have emerged as a serious public health issue in the recent

years and there is substantial latent demand for new medical agents that can eliminate the risk of infection, reduce

surgery time and alleviate the burden on patients.

From a surgeon’s perspective, TDM-621 also has a number of appealing features. A transparent liquid, it becomes

pH-neutral gel only after coming into contact with bodily fluids such as blood. Therefore, it does not obscure a surgeon’s

view and can be easily applied via a catheter or into a narrow tissue entrance. In contrast, standard hemostatic agents are

cloudy liquids and can obscure a surgeon’s view of a damaged area, especially when operating remotely with a camera.

Finally, unlike surgical glue, TDM-621 does not self-solidify, so it can be applied via a catheter.

3DM notes that TDM-621 induces hemostasis in, and perfectly seals surface membranes and peripheral blood vessels,

meaning it can induce a greater hemostatic effect than existing products (which induce hemostasis by bonding the tissue

or covering it with an adhesive agent.


25/89


3-D Matrix | 7777 |

R



Image of DM-621


TDM-621 is dispensed as a prefilled syringe product adding to ease of use. Any residual left in the body breaks down into

amino acids and is naturally excreted over the course of several days.

To eliminate the risk of administering potentially dangerous dosages, 3DM has introduced a number of measures to

prevent accidental dangerous use. For instance, TDM-621 is prefilled in a syringe with a non-standard tip that prevents

attaching needles and limits the amount of substance to recommended levels (see image above).

TDM-621 Features



26/89


3-D Matrix | 7777 |

R



Efficacy of hemostatic agent following endoscopic surgery for ulcers According to the company, an academic paper was published in November 2015 demonstrating the efficacy of

PuraMatrix in healing wounds and reducing post-operative bleeding following endoscopic submucosal dissection. The

study was an investigator-lead trial at Keio University Hospital in which PuraMatrix was applied to more than 100 patients

following endoscopic submucosal dissection of the esophagus, stomach, or large intestine. 3DM plans on using these

results to market the product to help heal wounds and control bleeding following endoscopic submucosal dissection in

addition to its use as a localized absorbable hemostatic agent.

TDM-621 R&D Status Japan:

3DM launched clinical trials in January 2010 for TDM-621 in order to apply for a Japanese manufacturing and marketing

approval. 97 clinical trial patients were chosen who exhibited the following symptoms:

◤ Exudative (oozing) hemorrhaging from wounds in coronary artery bypass surgery and artificial vascular replacement

surgery

◤ Exudative hemorrhaging from the wound surface in hepatic resection surgery

◤ Exudative hemorrhaging from the mucosal resection part or submucosal layer during upper gastrointestinal tract

endoscopic mucosal resection surgery, and endoscopic submucosal dissection.

Clinical trials were completed in April 2011.

TDM-621’s hemostatic efficacy has been generally confirmed in clinical trials and tests five to seven days after surgery did

not detect any problems. The product also received high praise by the doctors conducting the Japanese clinical trials.

Based off the clinical-trial results, the company submitted a manufacturing and marketing approval application in May

2011 to the PMDA for TDM-621.

However, the PMDA has notified 3DM that it must provide stronger evidence for the efficacy of TDM-621, with more

precise evidence on its hemostatic effects. In March 2015, the company withdrew its application for domestic

manufacturing and marketing approval and has decided to restart clinical trials in Japan and reapply for approval. The

company plans to commence clinical trials in April 2016.

In the medium-term management plan announced in June 2015, the company described plans to bring TD-621 to market

in Japan. It planned to perform clinical trials and file for approval in FY04/16, then launch the product in FY04/17 following

approval. As of the end of Q2 04/16 the company was working toward beginning the clinical trial in 1H FY04/16, but

more time than expected has been required in conferring with the PMDA on detailed aspects of the trial protocol, such as

scale and evaluation methods. Therefore, the company now plans on submitting the trial plan notification in FY04/16, and

initiating the clinical trial in Q1 FY04/17.

Asia (ex. Japan):

The company submitted an application for CE marking in Indonesia in July 2014 and South Korea in January 2015, taking

advantage of the fact that the CE marking can be used to obtain marketing approval without clinical trials. In Singapore,

the company obtained approval to register PuraStat® as a medical product in September 2014, after submitting an

application in July of that year. The company is also preparing to conduct a clinical trial in China with a view to launching

the product during FY04/17.


27/89


3-D Matrix | 7777 |

R



South America

South America (including Brazil, Columbia, and Mexico) is a CE marking region. The company received medical device

registration approval for the absorbable localized hemostatic agent PuraStat® in July 2015 in Columbia, and in November

2015 in Brazil. Approval in Mexico is expected in 2H FY04/16.

United States

In the United States, the company submitted an investigational device exemption application to the FDA, with an eye to

starting clinical trials in FY04/16. The company aims to apply for and obtain manufacturing and marketing approval, as

well as conduct a product launch, in FY04/17.

In the medium-term management plan announced in June 2015, the company indicated that to bring TD-621 to the US

market, it planned to start clinical trials in FY04/16, and in FY04/17, complete the trials, file for approval, obtain approval

and bring the product to market.

Europe

In Europe, 3DM’s French subsidiary obtained a CE Mark in January 2014 (CE Marks are required certification for selling

medical devices in the EU and denote EU safety standards have been met). According to the company, the acquisition of

the CE Mark will enable 3DM to sell the product in 28 EU member states, Hong Kong, Malaysia, Singapore, New Zealand,

and Chile. With the CE Mark, the company will also be able to obtain approvals without clinical trials in such nations and

regions as Australia, South Korea, Indonesia, Brazil, Thailand, Vietnam, the Philippines, and South America.

TDM-621 sales agreements Sales partnership with Fuso in Japan

In May 2011, 3DM concluded an exclusive sales agreement for absorbable localized hemostatic agent TDM-621 in Japan

with Fuso Pharmaceutical Industries Ltd. (TSE1: 4538). The company has already received an upfront payment and a

milestone payment (triggered by the confirmation of the regulatory approval application). It will receive a further

undisclosed milestone payment upon receiving the manufacturing and marketing approval for TDM-621. Furthermore,

Fuso Pharmaceutical is obliged to purchase a minimum volume of TDM-621 from 3DM for approximately 10 years. Fuso

Pharmaceutical was chosen as a partner as it recognized the value and potential of the product from an early stage.

Sales partnerships with four companies in rest of Asia

3DM plans to commercialize and sell TDM-621 in Asia, and concluded a partnership agreement with DW and a license

agreement with Excelsior Medical Co., Ltd. (September 2010). DW is one of South Korea’s leading pharmaceutical

companies, and Excelsior Medical one of Taiwan’s top medical devices manufacturers.

Further, 3DM’s subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd concluded an exclusive sales and marketing agreement

with Indonesia-based PT. Teguhsindo Lestaritama related to a sales partnership for the product in Indonesia (May 2013).

The company also announced an exclusive sales agreement between its Singapore subsidiary 3-D Matrix Asia Pte. Ltd. and

DW in July 2015 in order to expand coverage of absorbable local hemostat PuraStat® in the major markets in SE Asia. Based

on the agreement, 3DMA will grant an exclusive sales and marketing license for PuraStat® to DW in Thailand, the

Philippines, and Vietnam, and a semi-exclusive sales and marketing license in Indonesia. 3-D Matrix Asia Pte. Ltd. also

formed an exclusive sales and marketing agreement with Transmedic Pte Ltd (Transmedic) in December 2015 to expand


28/89


3-D Matrix | 7777 |

R



into Singapore, Malaysia, and Brunei.

Asian sales partners for the absorbable localized hemostatic agent


Europe

In Europe, the company is simultaneously pursuing both direct sales through sales agents and contracts with potential

distributors. The company is concluding contracts with sales agents in each country. These agents are brokers with their

own relatively small-scale sales networks. Meanwhile, distributors are larger companies with sales networks throughout

Europe and the capacity to run their own sales promotions. According to the company, there are only a limited number of

hospitals in Europe which perform surgical operations that would use their absorbable localized hemostatic agent. This

means that pursuing direct sales through sales agents should lead to increased sales volume. The company also plans to

accelerate sales volume growth through concluding sales contracts with distributors targeting all of Europe, as these

distributors possess sales networks throughout the region and are capable of running promotions.

As of December 2015, the company has begun sales (through agents) in the UK, German, France, Switzerland, and Spain,

among other countries. In Europe the company is accumulating clinical usage data, increasing its local sales force, and

enhancing educational and training efforts aimed at sales agents. The company has compiled a list of 100 key facilities,

mostly in the UK, Germany, and France, to target for marketing activities.

As of December 2015, the company is engaged in negotiations with three potential sales partners for FY04/16.

Price, market size According to the company, the global hemostat market is worth about USD3.0bn. About half of this market comprises

regions where sales are possible with the CE marking, or approval may be granted without clinical trials with the CE

marking.

Sales partner Country Date of agreementDaewoong Pharmaceutical Co.LTD Korea September 2010

Thailand July 2015PhilippinesVietnam

Excelsior Medical Co.,Ltd. Taiwan September 2010PT. Teguhsindo Lestaritama Indonesia May 2013Transmedic Pte Ltd Singapore December 2015

MalaysiaBrunei


29/89


3-D Matrix | 7777 |

R



Global hemostat market


Assuming the same pricing as for existing hemostatic products, Shared Research anticipates a sales price of around

JPY14,000/cc. However, when considering the competitive advantages of TDM-621, it is conceivable that a premium

could be charged.

Market for hemostatic products in Europe

Based on Millennium data, the company estimates that the European market for hemostatic products is worth USD1.1bn.

Existing products include Fibrin Sealant, which has a high market share, Gelatin, and Bioglue (an adhesive used in

surgery), which together with other types of liquid and spray-type products are thought to hold about 80% of the

market. The company aims to expand products sales by getting users to switch from Fibrin Sealant and other liquid and

spray-type products to PuraStat®.

Market for hemostatic products in Europe

Source: Shared Research based on MedMarket Diligence

Mucous membrane protuberance agent (development code: TDM-641)

R&D for 3DM’s self-assembling peptide based agent that is injected into the mucous membrane during endoscopic

procedures to form a protuberance on the tumor site is ongoing. TDM-641 is intended for use in endoscopic surgery for

stomach cancer, endoscopic mucosal resection (EMR) surgery and endoscopic submucosal dissection (ESD) surgery for

Approx. USD3.0bn

The US(USD1.3bn)

Sales possible using the CE marking

(USD1.1bn)

CE marking applies(USD286mn)

Japan (USD170mn)China (USD142mn)

Share by department Share by productCardiovascular surgery 36% Fibrin Sealant (Tisseal,Evicel) 50%Surgery(inc. digestive surgery) 19% Gelatine (Floseal, Surgiflo) 12%Gastrointestinal department 15% Tachosil 10%Brain surgery 12% Bioglue 8%Urology department・gynecology 10% Surgicel 5%Plastic surgery 8% Arista AH 2%

Others 13%


30/89


3-D Matrix | 7777 |

R



esophageal cancer.

The company is developing TDM-641 as an agent to be injected into the submucosal layer in endoscopic procedures and

causes the affected area to protrude. Based on the product’s feature–namely, of forming a pH neutral gel on coming into

contact with a liquid, such as blood–it has been confirmed in animal experiments that not only can TDM-641 produced

the protuberance, but that it also possesses a secondary hemostatic effect. Naturally, saline and sodium hyaluronate do

not provide this hemostatic effect and it is hoped that TDM-641 will reduce the difficulty of these operations.

Overview of the mucous membrane protuberance method


TDM-641 R&D Status Both mucous membrane protuberance agent TDM-641 and absorbable localized hemostatic agent TDM-621 use the

same RADA 16 self-assembling peptides as their raw material, although the concentration of the peptides varies for the

two. Consequently, safety data obtained in clinical trials for TDM-621 can also be used for TDM-641. In September 2014,

the company submitted a notification of plans for clinical trials of TDM-641 as an agent to be injected into the submucosal

layer in endoscopic procedures to the Pharmaceuticals and Medical Devices Agency (PMDA). In December 2014, the

company launched trials of the product, in order to evaluate and verify its safety and efficacy as a submucosal injection

material for endoscopy, for EMRs (endoscopic mucosal resections) and ESDs (endoscopic submucosal dissections). The

company planned to enroll 260 patients in these trials.

In February 2015 the company decided to temporarily halt the trials because the tests failed to provide sufficient proof of

the efficacy anticipated from previous clinical trials. The company will seek to come up with a better method of testing.

The company aimed to restart the study by end Q3 FY04/16, and there were no changes to its development plan for

bringing the product to market.

In its medium-term management plan announced on June 6, 2015, 3DM indicated that it planned to complete clinical

trials for mucous membrane protuberance agent TDM-641 in FY04/16, file for approval in FY04/17, and obtain approval

and bring the product to market in FY04/18.


31/89


3-D Matrix | 7777 |

R



TDM-641 Sales Agreements In February 2012, the company signed an exclusive sales agreement for TDM-641 in Japan with Fuso Pharmaceutical

Industries. The company has received upfront payments and milestone payments, and expects to receive more milestone

payments upon applying for and obtaining manufacturing and marketing approval.

Vascular embolization agents (development code: TDM-631)

3DM has been pursuing R&D of its RADA 16 self-assembling peptides technology for use as an intravascular embolization

agent in hepatic artery embolization surgery and uterine artery embolization surgery. The development code for this

product is TDM-631.

In hepatic artery and uterine artery embolization surgery, TDM-631 is injected via a catheter into the embolus in the

artery, this blocks the artery that provides the liver or uterine tumor with nourishment and by cutting off the blood supply

the tumor dies. As TDM-631 becomes gelatinous when it comes into contact with a liquid, it can be injected into the

artery via a catheter and used to close the intravascular cavity the company is exploring TDM-631’s use as a new type of

embolization agent.

TDM-631 R&D Status In pre-clinical trials, 3DM confirmed that vascular embolization agent TDM-631 becomes gelatinous within an

intravascular cavity after it was dissolved in a contrast agent and had been injected into the cavity via a catheter.

Moreover, it confirmed that the gelatinous TDM-631 can be checked visually using an X-ray camera. Going forward, once

the company’s mucous membrane protuberance agent enters the clinical development stage, 3DM plans to conduct

testing towards the clinical development of its vascular embolization agent.

In its medium-term management plan announced in June 2015, 3DM indicated that it planned to complete preclinical

trials for vascular embolization agent TDM-631 in FY04/16, complete clinical trials in FY04/17, and file for approval, obtain

approval and bring the drug to market in FY04/18.

Embolization Therapy


Alveolar bone reconstruction material (development code: TDM-711)

Alveolar bone degradation due to periodontitis can cause teeth to drop out. In such cases, artificial teeth can be artificially


32/89


3-D Matrix | 7777 |

R



implanted, however, if there is not enough bone to affix the artificial teeth to then alveolar bone reconstruction surgery is

required beforehand. 3DM has been developing TDM-711 as a scaffolding material for alveolar bone reconstruction bone

reconstruction.

The nanofibers created by self-assembling peptides in their gelatinous form have a structure similar to the biological

environment required for cells proliferation. By filling in areas where there is a lack of bone, TDM-711’s characteristics

allow it to function as a scaffolding material to promote bone reconstruction.

Overview of alveolar bone reconstruction process

Many surgeons in the U.S. use bone substitutes, such as autogenous, allogeneic, and artificial bone grafts, when

conducting alveolar bone reconstruction surgery as part of implant treatment. 3DM is investigating the use of alveolar

bone reconstruction material TDM-711 to improve bone take-up in reconstruction procedures that use autogenous or

allogeneic bone grafts.

Additionally, TDM-711 carries no risk of infection and should improve patients’ quality of life.

3DM is developing alveolar bone reconstruction material TDM-711 in the U.S. Shared Research believes that this is

because the country already has the market for the material in the regenerative medicine field and clinical trials are easy to

undertake in the dental field. Over the long term, the company appears to be targeting the orthopedic surgery field

(larger market) with its bone reconstruction material.

TDM-711 R&D Status The company performed GLP-compliant confirmatory tests of the efficacy of TDM-711 on patients with alveolar bone


33/89


3-D Matrix | 7777 |

R



defects. As significant bone regeneration was confirmed compared to the control group, the company then continued

R&D of TDM-711 and submitted an IDE approval application to the FDA in September 2010. Approval was granted in July

2011. In February 2012, it commenced clinical studies (first pilot study) at the Forsyth Institute (an independent

non-profit research center affiliated with Harvard University). In June 2012, the company completed the treatment and

observation of 15 patients in line with a predetermined protocol. None of these patients showed serious adverse

side-effects. In May 2014, the company submitted a full report of the clinical trials to the US Food and Drug

Administration (FDA). 3DM plans to launch a second pilot study in Q1 FY04/16.

In its medium-term management plan announced in June 2015, 3DM indicated that it planned to complete clinical trials

for alveolar bone reconstruction material TDM-711 in FY04/16, file for approval and obtain approval in FY04/17, and bring

the product to market in FY04/18.

Wound-healing agent (development code: TDM-511)

Most of the products that the company has in its pipeline are intended for use inside the body. However, the company is

also developing a product applied to the skin for use in tissue regeneration. Wound-healing agent TDM-511 is one such

product. It self-assembles into a gel structure and forms nanofibers, creating a condition conducive to skin-tissue

regeneration. This product is applied to light to moderate skin wounds.


TDM-511 is used to stop localized bleeding (it can quickly stop bleeding from the surface skin and inner skin) and heal

wounds (it promotes healing by enhancing tissue regeneration functions). However, the product has other uses. For

instance, this agent could be used to restore the skin after a tumor is removed. Animal experiments showed that the

agent not only promoted tissue regeneration, it also restored the skin to its original condition. Hence, in addition to

medical applications, this product is also being developed for use in cosmetic surgery.

R&D status The target markets for the wound-healing agent are Europe and the US. In October 2014, 3DM submitted a 510(k)

premarket notification to the US Food and Drug Administration (FDA), with a view to marketing the product as a medical

device. The company received approval in February 2015, allowing for the start of sales. Now that the company’s 510(k)

has been approved, it expects increased therapeutic effects from combinations with other drugs (antibiotics, anticancer

drugs, and hyaluronic acid), and is working on commercialization by providing higher added value for cosmetic surgery,

primarily for burn and skin cancer treatments. In the company’s 1H FY04/16 results briefing, it was mentioned that its US

subsidiary, 3-D Matrix, Inc., is preparing for sales of the wound-healing agent as a standalone product.

In the US, premarket notification submissions for medical devices that are substantially equivalent to existing devices in safety and effectiveness

can be filed without clinical trials. This submission process is known as 510(k).


34/89


3-D Matrix | 7777 |

R



DDS Field

3DM has been researching the possibility of using self-assembling peptides as a carrier in drug delivery systems (DDS). It

has also conducted multiple efficacy trials into the controlled release of proteins, including bFGF and PDGF. The surfactant

peptide A6K is drawing particular attention. A characteristic of A6K is that it forms a kind of nanotube, called micelle, in

liquids. The micelle is able to include or encapsulate various materials in it due to its surfactant effects. 3DM is researching

whether this characteristic can be used to deliver siRNA encased inside micelles through the cell membrane and inside

cancer cells.

DDS R&D Status 3DM is conducting two joint research projects with the National Cancer Center in pursuit of new cancer therapy

technologies using surfactant peptides: the National Cancer Center, Phase I Center, Early Research and Development

project, and Japan’s first non-clinical research aimed at turning revolutionary new cancer therapies into viable treatment

options.

Early R&D at the National Cancer Center, Phase I Center

In the Early Research and Development project, 3DM and the National Cancer Center are collaborating to develop siRNA

nucleic acid medicine that uses the self-assembling peptide A6K as a drug-delivery system (DDS), targeting the RPN2

gene, responsible for the spread of cancer and its resistance to pharmaceuticals. The timeline for the project is five years,

starting in FY2011. In FY04/15, the company plans to launch the first domestic investigator-initiated trials of siRNA nucleic

acid medicine for the indication of “triple negative” breast cancer that has failed to respond to existing treatments. In June

2015, it started treatment of a triple negative breast cancer patient with subclavian lymphatic metastasis (localized tumor)

as part of phase I physician-led clinical trials at the National Center Hospital for new siRNA nucleic acid medicine

TDM-812, which it developed in collaboration with the National Cancer Center.

siRNA (small interfering RNA) inhibits expression of specific genes by destroying cellular mRNA (messenger RNA, which

contains the amino acid sequence information for building proteins). siRNA has long been the focus of attention for the

potential of designing specific siRNA molecules to inhibit the synthesis of disease-related proteins. The approach suffers

from the drawback that siRNA molecules are degraded immediately within the body, and indeed this obstacle has

resently lead some major pharmaceutical companies to give up on siRNA therapies. Success of siRNA therapies therefore

depends on development of a technology to reliably deliver the molecules to cells.

Surfactant peptide A6K is comprised of 6 residues of the hydrophobic amino acid alanine and the hydrophilic amino acid

lysine. Dissolving the molecule in water causes binding of the hydrophobic residues, creating an A6K nanotube with a

positively charged external surface. Because siRNA molecules have a strong negative charge, mixing A6K and siRNA forms

a complex of the two molecules that prevents degradation of the siRNA.


35/89


3-D Matrix | 7777 |

R



Surfactant peptide A6K

Source: Company materials

Formation of complex with A6K and siRNA

Source: Company materials

In experiments on cancer-carrying mice, administration of siRNA alone resulted in increased cancer size, while

administration of the A6K/siRNA complex resulted in cancer shrinkage. Also, treating dogs with naturally occurring

mammary gland tumors with a siRNA nucleic acid drug (TDM-812) resulted in tumor shrinkage as well.

Based on these results,it started treatment of a triple negative breast cancer patient with subclavian lymphatic metastasis

(localized tumor) in June 2015 as part of phase I physician-led clinical trials at the National Center Hospital for new siRNA

nucleic acid medicine TDM-812, which it developed in collaboration with the National Cancer Center.

New nucleic acid medicine: RPN2siRNA-A6K compound


In the non-clinical research project, 3DM and the National Cancer Center are collaborating to develop a nucleic acid

medicine that uses self-assembling peptides as a DDS targeting microRNA (miRNA), which regulates cancer stem cells in

cancerous bone tumors (osteosarcoma). The timeline for the project is three years, starting in FY2012. According to the

company, it may be possible to lower the high recurrence rate of cancerous bone tumors by targeting the cancer stem

cells.

In the surgical and regenerative medicine fields, the company is able to independently carry out clinical trials and

acquiring manufacturing and marketing approvals. But in the DDS field, product development focuses on the

commercialization of its research products as pharmaceutical drugs. Here 3DM strategy is to license its technology to

major pharmaceutical companies.


36/89


3-D Matrix | 7777 |

R



Main business partners

The company is outsourcing the manufacture of the peptide raw materials to CPC Scientific Inc. (unlisted) and two other

companies, all of which appear to supply exclusively to 3DM.

Absorbable localized hemostatic agent (TDM-621)

In May 2011, 3DM signed a manufacturing outsourcing agreement with Fuso Pharmaceutical Industries Ltd. and part of

manufacturing process (pre-filling of syringes) has been exclusively outsourced to Fuso.

In April 2009, 3DM concluded a business tie-up agreement with Itochu Chemical Frontier Corporation (subsidiary of

Itochu Corp.; TSE1: 8001), for it to carry out raw peptide material procurement, outsourcing of manufacturing, and sales

on for 3DM. A cooperation and support system was also implemented.

The company has an exclusive sales agreement with Fuso Pharmaceutical for distribution in the Japanese market.

It has signed exclusive agreements with DW for South Korea, Thailand, Vietnam, and the Philippines. 3DM also has signed

exclusive agreements with Excelsior Medical Co. (Taiwan), and PT. Teguhsindo Lestaritama (Indonesia). Further, 3DM has

granted DW an exclusive sales and marketing license, and the two companies have agreed to conduct joint sales.

Mucous membrane protuberance agent (TDM-641)

The company has an exclusive sales agreement with Fuso Pharmaceutical for sales and distribution in Japan.


37/89


3-D Matrix | 7777 |

R



R&D System

3DM’s R&D activities are carried out by two departments:

◤ Pharmaceutical Development Department (three staff): manufacturing and marketing approval applications and

quality control systems;

◤ Business Development Department (six staff): sourcing of clinical-trial facilities, doctors for the trials, and the clinical

monitoring required.

The company has also signed self-assembling peptide technology MTA agreements with over 100 universities and

research institutes worldwide. 3DM has been conducting joint research with these partners with an eye to developing

new applications for its technology. In these joint-research agreements, the personnel and funds are sourced from its

partners, while the company is left to acquire the rights to commercialize any results.

Relationship with MIT

MIT holds the substance patent and the method-of-use usage patent for the self-assembling peptides (collectively termed

"the basic patents"). 3-D Matrix, Inc., a U.S. company that later became a subsidiary, concluded an exclusive patent

license agreement with MIT in April 2003 for the worldwide license (including re-licensing rights) to its patents in the

fields of medicine, life sciences, and beauty care.

In October 2004, 3DM signed a license-and-supply agreement with 3-D Matrix, Inc. and acquired the patent rights for

Asia. In October 2007, the contract was revised after 3DM became the parent of the U.S. company.

The basic patents cover all the peptides that self-assemble to form a hydro-gel, and while there are some variations across

regions, the main patents have all been registered.

A list of both self-developed patents awaiting approval and those that the company acquired through its exclusive license

deal with MIT follows:


38/89


3-D Matrix | 7777 |

R




Substance Patent

US(Patent pending)

UK(Patent pending)

Patent Applications

US 8697438 US

Patent HolderProduct Pipeline Patent Description Patent No. Territory

Self-Assembly PeptideSubstance Patent (self-assmebly and inhibitionmethods)

US 6548630 MITUS

High purity peptidecomposition 5730828 Japan

3-DMatrix, Inc.

2008-316133 Japan(Patent pending) 3-D Matrix

Alveolar bonereconstruction materialPuraMatrix

Absorbable localhemostatic materialProminence materialmucosa

Self-Assembly PeptideHemostatic agent andmethods for blockingassembly

Alveolar bonereconstruction materialPuraMatrix

Self-Assembly Peptide CellCulture Method

Self-Assembly Peptide CellCulture Method US 5955343 US MIT

MITPuraMatrixDDS

Self-Assembly PeptideProtein DDS US 7098028 US

MIT

PuraMatrixSelf-Assembly PeptideNerve RegenerationMethod

US2005/0287186

US 8647867 US

5263756 JapanOkayama

University / 3-DMatrix

Self-Assembly PeptideCardiac Muscle IssueRegeneration Method

PuraMatrix

PuraMatrix Self-Assembly PeptideSkin Tissue Regeneration

WO 06/014570

Absorbable localhemostatic materialProminence materialmucosaEmbolization materialAlveolar bonereconstructionmaterialWound-healing agentPuraMatrix

PuraMatrixSelf-Assembly PeptideModified PeptideSubstance Patent

MIT

US 7713923

US 8901084

US

US

PuraMatrixSelf-Assembly PeptideCartilage Cell CultureMethod

US 7449180 US

MIT

EP1367961 EU

US 6800481 US MIT

US(Patent pending) MIT

EP 2089047 EU

PuraMatrixSelf-Assembly PeptideCardiac Muscle IssueRegeneration Method

5558104 Japan3-D

Matrix, Inc.

US 9012404 US

PuraMatrixSelf-Asembly PeptideModified Peptide CellCulture Method

5057781 Japan MIT

PuraMatrixSelf-Assembly PeptideCartilage Cell CultureMethod

507629 Japan

5497451

EP 2229960

Japan

EU

3-D Matrix

PuraMatrix

PuraMatrix

EP 2322608

5606318

US 7179784

EU

Japan

US

Nippon MedicalSchool

3-DMatrix, Inc.

MIT

Self-Assembly PeptideTransfection agent

Self-Assembly PeptideSufficant peptidenanostructure


39/89


3-D Matrix | 7777 |

R




3DM believes that because it continues to add to its multiple patents portfolio, it will maintain its competitive advantage

despite the early expiration of a patent. It is working on its patent strategy with a prominent law firm based in Boston

(Choate Hall & Stewart LLP).

A number of Bain & Co. alumni, including the current chairman of 3DM, Keiji Nagano, co-invested as angel investors

when 3DM, Inc. was formed and exclusive commercialization rights to self-assembling peptides technology were

acquired from a group of MIT researchers in May 2001.

Contract company Subsidiary (3-D Matrix Inc.)Counterparty MITContract Title ・Amended and restated exclusive patent license agreement

Contract period

Main Agreement Licensing

Technology License Agreement

・First amendment, second amendment and third amendment toamended and restated exclusive patent license agreement

Basic patents covered until patent expiry, others covered until expiry or patentapplication abandoned

MIT grants 3-D Matrix Inc. exclusive global licensing rights (incl. sub-licensing rights)of self-assembling peptide patents owned by MIT as well as those for patents


40/89


3-D Matrix | 7777 |

R



Group companies

◤ 3-D Matrix Inc.: a 100% owned subsidiary based in Massachusetts, US;

◤ 3-D Matrix Europe SAS.: a 100% owned subsidiary based in Lyon, France;

◤ 3-D Matrix EMEA: 100% owned subsidiary based in Holland; will lead sales effort for hemostatic products and other

medical products in Europe.

◤ 3-D Matrix Asia Pte. Ltd. a 100% owned subsidiary based in Singapore;

◤ 3-D Matrix Da America Latina Representacão Comercial Ltda.: a 100% owned subsidiary based in Brazil. Responsible

for the medical products business in South America, including hemostatic materials and other products;

◤ 3-D Matrix Consulting (Beijing) Limited: a 100% owned subsidiary based in Beijing, China. Responsible for the

medical products business in China, including hemostatic materials and other products.

Global expansion



41/89


3-D Matrix | 7777 |

R



Business model

3DM’s business model is significantly different from that of conventional drug discovery start-ups. One of the things that

made this possible is a unique nature of self-assembling peptides. The company built its business model based on the

characteristics of self-assembling peptides.

Medical Device Business Flow-Chart


Company revenues can be categorized into:

▶ Upfront payments

▶ Milestone payments

▶ Revenues from product sales.

Upfront payments are received from licensee pharmaceutical companies when the agreement is signed, while milestone

payments are generated in the development process when certain goals are achieved.

This is the same as with conventional drug-discovery venture companies. The major difference is that in the case of 3DM,

the company develops the substance as a medical device itself and independently seeks a manufacturing and marketing

approval. Therefore, if its products reach the market, 3DM will sell them directly to pharmaceutical companies at a certain

percentage of the final market price. What this means is that 3DM gets a substantially larger portion of the sales revenues

compared to conventional drug discovery startups.

Up until FY04/13, the majority of 3DM’s revenues came from upfront and milestone payments. However, from FY04/15

on, if the launch of absorbable localized hemostatic agent TDM-621 and other products goes according to schedule,

product sales revenues will also be recorded. The company anticipates that the weight of such revenues will grow in the

future, leading to greater and more stable profits.

The gross profit margin is 100% for upfront and milestone payments. For product sale revenues the company expects the


42/89


3-D Matrix | 7777 |

R



GPM of around 60% at the start and around 70% once the mass production scale effect kicks in.

Because 3DM has acquired the exclusive rights to the patents from MIT, it pays a license fee to MIT as a fixed percentage

of sales. However, Shared Research anticipates that this license fee will not exceed few percentage points.

3DM pays a fee for the outsourced peptide raw materials. In addition, the company pays certain fees to such parties as

CROs and pharmaceutical consultants that provide it with advice and support regarding the procurement of peptide

materials, manufacturing technology, and domestic and overseas sales partnerships. The company, which has small

operations with a small number of employees, uses help from outside parties to improve its product development

efficiency.

The company’s business model is different from that of conventional pharmaceutical startups in various other ways, as

well. For instance, many conventional startups handle research and development themselves at least until the process

reaches the first part of Phase II clinical trials. Since these companies do not usually license the product to drugmakers

until then, they often face the following risks: 1) It takes a long time before the product is licensed to drugmakers; 2)

Costs are high; and 3) The chances of the product failing during the process of development are high.

On the other hand, the company’s products are considered “medical devices” as opposed to drugs. This means a

substantially shorter path to the regulatory approval. For instance, the company began developing its absorbablelocalized

hemostatic agent (TDM-621) in Japan around 2009. If the company brings TDM-621 to the market during FY04/15 as

planned, it will mean that the entire development process takes about five years. Furthermore, 3DM claims it can keep

development costs down by actively using outside parties. Also, all 3DM pipeline products use basically the same raw

material (the RADA 16 self-assembling peptides). Therefore, once it successfully completes clinical trials for the first

product, it should be able to shorten the time to market the subsequent products.

Overview of the company’s business model


As 3DM deals with medical devices there is a standardized manufacturing process for its products and the risk of

bottlenecks in raw material procurement, manufacturing, or at other points in the supply chain is low.


43/89


3-D Matrix | 7777 |

R



Strengths and weaknesses

Strengths

◤ Promise of the core self-assembling peptide technology: self-assembling peptides have a number of

advantages compared to their biocompatible material rivals, including safety and ease of use. Moreover, the material

can be used across a wide field of applications. 3DM has been granted the exclusive worldwide license (including

re-licensing rights) from MIT for the basic patents. Consequently, barriers to entry for competitors appear to be

high, both in terms of technology and intellectual property rights.

◤ Differentiated business model: the company is focused on the development of medical devices, which means the

product development period needed is relatively short when compared to the time it takes to develop standard

drugs. Moreover, development costs are also lower for medical devices than drugs. Finally, 3DM relies on third

parties for development of its medical products helping minimize its own employee numbers.

◤ Large potential market: 3DM’s target markets of hemostatic agents and alveolar bone reconstruction agents are

both expected to grow in the future. Shared Research believes the superiority of its core technology and its

exposure to growth medical markets puts the company in a sweet spot.

Weaknesses

◤ Commercial success depends on outside partners: given the company has chosen to focus on searching for

pipeline products, accumulating medical device development expertise, and specializing in ‘project management

and business strategy’, choosing the right partners for its other functions is critical to the company’s success.

◤ Dependence on third party core patents with relatively short lives: one potential weakness for the company is

the fact that most of the patents that form the core of 3DM’s technology are licensed (albeit exclusively) from MIT

and are due to expire in the period between 2014 and 2024. 3DM is aware of potential challenges and counters that

clever intellectual property management strategy would sufficiently ensure legal control of the related technologies.

In fact, the company has retained a prominent law firm to advise it on the patent strategy.

◤ Potential human resources bottlenecks: the majority of 3-D Matrix’s functions are dependent on third parties,

which helps ameliorates human resource bottlenecks as the company grows. However, the company must still

secure personnel with the necessary levels of expertise in order to carry out the project functions it has chosen to

focus on. Consequently, it still faces some human resource hurdles in its efforts to grow its business.


44/89


3-D Matrix | 7777 |

R



Market and value chain

Market environment

Hemostatic agent market Domestic market

Hemostatic agents are used in surgery in areas such as cardiac and vascular, respiratory, digestive, and neurosurgery. The

Japanese market is estimated to be worth approximately 17 billion yen. The Yano Economic Research Institute has forecast

the market will remain more or less at this scale going forwards. However, most of the currently used products are fibrin

glue-type or collagen-type, both of which use materials derived from living organisms and so carry the risk of infection

from viruses that may reside within these materials. A string of companies have been forced to withdraw from the market

as they have been unable to meet heightened safety standards following revisions to the Pharmaceuticals Affairs Law. This

and other factors have led to market stagnation.

After absorbable localized hemostatic agent TDM-621 is launched, the Company is aiming to capture 50% market share

based off TDM-621 replacing existing products on the market. The company is also expecting the domestic market to

grow to around 30 billion yen. The biggest reason is that currently surgeons are refraining from using hemostats due to

concerns about the risks associated with animal/human origin of the existing products. TDM-621 resolves this problem

and should trigger more liberal use. The company also develops new end applications such as use in combination with an

endoscope or peritoneoscope.

Domestic hemostatic agent market


US market

Hemostatic agents are widely used during surgery in the US. Due to the increasing number of operations driven by an

aging society, the American hemostatic agent market is expected to grow at an annual average rate of 6% and be worth

1.3 billion dollars by 2016, according to iDATA Research. The European market is also forecast to reach a similar size,

totaling 1.1 billion dollars in 2016 (source: the company’s estimate based on data from the Millennium Research Group.).


45/89


3-D Matrix | 7777 |

R



3DM believes it can capture a 30-50% share of both the European and US markets.

Forecast Trends for US Hemostatic Market


Overview of the mucous membrane protuberance agent market Around 800,000 endoscopic lesion resections are performed annually in Japan and this number is increasing by about

10% per annum, according to a survey by the Ministry of Health, Labour and Welfare.

Overview of the vascular embolization agent market There were 113,685 head, thorax, and abdominal surgical procedures and 11,526 procedures using anticancer agents in

arterial embolization to treat uterine myoma performed in Japan, according to a Ministry of Health, Labour and Welfare

survey.

Overview of the alveolar bone regeneration agent market About 600,000 implant procedures are carried out in Japan each year. However, in the US about 10 times this number is

performed. Moreover, alveolar bone reconstruction surgery in the US is expected to grow annually by 5.6% out to 2014,

according to the Millennium Research Group.

CY2016 Est: USD1.1bn

0

200

400

600

800

1,000

1,200

CY10 CY11 CY12 CY13 CY14 CY15 CY16

(USDmn) EU Hemostatic Market（2010 - 2016）


46/89


3-D Matrix | 7777 |

R




Barriers to entry

3DM’s core self-assembling peptide technology produces agents that have a number of advantages compared to other

biocompatible materials, including safety and ease of use. The company has also obtained from MIT the exclusive global

rights (including re-licensing rights) for the basic patents for this technology. Consequently, from both a technological

and intellectual-property-rights perspective barriers to entry are extremely high.

Competition

According to MedMarket Diligence, in 2009 the global market for hemostats was dominated by major corporations such

as CSL Behring (unlisted), Johnson & Johnson (NYSE: JNJ), King Pharmaceuticals, Inc. (unlisted; Pfizer Inc. subsidiary),

Nycomed (unlisted; Takeda Pharmaceuticals subsidiary), and Baxter International Inc. (NYSE: BAX). Pfizer Inc. (NYSE: PFE),

HemCon Medical Technologies, Inc. (unlisted) and Integra Lifesciences Corp (NASDAQ: IART) were also prominent.

The main hemostatic agents in the Japanese market include:

◤ Bolheal, a fibrinogen preparation. The product is manufactured by the Chemo-Sero-Therapeutic Research Institute

(Kaketsuken) and distributed by Astellas Pharma Inc. (TSE1: 4503) and Teijin Pharma Ltd., a subsidiary of Teijin Ltd.

(TSE1: 3401)

◤ Tachocomb, manufactured by CSL Behring

◤ Abiten, a collagen-type absorbable localized hemostatic agent, manufactured by Zeria Pharmaceutical Co. (TSE1:

4559).

◤ Arista AH, an absorbable localized hemostatic agent, developed by Medafor, Inc. and distributed by Mera

Pharmaceuticals Inc.

It appears that 3DM’s products are superior, particularly in terms of safety. Of many products available in the market,

Medafor’s Arista AH is derived from starch rather than from living organisms, and Matsudaito is a non-absorbable topical


47/89


3-D Matrix | 7777 |

R



hemostatic material for the central circulatory system, derived from urethane (sales by Terumo Corporation [TSE1: 4543]

and manufacturing by Sanyo Chemical Industries Limited [TSE1: 4471]).

Strategy

3DM strategy is to develop and commercialize products across a variety of fields based on its self-assembling peptide

technology, using outside partners to supply it with manufacturing and distribution capabilities while it focuses on

developing the pipeline, accumulates medical device development expertise, and recommends commercialization

strategies.

If the company can build a strong distributor network and find partners able to aggressively market its products, then the

products appear to be likely to realize their potential and capture significant market share. On the other hand, if its

distributor network is weak or it ends up partnering with companies who feel that the company’s products are a threat to

their existing product line-up then 3DM’s products are unlikely gain much traction.

3DM believes the strength of its products provides it with a strong negotiating position when dealing with current or

potential partners. In line with this view, the company intends to begin clinical trials and negotiate with potential sales

partners through contacts with influential medical institutions and key opinion leaders (KOL).

3-D Matrix ＞ Historical financial statements

48/89


3-D Matrix | 7777 |

R



Historical financial statements

FY04/15 results

(FY04/14 figures in parentheses.)

▶ Operating revenue: JPY100mn (JPY107mn)

▶ Operating loss: JPY1.9bn (operating loss of JPY1.5bn)

▶ Recurring loss: JPY1.8bn (recurring loss of JPY1.5bn)

▶ Net loss: JPY2.0bn (net loss of JPY1.5bn)

Operating revenue included JPY3mn in sales of absorbable local hemostatic products, a milestone payment of JPY51mn

related to the approval of these hemostatic products for sale in Indonesia, and payment for work under a joint research

project run in conjunction with Japan's National Cancer Center.

R&D expenses were JPY816mn (+36.3% YoY). Excluding R&D, SG&A expenses increased to JPY1.2bn (+15.8% YoY) as the

company ramped up overseas expansion.

The company posted JPY141mn in non-operating income (JPY3.5mn for Q1, JPY54.8mn for Q2, JPY72.7mn for Q3,

JPY10.0mn for Q4) because of an increase in the value of assets held in foreign currencies at subsidiaries.

Hemostatic agent (TDM-621) 3-D Matrix had applied to Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) for approval to manufacture and

sell this pipeline product in the domestic market. However, since the precise validation of the efficacy of the hemostat

was deemed necessary to obtain approval, the company decided to withdraw the application in March 2015, conduct a

subsequent clinical trial, and then reapply for approval. The company plans to start these clinical trials in 1H FY04/16

while continuing to consult with PMDA.

In January 2014, this hemostatic agent was certified as meeting the European CE marking requirements. As such, the

company can now apply for product registration in countries that adopt the CE marking system without conducting

clinical studies. With this approval, the company started clinical use in Germany in August 2014. As part of pre-marketing

activities, the company is compiling a track record of clinical use by well-known doctors and prominent medical

institutions in major European countries such as Germany, France, and the UK. Sales of the product through sales agents

in the UK and Switzerland began in Q4 FY04/15 and operating revenue was booked. The company negotiated sales

agreements with multiple potential sales partners in Europe, but agreements were not concluded during FY04/15.

According to the company, between July 2014 and Mach 2015 this hemostatic agent has been used in a total of 53 cases

since being certified as meeting the CE marking requirement in Europe, including 20 cases involving cardiovascular

surgery. The feedback from the physicians (oral and written) in these cases was positive, giving the 3DM's surgical

hemostat especially high marks for being easy to use and offering good visibility.

Among Asian countries that adopt the CE marking system (Singapore, Indonesia, South Korea), the company has applied

for product registration as a medical device and has begun preparing for product sales. It applied for medical device


49/89


3-D Matrix | 7777 |

R



product registration in Singapore in June 2014, which was approved in September of that year. It likewise applied for

product registration in Indonesia in July 2014, which was granted in April 2015. An application was submitted in South

Korea in January 2015. This application was still under review as of June 2015. In Indonesia, a milestone payment was

received from the sales partner on product registration approval, and product sales were started in Hong Kong where

such approval is not required, both of which were booked as operating revenue.

As South American countries (Brazil, Columbia, Mexico) adopt the CE marking system, the company applied for product

registration in Columbia in March 2015. The review of this application is currently ongoing. Preparations are being made

for similar application filings in Brazil and Mexico.


to start clinical trials in the US. Plans are to start these trials in FY04/16.

Mucous membrane protuberance material The company started a clinical study in December 2014, scheduling trials at seven facilities in order to compare the

efficacy and safety of existing products. However, after testing a total in roughly 50 cases during the first month of trials at

two facilities, the company realized that the clinical trials would proceed much faster than it had initially expected and, in

February 2015, decided to voluntarily and temporarily discontinue the study in order to explore test methods for more

evident efficacy and for product development. The company aims to restart the study by end-Q3 FY04/16 and as of June

2015 there were no changes to its development plan up to placing the product on the market. It aims to quickly restart

the study while maintaining product advantages.

Alveolar bone regenerator In clinical trials in the US, the company completed treatment and observations of 15 patients during the first pilot study,

collecting good results and data in terms of bone formation. After the FDA approves the trial protocols for a second pilot

study, the company plans to move onto the next clinical trial phase in 1H FY04/16.

Wound-healing agent In October 2014, 3-D Matrix submitted a 510(k) premarket notification to the US Food and Drug Administration (FDA),


in combination with other pharmaceuticals (antibiotics, anticancer drugs, hyaluronic acid) and as of June 2015 it was

working on commercialization with higher added value for the fields of skin burn treatments, skin cancer treatments, and

cosmetic surgery.

Collaborative research with National Cancer Center

In other areas, the company is collaborating with the National Cancer Center on treatment for “triple negative” breast

cancer with nucleic acid medicine that targets the RPN2 gene. It was awarded research grants from the government,

which were booked as operating revenue. The National Cancer Center has started physician-led clinical trials with the

company providing siRNA nucleic acid medicine that uses the self-assembling peptide A6K as a drug-delivery system

(DDS).

Collaborative research with New Energy and Industrial Technology Development Organization (NEDO)




50/89


3-D Matrix | 7777 |

R





Number of Cells.” The company has received subsidies for the relevant research, which it booked as subsidy income. The

company is also providing its self-assembling peptide as scaffolds for cartilage regeneration.

Earnings results (for reference purposes)

Q1 FY04/16 results (out September 7, 2015; see table above)

▶ Operating revenue: JPY47mn (JPY0mn in the previous year)

▶ Operating loss: JPY519mn (operating loss of JPY438mn in the previous year)

▶ Recurring loss: JPY477mn (recurring loss of JPY471mn in the previous year)

▶ Net loss: JPY453mn (net loss of JPY635mn in the previous year)

Operating revenue came from sales of JPY16mn. 3DM booked product sales from sales agents of hemostatic material

PuraStat®, mainly in Europe and Hong Kong. Meanwhile, R&D operating revenue was JPY31mn. In July 2015, the company

signed an exclusive agreement to market hemostatic material PuraStat® in the ASEAN region with South Korea-based

Daewoong Pharmaceutical Co., Ltd. (DW), and booked an upfront payment from the agreement.

R&D expenses came from cost of sales of JPY46mn. Cost of sales was higher than sales because of manufacturing costs in

the initial phase, but the company said this was a one-off event. JPY167mn (+18.1% YoY). Excluding R&D, SG&A

expenses increased to JPY354mn (+19.0% YoY) as the company ramped up overseas expansion.

The company posted JPY43mn in non-operating income because of an increase in the value of assets held in foreign

currencies at subsidiaries. In addition, 3-D Matrix booked JPY25mn in extraordinary income as it made gains on share

option reversal when rights holders lost their rights through retirement from the stock option system.

Hemostatic agent (TDM-621)

Status in Japan

In Japan, after 3-D Matrix withdrew its application for approval to manufacture and sell this pipeline product in the

domestic market in March 2015, it has resumed consultation with the Pharmaceuticals and Medical Devices Agency

(PMDA) for a clinical trial to ensure the precise validation of the efficacy of the hemostat. The company continued to

consult with PMDA regarding the contents of these clinical trials in Q1, and plans to start the trials in Q2. Unlike the

previous clinical trial, the company will work with the Contract Research Organization (CRO) to improve the efficiency of

the trials. Shared Research believes the company will conduct comparative trials in order to have an objective evaluation

of the agent’s effectiveness (Shared Research observes that in general many clinical trials are conducted to objectively

validate the efficacy of pharmaceuticals and pharmaceutical devices). It is looking to start manufacturing and selling the

product at the earliest opportunity, with the application for approval in place during the current term.

Status in Europe

In January 2014, this hemostatic agent was certified as meeting the European CE marking requirements. As part of

pre-marketing activities, the company is compiling a track record of clinical use by well-known doctors and prominent

medical institutions in major European countries such as Germany, France, and the UK. Sales of the product through sales


51/89


3-D Matrix | 7777 |

R



agents targeting the use by prominent medical institutions for cardiovascular surgery and other procedures in the UK and

Germany began in Q1 FY04/16.

The company continues negotiating sales agreements with three potential sales partners in Europe in Q1. Riding on good

reviews of the product based on clinical results, 3-D Matrix aims to conclude contracts by the end of Q3 FY04/16.

Status in Asia

Among Asian countries that adopt the CE marking system (Singapore, Indonesia, South Korea), the company has applied

for product registration as a medical device and has begun preparing for product sales.

It applied for medical device product registration in Singapore and Indonesia, approved in 1H. The company entered into

a partnership in Q1 with Daewoong Pharmaceutical Co., Ltd. (DW) for an exclusive sales and marketing license in the

ASEAN region (Thailand, Vietnam, and the Philippines). 3-D Matrix received milestone payments for granting the license

from DW. As an application for product registration is underway in South Korea, the company is expecting to gain

approval in Q1 and to launch sales in Q2.

Likewise in the ASEAN region, it is looking to obtain product registration approval during this term and to start selling in

the next term.

In addition, 3-D Matrix has received an order from its sales partner in Indonesia, PT. Teguhsindo Lestaritama, gearing up

for sales in Q1, while in Malaysia, it is taking steps for a sales campaign with the local sales agent. The company, thus, is

poised for launching sales in Indonesia and Malaysia over Q2–Q3.

Status in South America

As South American countries (Brazil, Columbia, Mexico, etc.) adopt the CE marking system, the company applied for and

obtained product registration in Columbia in Q1. 3DM is now able to conduct sales in Chili and Columbia, and was

preparing to commence sales via sales agents.

Similar application filings have been made in Brazil and Mexico. 3-D Matrix is expecting to complete product registration

in all the three countries by the end of the term and to launch sales.

Status in the US


to start clinical trials in the US. Plans are to start these trials in Q1

Mucous membrane protuberance material

The company started a clinical study in December 2014. However, in February 2015, it decided to voluntarily and

temporarily discontinue the study in order to explore test methods for more evident efficacy and for product

development. The company aims to restart the study by end Q3 FY04/16 and, as of September 2015, there were no

changes to its development plan up to placing the product on the market.

Alveolar bone regenerator

In clinical trials in the US, the company completed treatment and observations of 15 patients during the first pilot study,

collecting good results and data in terms of bone formation. After the FDA approved the trial protocols for a second pilot

study, the company moved onto the next clinical trial phase in Q1. Notwithstanding time-consuming observations to


52/89


3-D Matrix | 7777 |

R



confirm the process of bone formation, 3-D Matrix will stay on development track to roll out the product.

Wound-healing agent

In October 2014, 3-D Matrix submitted a 510(k) premarket notification to the US Food and Drug Administration (FDA),


in combination with other pharmaceuticals (antibiotics, anticancer drugs, and hyaluronic acid) and as of Q1, it is working

on commercialization with higher added value for the fields of skin burn treatments, skin cancer treatments, and cosmetic

surgery.

Other

In other areas, 3-D Matrix is collaborating with the National Cancer Center on treatment for “triple negative” breast

cancer with nucleic acid medicine that targets the RPN2 gene. The company is providing siRNA nucleic acid medicine

that uses the self-assembling peptide A6K as a drug-delivery system (DDS). In Q1, the National Cancer Center started

physician-led clinical trials with the new siRNA nucleic acid medicine TDM-812 (RPN2siRNA/A6K compound), jointly

developed by the Center and 3-D Matrix. These physician-led clinical trials are targeted at treatment-resistant breast

cancer patients who have tumors that can be felt from the surface of the body, and are the first such physician-led clinical

trials to be administered in humans.





Number of Cells.” The company is also providing its self-assembling peptide as scaffolds for cartilage regeneration.

Q3 FY04/15 results (out March 13, 2015; see table above) (Q3 FY04/14 figures in parentheses.)

▶ Operating revenue: JPY0 (JPY56mn)

▶ Operating loss: JPY1.5bn (operating loss of JPY1.0bn)

▶ Recurring loss: JPY1.4bn (recurring loss of JPY1.1bn)


R&D expenses were JPY603mn (+40.9% YoY). Excluding R&D, SG&A expenses increased to JPY911mn (+35.0% YoY) as

the company ramped up overseas expansion.

The company posted JPY131mn (JPY3.5mn for Q1, JPY54.8mn for Q2, and JPY72.7mn for Q3) in non-operating income

during cumulative Q3 because of an increase in the value of assets held in foreign currencies.


In January 2014, 3-D Matrix obtained the CE mark for this product, meaning the company can sell or apply to register it

without clinical trials in certain countries. As a result, the company launched clinical use of the product in leading facilities

in Europe. According to 3DM, key opinion leaders (KOLs) began clinical use of TDM-621 in Europe in the second half of


53/89


3-D Matrix | 7777 |

R



2014. As of March 2015, the company says it has received feedback on 60 cases, with positive evaluations for TDM-621’s

hemostatic properties, visibility and safety. The company continued to focus on uptake at leading facilities, thus

expanding clinical use of PuraStat®. The company is also negotiating sales agreements with a sales partner in Europe.

The company also aims to grow sales of PuraStat® using the CE mark in countries outside Europe. Subsidiary 3-D Matrix

Asia Pte. Ltd. (Singapore) obtained approval to register TDM-621 as a medical product in Singapore in September 2014

after applying in June of that year. The company also applied to register TDM-621 as a medical product in Indonesia in

July 2014, and use in clinical trials began in Hong Kong in September 2014. The company plans to continue growing sales

in Asia and Oceania.

In June 2014, the company established a subsidiary in Brazil, in order to develop sales of PuraStat® in South America. Its

use in clinical trials began in Chile in October 2014. The company is also preparing to register the product in South

America, and is looking for a potential sales partner.

In Japan, 3DM on May 31, 2011 filed an application with the Pharmaceuticals and Medical Devices Agency (PMDA) for

approval of the production and sale of TDM-621. However, 3DM withdrew this request on March 13, 2015 following the

agency’s decision that the company needs stronger evidence for the efficacy of TDM-621. The company will conduct

another round of clinical trials and submit a new request at a later date. 3DM said it was preparing for trials as of March

2015 and that it would start the trials during FY04/16.

In the US, the company is negotiating with the Food and Drug Administration (FDA) concerning the launch of clinical

trials. The company is also preparing to begin clinical trials in China.

Alveolar bone regenerator (development code: TDM-711)

The company is in talks with the FDA concerning the expansion of clinical trials in the US.

Mucous membrane protuberance material (development code: TDM-641)

3DM began clinical trials in December 2014. However, the company decided to halt the trials because the tests failed to

provide strong enough evidence for the efficacy of the agent. The company will seek to come up with a better method of

testing.

Wound-healing agent (TDM-511)

The company in October 2014 filed a 510(k) application with the FDA, and obtained approval in February 2015.

FY04/14 Results (out June 12, 2014) Operating revenue consisted of upfront payment for conclusion of an exclusive sales agreement for hemostatic agent

TDM-621 in Indonesia and development expenses received from the National Cancer Center, to total JPY107mn

(+234.7% YoY).

Operating expenses consisted of SG&A expenses for global expansion and increased R&D expenses, for a total of

JPY1.6bn (+57.6% YoY). Specifically, R&D expenses were JPY599mn (+51.5%) and SG&A expenses were JPY1.0bn

(+61.0%).


54/89


3-D Matrix | 7777 |

R




3DM is applying to Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) for approval to manufacture and sell

this pipeline product in the domestic market. Overseas, the company is in consultations with the Food and Drug

Administration, as it looks to begin clinical trials in the US. The company has permission to sell the product in Europe,

having been granted the CE mark on January 14, 2014. The company has begun manufacturing TDM-621, and is moving

to establish its use in influential medical institutions. The CE mark also means clinical trials are not necessary to

manufacture and sell the product in certain countries in Asia, Oceania, and South America.

3DM has begun working toward clinical research in influential facilities in Europe. The company is also working to have

TDM-621 placed on lists of recommended products in different countries, and encouraging its increased use in medical

institutions. The company is negotiating exclusive sales agreements with sales partners.

In May 2013, subsidiary 3-D Matrix Asia Pte. Ltd. (Singapore) agreed upon an exclusive sales agreement in Indonesia with

PT. Tegushindo Lestaritama (Indonesia).

Alveolar bone regenerator (development code: TDM-711)

3DM treated 15 patients in the US, and completed the clinical follow-up. Based on the results, the company plans to

begin discussions regarding the next phase of clinical trials with the US FDA.

Mucous membrane protuberance material (development code: TDM-641)

3DM is working with the PMDA in preparation for clinical trials.

The company is collaborating with the National Cancer Center on treatment for “triple negative” breast cancer with

nucleic acid medicine that targets the RPN2 gene. The Ministry of Health, Labour and Welfare judged this research to fall

under the “National Cancer Center, Phase I Center, Early Research and Development” system, and awarded the company

grants. The company booked the grants as operating revenue.

In 2010, 3DM began collaborative research with the New Energy and Industrial Technology Development Organization

(NEDO), an incorporated administrative agency. The title of the research is “Research and Development of


Medicine Technologies / Development of Autonomous Regeneration Device for Regenerating Tissue In Vivo with a Small

Number of Cells (Research and Development for the Practical Application of In Vivo Autonomous Regeneration of

Organs)”.

FY04/13 Results (announced on June 13, 2013) Operating revenue was 32 million yen, recurring loss was 977 million yen, and net loss was 978 million yen. The company

had already announced revisions to its full-year FY04/13 earnings forecasts on April 19, 2013.

The status of 3DM’s product pipeline at the end of FY04/13 was as follows:


The product continued to undergo screening by Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) as part of

the approval process for manufacture and sale in the domestic market. The company was also in the final stage of

establishing a TDM-621 manufacturing framework. The company made significant progress in preparation for export of


55/89


3-D Matrix | 7777 |

R



TDM-621 to various countries by obtaining ISO 13485 certification, a comprehensive quality management system for the

design and manufacture of medical devices. In the United States, the company filed an investigational device exemption

(IDE) application—equivalent to Japan’s investigational new drug (IND) application—for TDM-621 with the US Food and

Drug Administration (FDA). In Europe, 3DM was planning to submit an application for the CE Mark (the CE Mark denotes

that a product meets EU standards). The company continued to work with business partners to prepare for bridging

studies in South Korea and Taiwan. Mainly through its Singapore subsidiary, the company is strengthening relationships

with its business partners in South Korea and Taiwan, and will also pursue business interests in other parts of Asia.

Alveolar bone regenerator (Development code: TDM-711)

A US subsidiary began clinical trials for this product in February 2012. Treatment of 15 patients has been completed in

line with a predetermined protocol and was in the clinical follow-up stage. Based on the clinical trial results, the company

plans to begin discussions regarding the next phase of clinical trials with the US FDA.

Mucous membrane protuberance material (Development code: TDM-641)

The company was preparing to start clinical trials.


56/89


3-D Matrix | 7777 |

R



Income statement


FY04/12 Operating Revenue was JPY1.1bn, which can be broken down into milestone and upfront payments for the TDM-621

hemostatic agent for surgery (“TDM-621”), upfront payment revenues from contracts for the TDM-641 mucous

membrane protuberance material (“TDM-641”), and grant revenue associated with a joint project with Japan’s National

Cancer Center.

Expenses stood at JPY753mn driven by R&D costs, higher personnel costs on the back of business expansion, and IPO

related costs.

Consequently, the company recorded an operating profit of JPY354mn. Non-operating income came in at JPY3mn. Under

non-operating expenses totaling JPY48mn, JPY14mn was due to stock issuance expenses (IPO), and JPY26mn in advisory

costs. As a result, the company logged a recurring profit of JPY310mn and a JPY309mn net income.

Income Statement FY04/10 FY04/11 FY04/12 FY04/13 FY04/14 FY04/15(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons.Operating Revenue 402 158 1,107 32 107 100

YoY -60.6% 599.5% -97.1% 234.7% -6.9%

Sales 2 8 7 0 6 3

R&D Revenue 400 150 1,100 32 101 96

CoGS 1 2 3 0 3 2

Total Business Expenses 467 641 753 1,031 1,626 2,003 R&D Expenses 111 233 251 395 599 816

SG&A 355 406 499 636 1,024 1,185

Operating Profit -65 -482 354 -999 -1,518 -1,903YoY

OPM 32.0%

Non-Operating Income 11 3 38 32 153 Interest income 1 3 Foreign exchange gains 1 34 27 141 Subsidy income 2 2 4 4Non-Operating Expenses 5 27 48 17 38 45 Interest expenses 8 12 8 Commission fee 6 6 6 4 Stock grants 2 2 14 1 16 32Recurring Profit -60 -510 310 -978 -1,524 -1,795

YoY

RPM 28.0%

Extraordinary GainsExtraordinary Losses 3Tax Charges 1 21 1 1 2 5Net Income -61 -534 309 -978 -1,525 -1,995

YoYNet Margin 27.9%


57/89


3-D Matrix | 7777 |

R



In April 2012, the company upwardly revised its full-year FY04/12 forecasts. Thanks to lower-than-planned R&D and other

expenses, operating profit came in above the revised forecast of JPY300mn.

FY04/11 Total sales were JPY158mn (vs. JPY402mn in FY04/10), driven by JPY150mn in upfront payments (vs. JPY400mn in

FY04/10). Operating expenses meanwhile came to JPY641mn, an increase of JPY174mn from FY04/10. This was mainly

due to a JPY50mn increase in SG&A expenses from increased headcount, and a JPY122mn rise in R&D expenses from

higher clinical trial expenses for TDM-621. This resulted in an operating loss of JPY482mn (vs. JPY65mn in FY04/10); a

recurring loss of JPY510mn (vs. JPY60mn in FY04/10), and a net loss of JPY534mn (vs. JPY61mn in FY04/10).


58/89


3-D Matrix | 7777 |

R



Balance sheet


Assets The company assets are mostly cash and deposits. As of the end of FY04/15, cash and deposits accounted for 75% of total

assets. Reflecting the purchase of raw materials for peptide raw materials, inventories (valued at JPY777mn) accounted for

11% of assets. The company's balance sheet also showed JPY187mn in goodwill, resulting from the acquisition of its

former US parent. The company plans to amortize this at the rate of about JPY70mn per annum through FY04/19.

Liabilities The company is debt free as of the end of FY04/11.

Net Assets As a pharmaceutical startup, 3-Matrix has to incur R&D costs even before its products hit the market and as a result has

negative retained earnings as of the end of FY04/11.

Balance Sheet FY04/10 FY04/11 FY04/12 FY04/13 FY04/14 FY04/15(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons.ASSETS

Cash and Equivalents 544 589 1,758 2,033 2,641 5,137Accounts Receivable 0 0 0 0 0 52Inventories 33 39 25 261 789 777Other Current Assets 17 39 718 190 163 290

Total Current Assets 594 666 2,501 2,484 3,593 6,204Total Tangible Fixed Assets 7 6 88 107 103 94Total Other Fixed Assets 19 22 30 47 86 118

Goodwill 537 467 397 327 257 187Patents 42 38 40 46 56 136

Total Intangible Assets 578 505 437 383 339 393Total Fixed Assets 604 533 554 536 528 605Total Assets 1,198 1,199 3,055 3,020 4,121 6,809

LIABILITIESAccounts Payable 12 16 22 48 92 139Accrued Expenses 4 24 30 43 37 33Short-Term DebtOther Current Liabilities 15 9 59 821 829 238

Total Current Liabilities 31 49 112 913 958 409Long-Term DebtOther Fixed Liabilities 0 55 42 29 18

Total Long-Term Liabilities 0 55 42 29 18Total Liabilities 31 49 167 955 988 428SHAREHOLDERS' EQUITY (NET ASSETS)

Issued Capital 1,109 1,359 2,070 2,139 3,339 5,930Reserves 1,099 1,349 2,060 2,129 3,329 5,920Retained Earnings -1,063 -1,596 -1,288 -2,266 -3,792 -5,787Share Warrants 0 11 19 34 228 341

Total Shareholders' Equity (Net Assets) 1,167 1,150 2,888 2,066 3,133 6,382Working Capital 21 22 3 213 697 690Interest-Bearing DebtNet Debt -544 -589 -1,758 -2,033 -2,641 -5,137


59/89


3-D Matrix | 7777 |

R



The company has also conducted the following capital increases, primarily through issuance of new equity:

◤ October 2007: Third-party share allocation of JPY579mn (1,448 common shares issued to 3DM Investment LLC., and

Massachusetts Institute of Technology)

◤ November 2009: JPY500mn third-party allocation (1,250 common shares issued to Yasuda Enterprise Development

Co. No. 4 Business Investment Limited Partnership; JAIC SME Global Support Investment Limited Partnership; So-net

M3 Inc. (now M3 Inc.); Jafco Sangaku Bioincubation Investment Business Limited Partnership; and TAIB-JAIC Asian

Balanced Private Equity Fund)

◤ September 2010: JPY200mn third-party allocation (400 common shares issued to Fuso Pharmaceutical Industries

Ltd.)

◤ September 2010: JPY300mn third-party allocation (600 common shares issued to Excelsior Medical Co., Daewoong

Pharmaceutical Co.)

◤ October 2011: Public stock offering of JPY1.4bn (700,000 common shares issued)

◤ July 2013: Public stock offering of JPY2.3bn (550,000 common shares issued)

◤ July 2014: Public stock offering of JPY5.1bn (1,270,000 common share issued)

Per Share Data


The company has conducted the following stock splits:

▶ July 2011: Split shares 100:1 taking the outstanding common shares to 948,000.

▶ August 2011: Split shares 4:1 taking the outstanding common shares to 3,792,000.

▶ September 2012: Split shares 2:1 taking the outstanding common shares to 9,221,600.

▶ June 2013: Split shares 2:1 taking the outstanding common shares to 18,936,000

Warrants and Dilution As of the end of FY04/15, the company reported outstanding warrants for 758,000 shares. Assuming all warrants were

exercised as of the end of April 2014, the number of outstanding common shares would be 21,438,000, equivalent to

about a 3.5% dilution.

Per Share Data (JPY) FY04/10 FY04/11 FY04/12 FY04/13 FY04/14 FY04/15Cons. Cons. Cons. Cons. Cons. Cons.

No. of shares ('000) 8 9 4,589 9,468 19,876 21,438Earnings Per Share -7,871 -58,896 74 -105 -78 -95EPS (fully diluted) 69Dividend Per ShareBook Value Per Share 137,634.2 120,159.5 625.1 107.3 146.2 281.8

Per Share Data (JPY, adjusted)Split-Adjusted Shares ('000) 13,568 15,168 18,355 18,936 19,876 21,438

Earnings Per Share -4 -35 18 -53 -78 -95EPS (Fully Diluted) 17Dividend Per ShareBook Value Per Share 86.0 75.1 156.3 53.7 146.2 281.8


60/89


3-D Matrix | 7777 |

R



Statement of cash flows


Operating Cash Flow Almost fully determined by changes in pre-tax earnings.

Investment Cash Flow Minimal overall; driven by acquisition of tangible or intangible assets.

Financial Cash Flow Positive due to equity financing rounds.

Cash Flow Statement FY04/10 FY04/11 FY04/12 FY04/13 FY04/14 FY04/15(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons.Operating Cash Flow (1) -28 -434 -131 -647 -1,680 -1,905Investment Cash Flow (2) -13 -18 -100 -56 -83 -126

Free Cash Flow (1+2) -40 -452 -231 -703 -1,763 -2,030Financial Cash Flow 573 498 1,400 983 2,360 4,511

Depreciation & Amortization (A) 75 79 79 86 102 53Capital Expenditures (B) -11 -10 -90 -36 -40 -82Working Capital Changes (C) - 1 -20 210 485 -7

Simple FCF (NI + A + B - C) - -467 318 -1,139 -1,948 -2,017

3-D Matrix ＞ Other information

61/89


3-D Matrix | 7777 |

R



Other information

History

The company was founded in May 2004 to develop, produce, and sell medical devices based on self-assembling peptide

technology discovered by Dr. Shuguang Zhang of the Massachusetts Institute of Technology (MIT).

Dr. Zhang discovered self-assembling peptides at MIT in 1992. An MIT-research group acquired the rights to

commercialize the technology from the university in May 2001, and established 3DM, Inc. (currently a subsidiary of the

company) in the US. Nagano, who is the company chairman, teamed up with several people from Bain and Co. as angel

investors to fund the startup. Confident in the technology behind self-assembling peptides, Nagano founded 3-D Matrix

Japan Ltd. (now 3DM) in May 2004, with the aim, of developing, producing, and selling medical devices based on the

platform in Japan and rest of Asia.

In October 2004 the newly formed subsidiary entered into a license-and-supply agreement with 3DM, Inc., and also

obtained the rights to re-license the technology covered by the basic patents. 3DM, Inc. never took off the ground as a

business, and in 2007 the Japanese subsidiary acquired its parent in a stock swap, resulting in the present corporate

structure.

1992 Dr. Shuguang Zhang of MIT discovers self-assembling peptides

May 2001 3DM, Inc. (currently a subsidiary of the company) established in the U.S. as an MIT biotechnology

venture

April 2003 3DM, Inc. enters into an Exclusive Patent License Agreement (including sub-licensing rights) for

self-organizing peptides with MIT, the patent owner

May 2004 3-D Matrix Japan Ltd. founded to commercialize self-organizing peptide technology in Japan

October 2004 3-D Matrix Japan Ltd. concludes License and Supply Agreement* with 3DM, Inc. (currently US

subsidiary), receiving licensing and sub-licensing rights for patents relating to self-assembling

peptides

Agreements to supply research reagents free of charge to research institutions that had been

entered into by 3DM, Inc. transferred to agreements between those research institutions and 3-D

Matrix Ltd. (Japanese parent), and the company begins supplying them with PuraMatrix free of

charge

October 2007 3DM, Inc. becomes a subsidiary of 3-D Matrix Japan Ltd.

February 2008 Supply Agreement signed, granting Becton, Dickinson and Company exclusive worldwide rights

to sell the PureMatrix product (RADA16) for research reagent purposes

March 2008 Company name changed to 3-D Matrix Ltd. (3DM elsewhere in this report)

October 2008 Patent application filed for using self-assembling peptides as a hemostatic agent (TDM-621) in

surgery

April 2009 Itochu Chemical Frontier Corp. selected as partner for procurement of raw peptide materials and

manufacture of products. Business Collaboration Agreement for advice, cooperation, and support

signed

July 2009 Exclusive Sales License Agreement signed with Fuso Pharmaceutical Industries Ltd. (Fuso Pharma)

for the rights to sell its hemostatic agent (TDM-621) for surgery product in Japan signed

August 2009 Notification of clinical trial plan for hemostatic agent (TDM-621) for surgery submitted to Japan’s


62/89


3-D Matrix | 7777 |

R



Pharmaceuticals and Medical Devices Agency (PMDA)

January 2010 Clinical trials for hemostatic agent (TDM-621) begin

August 2010 Approval obtained for Class One medical devices manufacture and sale (Tokyo, Approval number

13B1X10105)

September 2010 3DM, Inc. submits IDE application for alveolar bone regenerator (TDM-711) to FDA

Partnership Agreement with Daewoong Pharmaceutical Co. of Korea granting them exclusive

rights to sell hemostatic agent (TDM-621) for surgery in Korea signed

License Agreement with Taiwan’s Excelsior Medical Co. granting them exclusive rights to

develop, manufacture, and sell hemostatic agent (TDM-621)

in Taiwan signed

May 2011 Agreement with Fuso Pharma for outsourced manufacturing of hemostatic agent (TDM-621) for

surgery signed

Notification of conclusion of clinical trials for hemostatic agent (TDM-621) for surgery submitted

to PMDA

Application for approval of manufacture and sale of hemostatic agent (TDM-621) for surgery

submitted to PMDA

July 2011 3DM, Inc. receives IDE approval for alveolar bone regenerator (TDM-711) from FDA

February 2012 Exclusive sales agreement with Fuso Pharma for mucous membrane protuberance material

(TDM-641) signed

U.S. clinical trials begin alveolar bone regenerator product TDM-711), intended for dental

implantation (registration and trial surgery for initial patients begins)

March 2012 Doctor-led clinical research started at Keio University’s School of Medicine by newly applying

3DM’s self-assembling peptide technology

April 2012 Sales agreement between Fuso Pharma and Kaken Pharma for absorbable localized hemostatic

agent (TDM-621)

Establishment of European subsidiary 3-D Matrix Europe SAS. in Lyon, France

October 2012 Establishes Singapore subsidiary 3-D Matrix Asia Pte. Ltd.

February 2013 IDE application filed with FDA for hemostatic agent (TDM-621)

March 2013 Receives ISO 13485

May 2013 Signs exclusive sales agreement with Indonesia’s PT. Teguhsindo Lestaritama for hemostatic agent

(TDM-621)

January 2014 Independent approval institution approves locally absorbent hemostatic material TDM-621 for the

CE mark, required for sales in Europe.

June 2014 Establishes 100% subsidiary 3-D Matrix Da America Latina Representação Comercial Ltda., in Sao

Paulo, Brazil

September 2014 Establishes 100% subsidiary 3-D Matrix Consulting (Beijing) Limited, in Beijing, China

February 2015 Received premarket notification 510(k) for its wound-healing agent in the US.

April 2015 Obtained approval to register its locally absorbent hemostatic material as a medical product in

Indonesia.

May 2015 Established 100% subsidiary 3-D Matrix EMEA in the Netherlands.

July 2015 Formed exclusive sales and marketing agreement with Daewoong Pharmaceutical for the

absorbable localized hemostatic agent in Thailand, the Philipines, and Vietnam, and a

semi-exclusive agreement for Indonesia. Obtained medical device registration for the product in

Columbia.


63/89


3-D Matrix | 7777 |

R



October 2015

Formed agreement with Maquet Australia Pty Ltd for sales and marketing of the absorbable

localized hemostatic agent in Australia.

November 2015 Obtained medical device registration for the absorbable localized hemostatic agent in Brazil.

December 2015

Formed exclusive sales and marketing agreement with Transmedic Pte Ltd for the absorbable

localized hemostatic agent in Singapore, Malaysia, and Brunei.

* In April 2009, the company and 3DM, Inc. of America revised agreements as necessary to reflect the October 2007 conversion of 3DM, Inc.

into a company subsidiary.

News and topics

October 2015 On October 5, 2015, the company announced that a subsidiary and Maquet Australia Pty had entered into a partnership

for the sales and marketing of absorbable local hemostat PuraStat®.

3DM’s Singapore-based consolidated subsidiary, 3-Matrix Asia Pte. Ltd (3MDA), entered a partnership with Maquet

Australia Pty Ltd (Maquet) for the sales and marketing of absorbable local hemostat PuraStat® in Australia.

Based on the agreement, 3DMA will grant a non-exclusive license to Marquet for sales and marketing in Australia. Once

product registration by Maquet is completed, Maquet will then market the product within Australia through its sales

network. Marquet expects that PuraStat® will be registered and commercial sales will begin by the end of the fiscal year.

The agreement will provide 3DM with access to a sales network in Oceania. 3DM noted that Australia is a key market with

a population of over 23mn people, average medical expenditure per capita of JPY730,000 (Japan: about JPY470,000), and

300,000 cardiovascular surgery cases per year (Japan: 63,800 cases). As Australia’s medical and surgical equipment

industry is expected to see 7% growth, 3DM will continue to develop and strengthen its sales platform in the Asia Pacific

region through 3DMA.

Product sales are set to begin in FY04/16, the initial year of the agreement, but at present the company does not expect

any impact on its full-year earnings forecast.

Septmber 2015 On September 15, 2015, the company announced the approval in the US of a patent for a transfection agent (for

transferring genes into cells) using peptide technology.

This patent is for using surfactant peptide as a transfection agent to introduce nucleic acid into tumor tissue, which has

been shown to be effective in suppressing gene expression in cancer cells. Professor Daizo Yoshida (Associate Professor at

Nippon Medical School, Department of Neurosurgery) has published articles and spoken at academic conferences about

the results of research into the use of surfactant peptide technology to treat brain tumors. The company is also

collaborating with the National Cancer Center (an incorporated administrative agency) to develop nucleic acids using this

technology to treat breast cancers resistant to other treatments, for which investigator-initiated trials have begun

The use of cationic transfection agents—such as cationic polymers and cationic liposomes—to introduce genes into cells is

well-established in basic research. However, these agents are known to be cytotoxic. Much research therefore focuses on

transfection agents with a high control efficiency rate of gene expression and low cytotoxicity, which improve the efficacy


64/89


3-D Matrix | 7777 |

R



of tumor treatments. Its low cytotoxicity means the application of surfactant peptides as a transfection agent—as covered

by this patent—has the potential to be approved for clinical use to treat various types of cancers, including brain tumors.

July 2015 On July 23, 2015, the company announced that it had obtained approval to register locally absorbent hemostatic

material PuraStat® as a medical product in Columbia.

The company’s subsidiary in Europe, 3-D Matrix Europe SAS. received notification from the Columbia regulatory

authority, INVIMA, that the product has been approved for registration as a medical device on July 23, 2015.

This approval received is for the CE marking that does not require clinical trials conducted on March 6, 2015 in Columbia,

and the product can now be sold in Columbia. The company plans to begin marketing locally absorbable hemostatic

material PuraStat® in Columbia in FY04/16, and to select its local marketing partner.

At this point, there will be no impact on full-year earnings forecasts for FY04/16.

On July 10, 2015, the company announced an agreement between a subsidiary and Daewoong Pharmaceutical Co.,

Ltd. (“DW”) for the sale and marketing of absorbable local hemostat PuraStat® in the ASEAN region.

The company’s subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd. (“3DMA”), entered into a partnership on July 10, 2015

with Daewoong Pharmaceutical Co., Ltd. (“DW”) for the sale and marketing of absorbable local hemostat PuraStat® in the

ASEAN region.

3DMA will grant an exclusive sales and marketing license for PuraStat® to DW in Thailand, the Philippines, and Vietnam,

and a semi-exclusive sales and marketing license in Indonesia. 3DMA will receive milestone payments for granting these

licenses.

This agreement will allow expansion of sales to medical institutions in the ASEAN region using DW’s local networks. In

Indonesia, 3DMA obtained permission from its local partner PT. Teguhsindo Lestaritama to grant a semi-exclusive sales

and marketing license to DW. It will strengthen promotion and sales efforts in Thailand, the Philippines, Vietnam, and

Indonesia to capture the expanding ASEAN market.

DW will be applying for product registration for PuraStat (CE marking) in Thailand, the Philippines, and Vietnam, and aims

for registration to be approved in FY04/16 and sales to launch in FY04/17.

Due to this agreement, the company will book about JPY30mn in revenue for Q1 FY04/16. As this was already factored

into full-year revenue forecasts, there will be no impact on full-year forecasts at this point.

On the same day, Shared Research updated the company report following an interview with management.

On July 7, 2015, the company announced that the National Cancer Center had started physician-led clinical trials using


65/89


3-D Matrix | 7777 |

R



the new siRNA nucleic acid medicine "TDM-812" targeting breast cancers resistant to other treatments.

According to the company, TDM-812, which it developed in collaboration with the National Cancer Center, has been

administered to patients participating in phase I physician-led clinical trials at the National Cancer Center Hospital.

These physician-led clinical trials are targeted at treatment-resistant breast cancer patients who have tumors that can be

felt from the surface of the body, and as such is a "first-in-human"––the world's first to be administered in humans in

physician-led clinical trials. These phase I trials will be looking at safety and tolerance when TDM-812 is administered

locally to a tumor under the skin, to determine a recommended dosage for topical administration. This is the first time

that clinical trials for breast cancer have been conducted using a drug developed as a nucleic acid medicine from seeds

developed by Japanese academics. Clinical trials commenced on June 30, 2015, with the first patient a “triple negative”

breast cancer patient with subclavian lymphatic metastasis (localized tumor).

Nucleic acid medicine is a highly anticipated new medicine that is expected to treat fundamental causes of disease, with

few side-effects by acting to control abnormal DNA activity. Through these physician-led clinical trials, the company

hopes to win approval for the world's first breast cancer treatment that uses nucleic acid medicine.

June 2015 On June 12, 2015, the company announced FY04/15 full-year results and its medium-term management plan.

May 2015 On May 27, 2015, the company announced the establishment of a subsidiary in the Netherlands.

In order to expand the medical products business—utilizing self-assembling peptide technology, which is currently under

development—in Europe, the company has decided to establish a wholly owned subsidiary in the Netherlands, mainly as

a sales and marketing base.

Overview of the new subsidiary

▶ Name: 3-D Matrix EMEA

▶ Business: Medical products business in Europe, such as hemostatic agents

▶ Capital: EUR300,000 (planned).

April 2015 On April 22, 2015, the company announced the approval of a US patent for the use of self-assembling peptide

technology in myocardial tissue regeneration.

The US Patent and Trademark Office approved a patent application for the use of self-assembling peptide technology in

myocardial tissue regeneration submitted by the company’s US subsidiary.

The patent covers both protection and regeneration of cardiac tissue via self-assembled peptide technology. Research has

shown that delivering self-assembled peptides to damaged myocardial tissue resulting from conditions including acute

myocardial infarction, pericardial disease, congenital heart disease, and congestive heart failure has beneficial effects for

cardiac function. According to the company, this patent will protect its rights as it expands the development of

regenerative medicine products in the US into the field of myocardial tissue regeneration, including the treatment of


66/89


3-D Matrix | 7777 |

R



heart diseases.

Myocardial tissue has significantly limited reproductive capacity, and the health of tissue that suffers damage from an

acute myocardial infarction gradually declines. Regenerative treatments for such necrotic tissue harbor potential, and a

significant amount of research is currently devoted to the subject. The self-assembled peptide treatment contained within

the patent provides scaffolding to not only protect cardiac tissue, but also aid in regeneration of cells. This is a new

approach to treatment for improving cardiac function, and the company anticipates that it will be able to contribute to

treating acute myocardial infarctions.

On April 20, 2015, the company announced revisions to full-year earnings forecasts for FY04/15.

Forecasts for FY04/15 (previous forecasts in parentheses)

▶ Sales: JPY97mn (JPY51mn)

▶ Operating loss: JPY1.9bn (loss of JPY2.0bn)

▶ Recurring loss: JPY1.8bn (loss of JPY1.9bn)

▶ Net loss: JPY2.0bn (loss of JPY2.1bn).

Reasons for the revisions

As announced on April 16, 2015, the company obtained approval to register locally absorbent hemostatic material

PuraStat® as a medical product in Indonesia. This means the company may market the product in Indonesia and, as a

result, it received a milestone payment of about JPY50mn from its exclusive sales and marketing partner in Indonesia, PT.

Teguhsindo Lestaritama. Together with an analysis of the recent sales performance of PuraStat®, this has led 3DM to make

an upward revision to its sales forecast announced on March 13, 2015. The company also made upward revisions to profit

forecasts, in view of the above increase in its sales forecast, and lower SG&A expenses.

The company does not expect this to have a material effect on medium-term targets announced on March 13, but it plans

to make another announcement including the effect of the above in April 2016 or later.

On April 16, 2015, the company announced that it had obtained approval to register locally absorbent hemostatic

material PuraStat® as a medical product in Indonesia.

The company’s subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd., and its sales and marketing partner for Indonesia, PT.

Teguhsindo Lestaritama (headquartered in Indonesia) received notification from the Ministry of Health on April 16, 2015

that the product has been approved for registration as a medical device.

This application, submitted on July 18, 2014, makes use of the CE marking for PuraStat® obtained on January 14, 2014.

This CE marking can used to apply for regulatory agency approval in the 28 member states of the European Union, in

addition to countries in Asia, Oceania, and South America. The product can be commercially marketed once the necessary

procedures are complete in each country.

PT. Teguhsindo Lestaritama plans to begin marketing the product in Indonesia in FY04/16. Furthermore, per a partnership


67/89


3-D Matrix | 7777 |

R



agreement with PT. Teguhsindo Lestaritama, 3-D Matrix Asia Pte. Ltd. will receive a milestone payment of approximately

JPY50mn, which it will report as sales.

The company is assessing the impact on full-year earnings forecasts for FY04/15, and plans to disclose any relevant

information as soon as the assessment is completed.

On April 15, 2015, the company announced the approval of a patent for the use of self-assembling peptide technology

in wound healing and skin-tissue regeneration in Europe.

The company has demonstrated that self-assembling peptides, when applied to wounds, can restore the skin to its

original condition without leaving a scar. According to the company, this patent will protect the company’s rights as it

expands sales of wound-healing agent TDM-511 in Europe.

When treating burns and moderate skin wounds, the limitation of scarring is a challenge. Many types of wound healing

agent and treatment methods are being developed to combat the scarring that often occurs after the treatment of deep

rounds that reach the dermis. According to 3DM, the use of self-assembling peptides in wound healing and skin-tissue

regeneration offers a treatment method that does not leave cosmetic damage.

The company does not expect this patent to have any material impact on earnings forecasts for FY03/15 or later.

March 2015 On March 13, 2015, the company announced that it decided to withdraw its application for approval of the production

and sale of TDM-621, a locally absorbent hemostatic agent, in Japan.

3DM will conduct another round of clinical trials and file a new application at a later date.

The company filed the application on May 31, 2011 with the Pharmaceuticals and Medical Devices Agency (PMDA) after

conducting trials for use in digestive system surgery, cardiovascular surgery, and gastrointestinal medicine. The PMDA has

recently notified 3DM that it must provide stronger evidence for the efficacy of TDM-621.

As of March 2015, 3DM preparing for new clinical trials, which may take place during FY04/16. The company is unable to

provide cost estimates for the trials at this time. 3DM will file another application for approval, although the company is

not certain when that will happen.

On the same day, the company revised its earnings estimates for FY04/15 and reduced directors’ compensation.

FY04/15 full-year earnings forecasts (previous estimates in parentheses)

▶ Operating revenue: JPY51mn (JPY10.4bn)

▶ Operating loss: JPY2.0bn (operating profit of JPY4.5bn)

▶ Recurring loss: JPY1.9bn (recurring profit of JPY4.5bn)



68/89


3-D Matrix | 7777 |

R




◤ TDM-621: 3DM had expected milestone payments and income from product sales associated with TDM-621.

However, the company on March 13, 2015 withdrew its request for domestic approval, saying that it will conduct

another round of clinical trials and file a new request at a later date. Thus, TDM-621 will not contribute to earnings

during this fiscal year.

◤ Delays in overseas sales contracts for TDM-621: 3DM had expected to sign contracts with overseas sales agents

for TDM-621 and receive one-time contract payments and earn regular income from product sales. The company

was in talks with several sales agents as of March 2015. However, the company may not reach any agreement by the

end of this fiscal year.

◤ Costs associated with TDM-621: The cost of sales may increase as a result of the above-mentioned development.

3DM will seek to reduce SG&A expenses.

On the same day, the company revised its medium-term management targets.

Earnings targets (JPYmn)

Operating revenue Operating profit Recurring profit Net income

FY04/16 (previous target) 14,307 6,796 6,779 4,678

FY04/16 (revised target) 3,694 731 714 171

FY04/17 (previous target) 18,473 8,213 8,196 5,450

FY04/17 (revised target) 11,345 4,377 4,361 3,000


◤ FY04/16: 3DM expected one-time contract payments, milestone payments, and income from product sales

associated with TDM-621, as well as payments for other products, both in Japan and abroad (Europe, the Americas,

and Asia) during FY04/15. The company now expects to sign contracts for TDM-621 with European sales agents

during FY04/16. The company may also sign similar agreements in Asia and Latin America.

◤ FY04/17: 3DM expected one-time contract payments, milestone payments, and income from product sales

associated with TDM-621, as well as payments for other products, both in Japan and abroad (Europe, the Americas,

and Asia) during FY04/15. The company now expects to sign contracts for TDM-621 with US sales agents during

FY04/17. The company may also win approval of TDM-621 in Japan and earn milestone payments. At the same time,

3DM may increase product sales in Europe, Asia, and Latin America, and receive milestone payments from mucous

membrane protuberance agents.

On March 9, 2015, the company announced the submission of an application to register absorbable hemostat PuraStat®

as a medical device product in Columbia.

European consolidated subsidiary 3-D Matrix Europe SAS submitted the application for medical device product

registration in Columbia on March 6, 2015.

This application makes use of the CE marking for PuraStat, obtained on January 14, 2014. This CE marking can used to


69/89


3-D Matrix | 7777 |

R



apply for regulatory agency approval in the 28 member states of the European Union, in addition to countries in Asia,

Oceania, and South America. The product can be commercially marketed once the necessary procedures are complete in

each country.

The company is also preparing use consolidated subsidiary 3-D Matrix Da America Latina Representação Comercial Ltda.

as a base to register and begin sales of PuraStat in other countries such as Brazil and Mexico.

February 2015 On February 16, 2015, the company announced that the US Food and Drug Administration (FDA) had granted a

wound-healing agent (TDM-511) premarket approval, following the submission of a 510(k) notification.

US subsidiary 3-D Matrix Inc. submitted the 510(k) on October 23, 2014, informing the FDA that the company intended

to sell TDM-511 as a medical device. The FDA granted premarket approval on February 13, 2015 (US time).

According to the company, the FDA granted approval for the company to market the device in light of equivalencies

between TDM-511 and wound-healing agents already approved in the US. TDM-511 is a gel composed of self-assembling

nanofibers that, when applied to skin (the epidermis or dermis), preserves moisture and creates conditions conducive to

skin-tissue regeneration. From a cosmetic standpoint, this product rarely leaves scars. Furthermore, TDM-511 does not

use animal or plant compounds, and contains no antiseptics likely to cause allergic reactions or irritate the skin. As a

prescription (Rx) device, it may be used under the supervision of a physician for healing wounds from the epidermis to

the dermis, including pressure sores, leg ulcers, diabetic ulcers, and surgical wounds. The approval also covers the

product’s use in over-the-counter (OTC) applications to heal light to moderate skin wounds, including cuts, excoriation,

wounds, and first-degree burns.

This approval covers wound-healing applications classed as skin-tissue regeneration, such as burns and sores. The

company plans to extend the range of applications to include cosmetic surgery (such as hyaluronic acid injections) and

skin cancer when used together with anti-cancer agents.

This approval is not accounted for in 3DM’s full-year earnings forecasts for FY04/15, or in the operating revenue target

given in the company’s medium-term management plan. In the event that this approval will have a material effect on

earnings results, the company will disclose such information as soon as possible.

On the same day, the company announced the temporary cessation of clinical trials of endoscopic mucosal resection aid

“mucous membrane protuberance material (TDM-641).”

On December 11, 2014, the company launched domestic clinical trials to evaluate and verify the safety and efficacy of

TDM-641 when used in endoscopic procedures such as endoscopic mucosal resection (EMR) and endoscopic

submucosal dissection (ESD). The company has now resolved, however, to submit a report on the safety measures and

findings of the clinical trials of this medical device to the Pharmaceuticals and Medical Devices Agency (PDMA) and

temporarily end the clinical trials as of February 17, 2015.

The company expected a certain level of efficacy based on preclinical data, but it has been unable to demonstrate this

level of efficacy in the new domestic clinical trials. The company has thus resolved to voluntarily call a temporary end to


70/89


3-D Matrix | 7777 |

R



the clinical trials, in order to focus on product development and trial methods that will more clearly demonstrate

TDM-641’s efficacy.

As the company looks to market this product, it will consider how to develop TDM-641 in a way that ensures its

superiority as a medical device is verifiable. The company plans to coordinate with physicians leading the clinical trials as

it develops the product, with the aim of restarting clinical trials.

The temporary cessation of the domestic clinical trials of TDM-641 will have a negligible effect on 3DM’s full-year earnings

forecasts for FY04/15.

January 2015 On January 29, 2015, the company announced the submission of an application to register absorbable hemostat

PuraStat® as a medical device product in Korea.

DW, the company’s exclusive sales and marketing partner for the Korean market, submitted the application for medical

device product registration in Korea on January 29, 2015.

This application makes use of the CE marking for PuraStat®, obtained on January 14, 2014. This CE marking can used to

apply for regulatory agency approval in the 28 member states of the European Union, in addition to countries in Asia,

Oceania, and South America. The product can be commercially marketed once the necessary procedures are complete in

each country.

At the time of writing, 3DM is focused on the launch of the product in Europe. The company is also preparing to register

and begin sales of PuraStat® in various other countries where it can use the CE marking to apply for approval.

On January 27, 2015, the company announced a new global license agreement between a subsidiary and the

Massachusetts Institute of Technology (MIT).

Subsidiary 3-D Matrix Asia Pte. Ltd. (Singapore) concluded the global license agreement with MIT for a method of

incorporating and using modified self-assembling peptides and peptide surfactant technology.

This method of modified self-assembling peptides may be used to apply short motif sequences to self-assembling

peptides in order to stimulate biological functions. It is mainly used in regenerative medicine. This license broadens the

company’s rights on cell-growth enhancing peptides in areas such as bone tissues, skin tissues, myocardial tissues, and

nerve tissues.

Peptide surfactant technology has been used in drug delivery systems as a carrier of drugs or treatment materials. The

new license grants rights to additional peptide sequences. In combination with the ultrashort peptide technology license

concluded in May 2014 with Exploit Technology Pte. Ltd. (Singapore), a technology transfer arm for the Agency of

Science, Technology and Research (A*STAR), the company now has a wider range of peptide sequences to develop new

carriers for the sustained release of molecules.


71/89


3-D Matrix | 7777 |

R



December 2014 On December 22, 2014, the company announced the start of clinical use of the locally absorbent hemostatic material

PuraStat® in endoscopy.

Clinical use of PuraStat® began in Europe after the company obtained the CE marking on January 14, 2014. Its first clinical

use in endoscopy was in France on December 17, 2014, with permission to announce its use granted by the medical

institution on December 22, 2014.

Professor Thierry Ponchon of the Hepato-Gastroenterology department at the Edouard Herriot Hospital used PuraStat® to

control bleeding during and after endoscopic submucosal dissection (ESD) surgery. This hospital is a leading facility in

Europe for endoscopic mucosal resections (EMRs) and ESDs, with about 900 surgeries performed each year. In EMRs and

ESDs, surgeons use endoscopes to remove benign and early tumors in the gastrointestinal tract. The techniques are

minimally invasive, thus contributing to patients’ quality of life. PuraStat® is a liquid locally absorbent hemostatic material

that turns into a gel when it comes into contact with the source of the bleeding. It is well suited to endoscopic surgery,

which uses thin tubes.

The company aims to increase distribution of PuraStat® by further promoting its use in the European market and forming

exclusive sales agreements with marketing partners.

On the same day, the company announced the termination of a semi-exclusive sales license agreement for locally

absorbent hemostatic material TDM-621 between sales partner Fuso Pharmaceutical Industries, Ltd. (TSE1: 4538) and

Kaken Pharmaceutical Co., Ltd. (TSE1: 4521).

3DM developed TDM-621, and is applying for approval to manufacture and market the product as medical equipment.

Fuso Pharma and Kaken Pharma planned to sell the product concurrently, but following the cancellation of this

agreement, 3DM will consider an alternate system for selling the product. According to the company, its exclusive sales

license agreement with Fuso Pharma remains unchanged, and the two companies remain on good terms. The company

plans to hold further consultations with Fuso Pharma.

As soon as more information is available, the company plans to disclose details of the effect of the cancellation of the

semi-exclusive sales license agreement on full-year earnings estimates for FY02/15 and the medium-term plan announced

on June 12, 2014.

On December 11, 2014, the company announced the start of domestic clinical trials of endoscopic mucosal resection

aid “submucosal injection material for endoscopy (TDM-641).”

3DM is developing TDM-641 using self-assembling peptide technology, for which the Massachusetts Institute of

Technology (MIT) granted 3DM the exclusive license.

3DM has been preparing to launch clinical trials for TDM-641 as a medical device since the Pharmaceuticals and Medical

Devices Agency (PMDA) received the company’s clinical trial application, submitted on September 9, 2014. The clinical

trials began on December 11, 2014, with the aim of evaluating and verifying the safety and efficacy of TDM-641 when


72/89


3-D Matrix | 7777 |

R



used in endoscopic mucosal resection (EMR) and endoscopic submucosal dissection (ESD).

3DM plans to apply to the PMDA for approval to manufacture and market TDM-641, after conducting trials at seven

domestic trial facilities. After approval is awarded, the company plans to market the product together with Fuso

Pharmaceutical Industries, Ltd. (TSE1: 4538), to which it has granted an exclusive domestic sales license for TDM-641.

On December 3, 2014, the company announced the approval of a patent for modified peptides.

The Massachusetts Institute of Technology (MIT) granted 3DM the exclusive license to self-assembling peptide

technology. A US patent has now been approved for a method of modifying self-assembling peptides.

▶ Invention title: self-assembling peptides incorporating modifications and methods of use thereof

▶ US patent number: 8901084

▶ Patent holder: Massachusetts Institute of Technology

This patent covers the method of applying a short motif sequence to self-assembling peptides in order to stimulate

organic functions. The patent was approved following a new patent application after the approval of US patent 7713923

in 2010, which applied only to a limited range of motif sequences for modifying self-assembling peptides. There are no

such limits on the motif sequences in the new patent, meaning it has a wider application.

Modified peptides are better for cultivating cells than conventional non-modified self-assembling peptides, as shown with

bone, skin, cardiac muscle, and neural tissue. Professor Shuguang Zhang of MIT—the inventor of self-assembling peptides

and patent applicant—and partner research institutes are conducting research in preparation for the clinical use of this

technology, and plan to release their results via academic papers and conferences.

November 2014 On November 27, 2014, the company announced the start of comprehensive R&D toward creating a cultivation kit for

ReproHepato™—a cellular product manufactured by ReproCELL Incorporated—and PuraMatrix®—manufactured by the

company.

The cultivation kit will be the recommended material for use in cultivation of ReproHepato™—liver cells derived from

human iPS cells that are manufactured and were first commercialized by ReproCELL Incorporated—when used in

conjunction with the company’s PuraMatrix® research agent.

Under an exclusive license to use self-assembling peptide technology developed at the Massachusetts Institute of

Technology, 3DM globally markets PuraMatrix®, a research agent that enables three-dimensional cell culturing.

ReproHepato™eproHepatonsional cell culturing. ReproHepatoing peptide technology developed at the

MassachusetPuraMatrix® was included in standard protocols for cell cultivation of ReproHepato™ because it can

significantly increase the metabolism of drugs exposed to ReproHepato™eproHepatotly increase the metabolism of drugs

exposed to ReproHepatoveloped at the Massaraise evaluation efficiency. Use of PuraMatrix® also accelerates experiments,

as it requires no prior preparation. The two companies plan to continue capitalizing on the strengths of the respective

products as part of comprehensive joint research toward producing a cultivation kit.


73/89


3-D Matrix | 7777 |

R



On November 6, 2014, the company announced the start of clinical use of the locally absorbent hemostatic material

PuraStat® in Hong Kong.

Clinical use of PuraStat® began in Europe after the company obtained the CE marking on January 14, 2014. On October

30, 2014, clinical use began at the Pamela Youde Nethersole Eastern Hospital (PYNEH) in Hong Kong. On November 6,

2014, the company received positive feedback from PYNEH.

According to the company, Doctor Chung Ngai Tang, M.D., chief of service at the department of surgery and director of

the minimal access surgery training center at PYNEH used PuraStat® to control bleeding during surgery. PYNEH is one of

the largest hospitals in Hong Kong, performing over 5,000 surgical procedures per year.

The company aims to increase distribution of PuraStat® by further promoting its use in Hong Kong and forming exclusive

sales agreements with marketing partners.

On November 4, 2014, the company announced the start of clinical use of the locally absorbent hemostatic material

PuraStat® in Latin America.

Clinical use of PuraStat® began in Europe after the company obtained the CE marking on January 14, 2014. On October

30, 2014, clinical use began at the Hospital San Borja-Arriaran in Chile. Doctor Christian Baeza, head of the cardiac surgery

department at the leading Chilean medical institution Clinica Las Condes and the Hospital San Borja-Arriaran, used

PuraStat® to control bleeding during surgery.

The company aims to increase distribution of PuraStat® by further promoting its use in Latin American markets and

forming exclusive sales agreements with marketing partners.

October 2014 On October 23, 2014, the company announced that it has submitted a 510(k) premarket notification to the US Food

and Drug Administration (FDA) for sales of its wound-healing agent (TDM-511).

According to the company, the 510(k) was submitted by subsidiary 3-D Matrix Inc. on October 22, 2014 for TDM-511, a

wound-healing agent that is currently in development by the company.

Premarket notification in the 510(k) application process is separate from premarket authorization, which is a process

made available for new products that have no competitors. Premarket notification requires the submitting part to submit

notification to the FDA at least 90 days prior to when the product is scheduled to be made available to the public. The

FDA will then carry out an investigation, to be completed within 90 days, to determine if any similar products exist in the

market. Upon receiving approval from the FDA, the submitting party may then proceed to sell its product.

This application will mark the company’s entry into the skin regeneration business. Initial applications will be for light to

medium skin wounds—such as burns and sores—with possible expansion to cosmetic surgery procedures—such as

hyaluronic acid injections—in the future. The application in its current form also includes antibiotic and anti-inflammatory

properties, which will aid in preventing infections and inflammation of treatment sites. Due to its low toxicity, the


74/89


3-D Matrix | 7777 |

R



inclusion of a cancer fighting additive would also open possibilities for its use in fighting skin cancer.

In the event that the approval process will have a material effect on the company’s FY04/15 earnings forecasts or its

medium-term plan, 3-D Matrix will disclose such information as soon as possible.

September 2014 On September 10, 2014, the company announced the approval of a patent for a transfection agent (for introducing

genes into cells) using peptide technology.

The company was granted a domestic patent for the use of surfactant peptide technology as a transfection agent. The

application was submitted jointly with Nippon Medical School (an incorporated educational institution).

This patent covers the method of using surfactant peptide technology as a transfection agent to introduce nucleic acid

(genes) into tumor tissue, which has been shown to be effective in suppressing gene expression in cancer cells. Professor

Daizo Yoshida (Associate Professor at Nippon Medical School, Department of Neurosurgery) has published articles and

spoken at conferences about the results of research into the use of surfactant peptide technology to treat brain tumors.

The company is also collaborating with the National Cancer Center (an incorporated administrative agency) to prepare

for investigator-initiated trials, with an aim toward clinical application for this technology.


well-established in basic research. However, these agents are known to be cytotoxic. Much research therefore focuses on

transfection agents with a high transfection rate and low cytotoxicity, placing less of a burden on patients yet improving

the efficacy of tumor treatments. Its low cytotoxicity means the use of surfactant peptides as a transfection agent—as

covered by this patent—has the potential to be approved for clinical use to treat various types of solid cancers, including

brain tumors.

On September 9, 2014, the company announced that it submitted a clinical trial application for endoscopic mucosal

resection aid “Submucosal injection material for endoscopy (TDM-641).”

The company submitted an application to the Pharmaceuticals and Medical Devices Agency (PMDA) on September 9,

2014 to conduct a clinical trial for the endoscopic mucosal resection aid "Submucosal injection material for endoscopy

(development code: TDM-641)," which is currently under development.

According to the company, TDM-641 is a transparent liquid composed of a peptide made of three types of amino acids.

Its property of instantly forming a hydrogel (self-assembled) when injected submucosally improves operability of

resecting or separating damaged sites. This is due to its ability to separate and raise the mucosal and muscle layers and

maintain this state after being injected into the submucosal layer of damaged sites during endoscopic treatment.

This peptide is manufactured via chemical synthesis, and since this eliminates animal products, there is no risk of infection

from agents such as the hepatitis C virus or other foreign substances. TDM-641 is anticipated to reduce risk and burden

for healthcare professionals and patients due to its easy administration as an aqueous solution via submucosal injection. It

is also able to form a steep protrusion suitable for mucosal resection since TDM-641 promptly turns into a gel after it is

injected submucosally. TDM-641 is also able to maintain the mucosal protrusion by forming a gel.


75/89


3-D Matrix | 7777 |

R



On February 20, 2012, the company entered into an agreement with Fuso Pharmaceutical Industries, Ltd. (TSE1: 4538)

granting an exclusive domestic sales license for TDM-641.

On September 3, 2014, the company announced that subsidiary 3-D Matrix Asia Pte. Ltd. (Singapore) obtained approval

to register locally absorbent hemostatic material PuraStat® as a medical product in Singapore.

The company obtained the Appro for PuraStat® on January 14, 2014. The CE marking may be used to apply for approval to

manufacture and sell products in countries across the globe, including the 28 member states of the EU—where the

company already has approval to sell PuraStat®—and countries in Asia, Oceania, and South America. The company will

thus be able to sell PuraStat® in these countries once it has completed the necessary application procedures.

Following an application on June 3, 2014, the company obtained approval from Singapore’s Health Sciences Authority to

register PuraStat® as a medical product in Singapore. The company’s use of the CE marking in this application meant it did

not need to perform clinical trials.

At the time of writing, 3-D Matrix is preparing for sales of PuraStat® in the EU, and is also applying for approval to register

it as a medical product in Indonesia. Henceforth, the company intends to continue preparing to register the product and

launch sales in countries where the CE marking may be used to apply for approval.

On September 1, 2014, the company announced the establishment of a subsidiary.

The company is currently expanding its medical business utilizing self-assembling peptide technology in Japan, the US,

the EU, South America, and Asia. To further global expansion of this business, the company established a subsidiary on

August 21, 2014, in Beijing via subsidiary 3-D Matrix Medical Technology Limited (a wholly-owned subsidiary of 3-D

Matrix Asia Pte. Ltd).

Subsidiary details

▶ Name: 3-D Matrix Consulting (Beijing) Limited

▶ Business: Promotion of medical products such as hemostatic agents in China

▶ Capital: JPY20mn (tentative)

▶ Shareholders: Subsidiary 3-D Matrix Medical Technology Limited (owns 100%).

August 2014 On August 28, 2014, the company announced the start of clinical use of the locally absorbent hemostatic material

PuraStat® in Germany.

The company obtained the CE marking for PuraStat® on January 14, 2014. Since then, it has been preparing to initiate

clinical use of the product in major European markets.

Doctor Michiel Morshuis, from the Heart and Diabetes Center NRW at the Clinic for Thoracic and Cardiovascular Surgery,


76/89


3-D Matrix | 7777 |

R



used PuraStat® to control bleeding during cardiovascular surgery. The Heart and Diabetes Center NRW is a global leader in

cardiovascular surgery, with about 5,000 procedures per year.

The company aims to increase distribution of PuraStat® by further promoting its use in European markets and forming

exclusive sales agreements with marketing partners.

On August 8, 2014, the company announced the settlement of a lawsuit and the recording of an extraordinary loss.

The company had been named as the defendant in a lawsuit filed by OncoTherapy Science, Inc. (TSE Mothers: 4564) for

compensation nonpayment, and the suit was settled on August 8, 2014. 3-D Matrix will incur an extraordinary loss as a

result of this settlement.

The lawsuit alleged that 3-D Matrix did not pay a portion of fees that were owed to OncoTherapy as part of a domestic

advisory agreement between the two companies. After assessment of the conditions at hand, 3-D Matrix decided to settle

with OncoTherapy, under the view that settlement of the issue would contribute more to the medium and long term

profitability of the company by absolving it of possible obligations in the future.

As a result of the above, the company plans to book an extraordinary loss of JPY160mn during Q1 FY04/15 in relation to

the lawsuit settlement; the effect that this will have on full year results is still under investigation. According to the

company, resolution of this lawsuit is likely to yield reduced costs in the medium to long term, and it is also working to

determine effects this will have on its medium term plan in FY04/16 onward; results will be disclosed upon completion of

the investigation.

July 2014 On July 18, 2014, the company announced an application to register the locally absorbent hemostatic material

TDM-621 as a medical product in Indonesia.

PT. Teguhsindo Lestaritama made the application on July 18, 2014. PT. Teguhsindo Lestaritama has an exclusive sales

agreement in Indonesia with 3-D Matrix Asia Pte. Ltd., the company’s Singapore subsidiary. Indonesia is the second South

East Asian country where the company has used the CE Mark to apply to register TDM-621, following the application in

Singapore on June 3, 2014.

The company will be able to bring the product to market early if the Indonesian Ministry of Health grants approval. The

company aims to begin sales of this product in FY04/15.

On July 14, 2014, the company announced commencement of clinical use in the EU for absorbable hemostat

“PuraStat®”.

The company has been working toward initiating clinical use of absorbable hemostat “PuraStat®”since obtaining CE

marking for the product on January 14, 2014. On July 1, 2014, clinical use began at the St. John of God Hospital in Austria.

Doctor Bernhard Dauser of the St. John of God Hospital, Department of Surgery, utilized PuraStat® to control bleeding


77/89


3-D Matrix | 7777 |

R



during a surgical procedure. St. John of God Hospital is a major hospital that conducts more than 4,000 surgical

procedures every year

With the beginning of clinical use, the company aims to further promote use of PuraStat® in core European markets, and

expand its distribution through exclusive agreements with marketing partners.

June 2014 On June 25, 2014, the company announced details of an overseas offering of new shares, including the offer price and a

change to the number of shares offered.

Changes to the number of shares (initial data in parentheses)

▶ Total new shares: 1.3mn (1.6mn)

▶ Total shares after the offering: 21.2mn (21.5mn)

▶ Approximate funding received (after deductions): JPY5.0bn (JPY6.3bn)

▶ Dilution: 4.84% (4.77%).

Details of the offering

▶ Offer price per share: JPY4,162

▶ Total offer value: JPY5.3bn

▶ Paid-in amount per share: JPY3,977.5

▶ Total paid-in amount: JPY5.1bn.

On June 24, 2014, the company announced an overseas offering of new shares.

The company intends to use funds raised by this offering to cover costs for R&D (primarily global application and clinical

trial costs associated with attaining the CE marking for absorbable localized hemostatic agents), raw materials, and

production evaluation.

Assuming that all shares are issued according to initial plans, dilution resulting from the offering is estimated to be 8.0%

(19,914,800 shares have been issued as of May 31, 2014).

Funds to be raised from the offering will amount to an estimated JPY6.3bn. Of this, JPY3.0bn is scheduled to be used by

FY04/18 for R&D, raw materials, and production evaluation. JPY800mn is earmarked for use to repay debts during

FY04/15, and the balance is planned for use in operational costs through FY04/17. Costs to be covered by the balance are

detailed below.

R&D for hemostatic agent: JPY2.8bn (August 2014 – April 2018)

R&D for wound-healing agent: JPY200mn (November 2014 – April 2016)

Debt repayment: JPY800mn (FY04/15)


78/89


3-D Matrix | 7777 |

R



Share offering details

▶ Number of shares to be issued: 1.6mn common shares

▶ Offering method: Overseas offering primarily targeting Europe and Asia

▶ Paid-in amount: To be determined on a date between June 24 and June 26, 2014

▶ Issue price: To be determined based upon demand and the market price on the Tokyo Stock Exchange as of the date

which the issue price is set, multiplied by a factor of between 0.90 and 1.00.

▶ Sponsor: Mizuho International Plc to purchase all shares

▶ Payment deadline: July 9, 2014

On June 20, 2014, the company announced the approval for a patent regarding myocardial tissue regeneration

properties of its self-assembled peptide technology.

According to the company, it was granted a Japanese patent for application of self-assembled peptide technology to

myocardial tissue regeneration.

The patent covers both protection and regeneration of cardiac tissue via self-assembled peptide technology. Research has

shown that delivering self-assembled peptides to damaged myocardial tissue resulting from an acute myocardial

infarction has beneficial effects for cardiac function.

Myocardial tissue has significantly limited reproductive capacity, and the health of tissue that suffers damage from an

acute myocardial infarction gradually declines. Regenerative treatments for such necrotic tissue harbor potential, and a

significant amount of research is currently devoted to the subject. The self-assembled peptide treatment contained within

the patent provides scaffolding to not only protect cardiac tissue, but also aid in regeneration of cells. This is a new

approach to treatment for improving cardiac function, and the company anticipates that it will be able to contribute to

treating acute myocardial infarctions.

▶ Invention title: Composition and method for protection and regeneration of cardiac tissue

▶ JP Patent No.: 5558104

▶ Patent holder: 3-D Matrix

On June 17, 2014, the company announced the establishment of a consolidated subsidiary in Brazil for R&D and

arranging business partnerships in South America.

According to the company, the new subsidiary will focus on R&D, marketing and sales as the company develops the

medical products business in South America. This segment is centered on the self-assembling peptide technology that

the company is developing (pipelines for a locally absorbent hemostatic material and a dental bone reconstruction

material).

Overview of the new consolidated subsidiary

▶ Name: 3-D Matrix Da America Latina Representação Comercial Ltda.


79/89


3-D Matrix | 7777 |

R



▶ Business description: medical products in South America, such as hemostatic materials

▶ Capital: BRL600,000 (approximately JPY27mn)

▶ Established: June 13, 2014

▶ Shareholders: 3-D Matrix Ltd. (99% stake)

3-D Matrix Europe SAS (consolidated subsidiary; 1% stake)

▶ Personnel overlap: 3-D Matrix, Ltd. Chairman Keiji Nagano and Vice President Jun Okada will serve as

directors.

On June 12, 2014, the company announced revisions to its medium-term management plan.

On June 5, 2014, the company announced the approval of a patent for a transfection agent (for introducing nucleic acid

[genes] into cells) using peptide technology.

According to the company, it was granted a European patent for the use of surfactant peptide technology as a

transfection agent. The application was submitted jointly with Nippon Medical School (an incorporated educational

institution).

The patent covers the transfection method and its application in suppressing gene expression in cells, which has been

shown to be effective in cancer cells.

The company is collaborating with the National Cancer Center (an incorporated administrative agency) to prepare for

investigator-initiated trials, with an eye toward a clinical application for this technology.


well-established in basic research. However, these agents are known to be cytotoxic. Much research focuses on

transfection agents with a high transfection rate and low cytotoxicity. Many such candidates for nucleic-acid carriers are

being studied, but surfactant peptide technology may be approved for clinical use due to its low cytotoxicity.

On June 4, 2014, the company announced the application to register TDM-621, a locally absorbent hemostatic material,

as a medical product in Singapore.

According to the company, its subsidiary in Singapore, 3-D Matrix Asia Pte. Ltd. submitted the application on June 3,

2014. Applications for registration as a medical product in Singapore use the CE marking system, which does not require

clinical trials. Approval from the Health Sciences Authority in Singapore will make sales of the product possible in the near

future.

3-D Matrix is making progress toward sales of this product in Europe. The company is also applying for registration in

Indonesia, via 3-D Matrix Asia Pte. Ltd. Henceforth, the company intends to continue preparing for registration, with an

eye to launching global sales of TDM-621 wherever the CE marking system is valid.


80/89


3-D Matrix | 7777 |

R



May 2014 On May 30, 2014, the company announced the approval for a patent regarding pancreatic regeneration properties of its

self-assembled peptide technology.

According to the company, it was granted a US patent for the application of self-assembling peptide technology to

pancreatic regeneration, which was submitted jointly with Okayama University.

The patent covers culturing islets of Langerhans (groups of cells that secrete chemicals such as insulin in the pancreas),

and demonstrates the effectiveness of islets that have retained their organic functions in three-dimensional

self-assembling peptide scaffolds. This patent is supplementary to the patent acquired in February 2014, which covered

the method used to culture islets. With the issuance of this patent, the company now has full control over both the

method to culture islets and the resulting cell cultures.

During organ transplantation, maintaining the physiological functions of cells and tissue are a dominant issue, and the

development of a method to allow culturing islets of Langerhans would be beneficial in the field of islet transplants for

diabetic patients. It is known that repeating two-dimensional cell culturing promotes dedifferentiation and results in the

loss of cell functions. As a result, it is believed to be difficult to culture liver and pancreatic cells while maintaining cell

functions in a two-dimensional setting, and much research is being conducted in this field. According to the company’s

announcement, the patent’s three-dimensional cell culturing method could become one method to maintain the

functions of islet cells, and the company hopes that this method can contribute to the establishment of islet

transplantation technology and treatment of diabetes.

On May 12, 2014, the company announced a license agreement on self-assembled ultrashort peptide technology.

The company announced that it has concluded a global license agreement for self-assembled ultrashort peptide

technology between subsidiary 3-D Matrix Asia Pte. Ltd. (“3DMA”) and Exploit Technologies Pte Ltd ("ETPL"), the

technology transfer arm of the Agency for Science, Technology and Research ("A*STAR") in Singapore.

The agreement grants license on self-assembled ultrashort peptide technology invented by Dr. Charlotte Hauser, team

leader and principal research scientist of the Institute of Bioengineering and Nanotechnology (IBN), a national research

institute under A*STAR. The technology will reinforce the group’s intellectual property portfolio and allow for further

commercial development opportunities as it will provide more options as to the types of candidate peptides. This

technology will be used in the areas of regenerative medicine and drug delivery systems in orthopedic surgery.

IBN’s technology is based on rationally designed ultrashort peptides that have an innate tendency to self-assemble to

helical fibers within supramolecular structures. These peptides, which are composed of a hydrophobic tail and a

hydrophilic head group, form hydrogels by changing their secondary structures from α-helical intermediates to β-turn

end structures. They demonstrate high mechanical stiffness and thermal stability. These hydrogels can be used as carriers

of cells and drugs. The hydrogels demonstrate high biocompatibility and injectability that are similar to β-sheet hydrogels

(e.g. PuraMatrix). Therefore, these hydrogels are attractive for various biotechnological applications, for example for bone

regeneration, and for sustained release of drugs, where they serve as scaffolds and carriers. Their short lengths also

substantially lower the cost of synthesis.


81/89


3-D Matrix | 7777 |

R



April 2014 On April 1, 2014, the company announced that its patent on the use of self-assembling peptide technology for

skin-tissue regeneration has been approved in Japan.

The patent relates to self-assembling peptide technology for skin-tissue generation. The company has demonstrated that

self-assembling peptides, when applied to wounds, can restore the skin to its original condition without leaving a scar.

The company is developing wound-healing agent TDM-511 in the US based on this technology.

According to the company, the approval is not likely to affect its earnings for FY04/14 or thereafter.

February 2014 On February 13, 2014, the company announced it was granted a US patent for self-assembling peptide technology for

pancreatic cell culturing.

The company was granted a US patent for the application of self-assembling peptide technology to pancreatic cell

culturing, which was submitted jointly with Okayama University.

The patent covers the method of culturing cells using self-assembling peptides as scaffolds and the application of this

method. More specifically, the patent explains the method is effective in culturing islets of Langerhans (groups of cells

that secrete chemicals such as insulin in the pancreas) in three-dimensional self-assembling peptide scaffolds.

During organ transplantation, maintaining the physiological functions of cells and tissue are a dominant issue, and the

development of a method to allow culturing islets of Langerhans would be beneficial in the field of islet transplants for

diabetic patients. It is known that repeating two-dimensional cell culturing promotes dedifferentiation and results in the

loss of cell functions. As a result, it is believed to be difficult to culture liver and pancreatic cells while maintaining cell

functions in a two-dimensional setting, and much research is being conducted in this field. According to the company’s

announcement, the patent’s three-dimensional cell culturing method could become one method to maintain the

functions of islet cells, and the company hopes that this method can contribute to the establishment of islet

transplantation technology and treatment of diabetes.

January 2014 On January 31, 2014, the company announced that it was filing a patent infringement suit.

3-D Matrix, Inc. (an American subsidiary of the company), together with the patent owner, Massachusetts Institute of

Technology (MIT) filed the patent infringement suit against Menicon Co., Ltd. and B-Bridge International, Inc. (B-Bridge)

with the Federal District Court in Massachusetts. Furthermore, 3-D Matrix, Inc. filed an objection to the validity of a patent

held by Menicon with the United States Patent and Trademark Office.

3-D Matrix, Inc.’s lawsuit states that Menicon’s PanaceaGelTM infringes upon two patents that concern self-assembling

peptides and their usage. 3-D Matrix, Inc. requests that the district court order Menicon and B-Bridge to pay monetary

damages for the ongoing infringement, and to cease any future infringement.

The objection that 3-D Matrix, Inc. has filed concerns a patent that Menicon claims covers the Menicon product

PanaceaGelTM. 3-D Matrix, Inc. requests that the United States Patent and Trademark Office reexamine this patent. 3-D


82/89


3-D Matrix | 7777 |

R



Matrix, Inc. alleges misconduct by Menicon in not recognizing Dr. Shuguang Zhang—MIT professor and 3-D Matrix, Inc.

founder—as the true inventor of the self-assembling peptides and their usage.

On January 15, 2014, the company announced that the hemostatic agent TDM-621 had received the CE mark in

Europe.

The company’s 3-D Matrix Europe SAS unit received the CE mark for hemostatic agent TDM-621 on January 14, 2014. The

acquisition of the CE mark allows the company to sell TDM-621 in European Union nations. The company will make the

product in Japan and export it to Europe.

The market size of hemostatic agent in Europe is estimated at JPY100bn. The acquisition of the CE mark will also enable

the company to seek approval of the agent in several nations in the Oceania and ASEAN regions without conducting

separate clinical trials.

3-D Matrix stated that the acquisition of the CE mark would not have much impact on the company’s earnings forecast for

FY03/14. However, the company is currently assessing the financial impact of the move on its medium-term management

plan. The company said it would release a new management plan as soon as the assessment is made.

Major shareholders

Source: Shared Research based on company data Note: As of April 30, 2015

Major shareholders are business partners of the company. Venture capital funds collectively owned 24.6% of the

company prior to the IPO, 9.1% at the time of IPO, and less than 1% as of the end of April 2015.

Dividends and shareholder benefits

Once the company’s cumulative losses are cleared, management will start considering whether to pay a dividend by

taking into account the company’s financial situation and performance trends. Management stated that it was considering

the matter positively.

Top Shareholders AmountHeld

Keiji Nagano 8.07%BBH For Oppenheimer Global Opportunities Fund 4.20%Fuso Pharmaceutical Industries Ltd. 2.99%SBI Securities Co., Ltd. 2.69%I'LL Inc. 1.87%CBHK-Korea Securities Depository-Daishin 1.49%CYPRESS JAPAN LLC 1.49%Pershing-Div. of DLJ Secs. Corp 1.41%New Media Japan, Inc 1.16%MLPFS CUSTODY ACCOUNT 0.94%


83/89


3-D Matrix | 7777 |

R



Top management

Keiji Nagano, Chairman

Nagano was one of 3DM, Inc.’s (of America) original investors. In 2004 he sublicensed patents from it and established

3DM Japan. After working at Exxon and Bain & Co., he joined New Media in 2000, serving as the representative for New

Media Japan Inc. At Bain and Co. he served as a vice president in their Tokyo office and had a central role in establishing

Bain’s Korea practice and served as the representative there for four years. While at Bain he worked with clients across a

variety of industries, but accumulated particular experience in the telecoms, high-tech, entertainment, and healthcare

fields. He has an MBA from Columbia University.

Kentaro Takamura, President and CEO

Takamura worked for many years developing pharmaceuticals, biomaterials, and medical devices. He then went on to

found Japan Tissue Engineering Co. (JASDAQ: 7774) in 1999, which was the first company in Japan to develop products

employing cultured human cells, and served as a director and head of R&D. He became COO of Medinet Co. (TSE

Mothers: 2370) in 2002, where he developed business support for cell tissue medical treatment and took the company

public for its October 2003 listing on the Tokyo Stock Exchange’s Mothers market. He has been a director of 3DM since

2005, and president since 2007. He has a PhD in medicine from Tokyo Medical University.

Jun Okada, Executive Vice President

Since 1998 Okada worked as a consultant in the Tokyo office of Bain & Co., where he was involved in many projects,

including one year as a resident involved development support for a pharmaceutical company and venture capital

investment support for biotech companies. He took over management planning for 3DM in 2005, has been a director

since 2007, and was appointed an executive vice president in July 2012. He has a MBA from INSEAD.

Tomoyuki Arai, Director

Since 1996, Arai worked at Pronexus Inc. and was involved with many IPO projects. From 2006, he worked for CSBA

Consulting, Inc., providing consulting services related to IPO and internal controls. He served as a director at CSBA

Investment K.K. from 2007. In 2008, he played a key role in listing ASCOT Corporation’s stock on the JASDAQ market. Arai

joined 3DM in 2008, and after acting as an executive in charge of compliance and corporate planning, he gained the

current post in July 2012.

Tsuboi Issei, Director

From 2000, Issei worked as a consultant in the Tokyo office of Bain & Co., and was transferred to Singapore-based Bain &

Company Southeast Asia in 2006. He has worked on insurance, retail, communications, and energy projects in Southeast

Asia, India and Australia. While in Singapore, he joined Temasek Holdings (an investment company owned by the

government of Singapore) in 2008, where he provided strategic advice on investment targets, primarily in Asia and the

Middle East, and performed company valuations. After setting up 3-D Matrix Asia Pte. Ltd. in 2012, he was appointed a

director. Issei was appointed a director of 3DM in July 2015.

Employees

On a consolidated basis, the company had 33 employees as of end-April 2015. The parent had 18 of those (average age

40.2 years; years at the company 4.6 years).

The company has very little assets itself for the development, manufacturing, or sales of products, and these functions are


84/89


3-D Matrix | 7777 |

R



outsourced to various external partners.

Glossary

Absorption, Distribution, Metabolism, Excretion (ADME) Experiment

A pharmacokinetic experiment monitoring the entire process from the administration of a drug into the body through to

its excretion from the body. ADME experiments gauge the resident period and excretion process and duration of a drug

or equivalent in or from the body.

Alanine (A)

A type of neutral protein-forming amino acid. A nonessential amino acid for humans, and commonly exists naturally in

such foods as meats, soy beans, and dairy products. Abbreviated as A or Ala.

Amino Acid

Compounds with an amine group (NH2) and a carboxylic acid group (-COOH) in the same molecule.

Arginine (R)

A basic amino acid that forms proteins. It is a nonessential amino acid for humans, and commonly exists naturally in such

foods as meats, soy beans, and dairy products. It is abbreviated to R or Arg.

Artificial blood vessel replacement surgery

Surgery for improving blood flow by removing the blood vessel area where blood flow is hindered due problems such as

an aneurysm, and replacing it with an artificial blood vessel composed of synthetic fibers.

Asparaginic acid (D)

An acidic amino acid that forms proteins; it is a nonessential amino acid for humans, and commonly exists naturally in such

foods as meats, soy beans, and dairy products. It is abbreviated to D or Asp.

Basic fibroblast growth factor (bFGF)

Contributes to fibroblast growth and angiogenesis (the physiological process involving the growth of new blood vessels

from pre-existing vessels) at the time of wounding.

Bridging

The practice of sharing data for preclinical and clinical trials between countries with different drug regulations when

applying for regulatory approval.

Carrier

A substance that serves as the foundation for securing a substance that exhibits absorption or catalytic activity.

Clinical trial

Tests for studying the safety and effectiveness of an unapproved drug or medical device on humans. The drug/device is

administered to humans and data collected, for the purpose of obtaining regulatory approval for its commercial use.

Coronary artery bypass graft surgery

A surgery treatment for ischemic heart disease (any disease characterized by reduced blood circulation to the heart),


85/89


3-D Matrix | 7777 |

R



which restores blood blood-flow to the heart. Blood vessels are connected to the aorta in order to alleviate a lessening of

blood-flow caused by contraction or blockage of the coronary artery sending blood from the heart.

Drug Delivery System (DDS)

A device or technology that provides the necessary dosage of a drug over a required length of time.

Embolization

Introducing substances into the circulatory system to cause blood vessel occlusion. Also, a minimally invasive therapeutic

procedure using the technique.

Endoscopic Mucosal Resection (EMR)

A surgical procedure for treating early stage cancers or polyps. A high frequency electrical current is targeted into the

submucosal layer through a wire (known as a snare) using an endoscope, in order to avoid damage in the muscle or

below (within the submucosal layer). The tumors/polyps are then recovered.

Endoscopic submucosal dissection (ESD)

A relatively new surgical method for treating early stage stomach or throat cancer by using various electric scalpels to

gradually carve away at the tumor after first injecting drugs such as hyaluronic acid in the area of the tumor and then

creating a sufficient submucosal bulge. Since it uses an electric scalpel to cut away the tumor, it differs from endoscopic

mucosal resection in that there is no limit on the size of the structure to be ablated, and it is possible to ablate an entire

large lesion all at once.

Extracellular matrix

A scaffold material that supports the adhesion and growth of cells and proteins that form collagen outside of cells.

Exudative (oozing) bleeding

Hemorrhage in which blood flows weakly, in an oozing fashion.

Fibrinogen

Fibrinous plasma protein; a blood clotting factor.

Gelation

Gels are absorbent polymer materials that retain the flexibility of liquids while having the elasticity of solids. The formation

of these materials is known as gelation.

Good Laboratory Practice (GLP)

Code of practice for maintaining the reliability of data for preclinical trials (especially safety tests, such as animal

experiments) for drug or medical device development.

Investigational Device Exemption (IDE)

Application submitted to US Food and Drug Administration (FDA) for special exemption relating to clinical testing of new

medical devices.

Lysine (Lys or K)


86/89


3-D Matrix | 7777 |

R



One type of amino acid, used as a building block in proteins. An essential amino acid for humans, lysine is not present in

large quantities in grains, but is present in beans, meat, and fish.

Material Transfer Agreement (MTA)

An agreement relating to the use of research samples such as genes, lab animals, or antibodies, when they are being

transferred to a third party researcher.

Milestone payment

Payments made by a contract partner to a company that has invented a new product in accordance with the

development progress for a new drug or medical device. The timing of these payments will be specified under any joint

development agreement or exclusive sales licensing agreement between the companies.

Occlusion coil / artificial embolization device

A medical device intended for blocking blood flow to a site when treating it, these are administered intravascularly,

causing the formation of an embolism (blocking the blood vessel).

Peptide

A chemical substance formed from two or more bonded amino acids (depending on the number of amino acids involved

they may also be referred to as dipeptides, polypeptides, etc.).

pH

A measure of alkalinity or acidity (concentration of hydrogen ions).

Platelet Derived Growth Factor (PDGF)

Primarily contributes to regulation of growth, and migration of mesenchymal cells (fibroblasts, smooth muscle cells, glial

cells, etc.).

Preclinical trial

An experiment conducted during the research stage of the manufacturing authorization application process of a drug or

medical device on multiple animals for obtaining scientific data for evaluating or proving the fundamental efficacy of a

drug or medical device before using it on humans (clinical trial).

Pre-filled syringe

A syringe sold ready-to-use, filled with the required drug dosage.

PuraMatrix™

A first generation hydrogel product employing self-organizing peptide technology. Repeated sequences of peptide

RADA16, formed from the amino acids arginine (R), alanine (A), asparaginic acid (D), which comprise the body.

Reimbursement Price

The price set by the Ministry of Health, Labour and Welfare for medical devices covered by national health insurance.

Scaffolding

An intracellular matrix composed of a substance found within the body, such as collagen, which acts as a scaffold for cell


87/89


3-D Matrix | 7777 |

R



growth.

Self-assembling peptide

A peptide family that collects with other peptide molecules, and forms nanofibers under certain physiological conditions

(neutral pH and the presence of salts).

siRNA

Low molecular weight double-stranded RNA composed of 21-23 base pairs. siRNA contributes to the phenomena known

as RNA interference (RNAi) and suppresses gene expression in a sequence-specific fashion by breaking down messenger

RNA (mRNA). However, siRNA breaks down immediately after being administered. A secure intracellular delivery

technology is thus necessary to stabilize siRNA when creating pharmaceuticals to be administered into the bloodstream.

Surfactants

A substance that lowers the surface tension of a liquid in small quantities.

Upfront Payment

A payment made by a licensee to the licensor at the beginning of a license contract.


88/89


3-D Matrix | 7777 |

R



Company profile

Company Name Head Office

3-D Matrix Ltd.

Kojimachi HF Building 7th floor

3-2-4 Kojimachi Chiyoda-ku

Tokyo, Japan 102-0083

Phone Listed On

+81-3-3511-3440 JASDAQ

Established Exchange Listing

May 19, 2004 October 24, 2011

Website Fiscal Year-End

April

IR Contact IR Web

IR Mail IR Phone

R Shared Research Report

About Shared Research Inc.

We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by

presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared Research can be found on

the web at http://www.sharedresearch.jp.

Current Client Coverage of Shared Research Inc.

Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.

Disclaimer This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared Research

Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. Shared Research

Inc. shall not be held responsible for any damage caused by the use of this report.

The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared Research Reports

belong to Shared Research Inc. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report are

strictly prohibited and a violation of the copyright of this report. SR Inc. officers and employees may currently, or in the future, have a position in

securities of the companies mentioned in this report, which may affect this report’s objectivity.

Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer The report has been prepared by Shared Research Inc. (“SR”) under a contract with the company described in this report (“the Company”).

Opinions and views presented are SR’s where so stated. Such opinions and views attributed to the Company are interpretations made by SR. SR

represents that if this report is deemed to include an opinion by SR that could influence investment decisions in the Company, such opinion may be

in exchange for consideration or promise of consideration from the Company to SR.

Contact Details Shared Research.inc

3-31-12 Sendagi Bunkyo-ku Tokyo, Japan

http://www.sharedresearch.jp

Phone: +81 (0)3 5834-8787

Email: [email protected]

Accretive Co., Ltd. Gamecard-Joyco Holdings, Inc. Nisshinbo Holdings Inc. AEON DELIGHT Co. GCA Savvian Corporation Onward Holdings Co., Inc.Ai Holdings Corp. Grandy House Corp. Paris Miki Holdings Inc.Aiming Inc. Gulliver International Co., Ltd. NS Tool Co.AnGes MG Inc. Hakuto Co., Ltd. NTT Urban Development CorporationAnicom Holdings, Inc. Happinet Corporation Pigeon Corp.Anritsu Corporation Harmonic Drive Systems Inc. Resorttrust, Inc.Apamanshop Holdings Co., Ltd. Hearts United Group Co., Ltd. Round One Corp.ArtSpark Holdings Inc. Heiwa Real Estate Co., Ltd. Ryohin Keikaku Co., Ltd. AS ONE Corporation IID, Inc. Sanix IncorporatedAxell Corporation Infomart Corp. Sanrio Co., Ltd.Azbil Corporation Intelligent Wave Inc. SATO Holdings Corp. Bell-Park Co., Ltd. istyle Inc. SBS Holdings, Inc. Benefit One Inc. Itochu Enex Co., Ltd. Ship Healthcare Holdings Inc.Canon Marketing Japan Inc. ITO EN, Ltd. SMS Co., Ltd.Carna Biosciences, Inc. J Trust Co., Ltd SOURCENEXT CorporationChiyoda Co., Ltd. Japan Best Rescue System Co., Ltd. Star Mica Co., Ltd.Chugoku Marine Paints, Ltd. JIN Co., Ltd. SymBio Pharmaceuticals LimitedCocokara Fine, Inc. Kameda Seika Co., Ltd. Takashimaya Co., Ltd.Comsys Holdings Corporation Kenedix, Inc. Takihyo Co., Ltd.CRE, Inc. KLab Inc. Tamagawa Holdings Co., LtdCreek & River Co., Ltd. LAC Co., Ltd. TEAR CorporationDaiseki Corp. Lasertec Corp. 3-D Matrix, Ltd.DIC Corporation MAC-HOUSE Co. TOKAI Holdings Corp.Digital Garage Inc. Matsui Securities Co., Ltd. Verite Co., Ltd.Don Qijote Holdings Co., Ltd. Medinet Co., Ltd. WirelessGate, Inc.Dream Incubator Inc. Megane Super Co., Ltd. Yellow Hat Ltd.Elecom Co. MIRAIT Holdings Corp. Yumeshin HoldingsEMERGENCY ASSISTANCE JAPAN Co. MONEY SQUARE HOLDINGS, INC. VOYAGE GROUP, Inc.en-Japan Inc. NAGASE & CO., LTD ZAPPALLAS, INC.FerroTec Corp. NAIGAI TRANS LINE LTD. ZIGExN Co., Ltd. Fields Corp. NanoCarrier Ltd.FreeBit Co., Ltd. Nippon Parking Development Co., Ltd.

http://www.sharedresearch.jp/

http://www.sharedresearch.jp/

mailto:[email protected]

last update 3-d matrix | 7777 · 1/26/2016 · 3-d matrix | 7777 | r shared research report last...

Documents