Nxera Pharma Co., Ltd. (4565) Earnings Call Transcript & Summary

The 34th Ordinary General Meeting of Shareholders of Sosei Group Corporation will now come to order. Questions and comments from the shareholders will be collectively accepted after all reports on reporting matters and explanations of the contents of the resolution matters have been completed. Shareholders present at the meeting are also invited to ask questions or make comments from the nearest microphone. In the event of an earthquake or other unforeseen events during the proceedings, please remain calm and follow the instructions of the staff. Please understand that in some cases, at my discretion, I may give priority to voting on the resolution matters in accordance with Article 325, Paragraph 3 of the Companies Act. The contents of the reporting matters at today's general meeting of shareholders are as set out in the convocation notice provided on the company's website. But in accordance with the law and the articles of incorporation, no printed materials have been sent out. The contents are projected on the front screen, which you are kindly requested to view. You can also find the convocation notice provided on the company's website via your smartphone. The secretariat will now first report on the number of shareholders attending the meeting and the number of voting rights held by them.

Let me report. Out of total of 30,016 shareholders, those entitled to vote at the general meeting are 27,605 shareholders. The number of voting rights held by those shareholders is 893,978. Including shareholders who attend the meeting today and those who exercised their voting rights via the Internet or by post, by mail, the total number of voting rights held by all shareholders is 9,458 and the number of voting rights held by the shareholders is 585,351.

Thank you. I am pleased to report that as reported by the secretariat, the quorum required to consider today's agenda is present. First of all, the Audit Committee will report on the results of the audit. Chair of the Audit Committee, Mr. Tohyama, please.

I am Tohyama, Chair of the Audit Committee. Allow me to report on the results of the Audit Committee's audit. The Audit Committee audited the performance of the duties of the directors and executive officers for the 34th fiscal period from January 1 to December 31, 2023. The audit results are presented in the Audit Committee's audit report on Page 76 of the convocation notice. The committee found that the business report and supplementary schedules accurately present the status of the company in accordance with laws, regulations and the Articles of Incorporation. The committee did not find any inappropriate conduct related to the execution of duties by directors or executive officers or any material facts indicating violation of laws and regulations of the Articles of Incorporation. The committee found that the contents of resolution of the Board of Directors related to the system of internal control to be appropriate. In addition, the committee did not find any matter requiring it to comment on the contents of the business report or execution of duties by directors or executive officers regarding the system of internal control. The committee found that the methods and results of the audit performed on the consolidated financial statements, nonconsolidated financial statements and supplementary schedules by the independent auditors, Ernst & Young ShinNihon, were appropriate. That concludes my report.

Thank you, Chair Tohyama of the Audit Committee. I would now like to move on to the report and business outlook. The matters to be reported at the Annual General Meeting are as described in the convocation notice, which is available on the company's website. And I will now provide a summary of those matters and an explanation of the business outlook for the future. Please turn to Slide 8. Last year, revenue was JPY 12.7 billion and the core operating loss was JPY 3 billion. This was due to a delay in the timing of new alliances, the Idorsia Japan, IPJ, acquisition, taking effect midyear and one-off acquisition costs. However, we continue to invest in R&D for the growth and maintain sufficient cash and cash equivalents to support future investments. Slide 9, please. We are pleased that our auditors, E&Y ShinNihon have audited the 2023 financial statements and intend to issue unqualified audit reports. Slide 10, please. 2023 was a year of significant change for the company. The company made progress as a whole, including listing on the prime -- Market Prime Segment or section of TSE, the acquisition of Idorsia Pharma in Japan and APAC and fundraising, including from the foreign wealth fund JIC VGI. In in-house development, in addition to the application for approval of daridorexant, GPR52 Agonist and an EP4 Antagonist entered Phase I trials. In partnered programs, Phase I trials of several muscarinic compounds and novel GLP-1 Agonists were initiated by Neurocrine and Pfizer, respectively. In 2023, alongside these progresses, investments were made for further future growth. Slide 11, please. These progress are building a stronger pipeline. Among them, let me briefly explain the partnership with Boehringer for GPR52, which we announced this month. Slide 12, please. The partnership with Boehringer Ingelheim is an extremely valuable partnership. The GPR52 Agonist is a first-in-class development for schizophrenia and has the potential to be an innovative treatment for all 3 major symptoms that have been difficult to treat. In pursuing this development, we partnered with Boehringer Ingelheim, which has a high degree of expertise in the field of central nervous system. We believe that the fact that this large contract with an upfront payment and option exercise fee of approximately JPY 13.7 billion is the result of the high evaluation of the value of this pipeline. Both companies will focus on accelerating the development of this innovative program in the future. Slide 13, please. We have implemented several key strategies since our inception. Since our founding in 1990, we acquired Arakis in 2005. the COPD drugs developed by Arakis have been stable source of royalty income for us to date. In 2015, we acquired Heptares, which gave us an innovative drug discovery platform and collaboration with a number of global partners is ongoing. Last year, we acquired Idorsia Pharmaceuticals Japan and APAC, excluding China, gaining late-stage development and commercialization capabilities in 2 key programs, Pivlaz and daridorexant. Through this process, we have grown into a fully integrated biopharmaceutical company. And now we will become a leader in the next era of the pharmaceutical industry. Please turn to Slide 14. We unified our company name to Nxera Pharma, including subsidiaries and aim to become completely new biopharma for the next era. Nxera's mission is fast track groundbreaking medicines through leading-edge science and technology. To that end, we have an aspirational vision. As pioneers from Japan, lead the new era of biopharma and medicine innovating for both Japanese patients in the world. Today, we will unveil the new logo of Nxera for the first time. It is pronounced as Nxera, a term coined by combining Next and Era. The shape of the logo represents the mixture of N from Nxera and the image of protein structure. The new website is scheduled to be opened from April 1. Please turn to Slide 15. As you can see, we will also change the names of our subsidiaries. We will accelerate the management integration and enhance the management efficiency of the subsidiaries in Japan and strongly promote business in the future. Please turn to Slide 16. To achieve our vision, we have set 5 objectives for 2024. By implementing them steadily, we will lead the new era of biopharma and medicine, innovating both Japanese patients and the world as pioneers. Please turn to Slide 17. In Japan and APAC, we will aim for growth through development and marketing of external in-licensed products, including Pivlaz and daridorexant. In the EU and the U.S., we will develop our internal products until certain stage and look for collaboration with global pharmaceutical partners. Through that, we will grow as diversification of a pharma company with the upside of a biotech. Please turn to Page 18. We are exposed to the fastest-growing areas of medicine. In Neuropsychiatry, we continue to witness large-scale acquisitions of companies with muscarinic agonist pipeline and the level of attention is extremely heightened. We out-licensed multiple muscarinic agonist to Neurocrine, the specialist in this area. In addition, regarding the new schizophrenia treatment candidate, GPR52 Agonist, we newly partnered with Boehringer. In metabolic disease, GLP-1 Agonist market size is estimated to reach approximately JPY 7.5 trillion in 2024, and it is the area with the highest level of attention. We partner with Pfizer and Eli Lilly with ample experience in this area and research, next-generation development candidate, in-house. As explained, we are perfectly positioned with the right partners in the fastest-growing areas of medicine. Please turn to Slide 19. Over the next 12 months, multiple events are waiting for us, not only for our internal products, but also for partnered pipeline. Since the announcement in February, until today, several events have been already achieved, but the employees will make all-out effort to give you positive updates. This concludes the explanation on the items to be reported and the future business outlook. I now move to proposals. We will take questions for the items to be reported at the end. I will now explain proposal #1, partial amendments to the Articles of Incorporation. Please look at the notice of convocation in front of you. There are 3 proposed amendments. Firstly, in July 2023, Idorsia Pharmaceuticals Japan Limited became a wholly owned subsidiary with a strategic goal to expand the company's operations in Japan. As IPJ and Sosei Company Limited, also a wholly owned subsidiary of the company plan to emerge as of the effective date, April 1, 2024. The company has decided to use the event to adopt a unified corporate brand and corporate name for the group, including all subsidiaries. As a result, the company's corporate name as stipulated in Article 1 of the Articles of Incorporation shall be changed from Sosei Group Corporation to Nxera Pharma Company Limited. The name Nxera is derived from the words Next and Era, to express the company's determination to be a leader in the next era of science and health care. Nxera will be a technology-enabled pharma company that will challenge the status quo in its pursuit of better treatments for patients that are waiting. Secondly, considering the merger between the subsidiaries, as described, the company's head office will be moved to the same location as the Head Office of IPJ to accelerate business integration and enhance operating efficiencies. In accordance with this change, the location of the head office as stipulated in Article 3 of the Articles of Incorporation shall be changed from Chiyoda-Ku, Tokyo to Minato-Ku, Tokyo. Lastly, for future flexibility to enhance the supervisory function of the Board as the company grows, this is to amend the number of directors specified in Article 19 of the existing Articles of Integration from not more than 10 to not more than 12 by adding 2 directors. The changes in corporate name and head office location will be effective from April 1, 2024. The contents of the proposed amendments are in accordance with the notice of the convocation. Let us move on to proposal #2, election of 9 directors. Please refer to the notice of convocation. The term of office of all of current 9 directors will expire at the conclusion of the meeting. In accordance with the decision by the Nomination Committee, I would like to propose the election of the following 9 directors. The candidates are Shinichi Tamura, Tomohiro Tohyama; Kuniaki Kaga; David Roblin; Noriaki Nagai; Rolf Soderstrom; Miwa Seki, Eiko Tomita and myself, Christopher Cargill, 9 directors. The career summary of each candidate is written in the notice of convocation. Then we would like to take votes for the first proposal. One, partial amendments to the Articles of Incorporation. This is as we explained. If you're in favor of this proposal, please applaud. [Voting]

Thank you very much. With your vote, including the Internet and also through the exercise of the voting rights, including the shareholders and also including a number of voting rights from the attending shareholders, we have more than 2/3 of the approval. Thank you very much. This proposal is approved as proposed. Moving on to proposal #2, election of 9 directors. The explanation is provided already. If you're in favor of the proposal, please applaud. [Voting]

Thank you very much. With the current vote, including the shareholders who exercise the voting rights through Internet and also the voting exercise document. We have been able to have the support from the majority of the shareholders. Therefore, this proposal is approved as originally proposed. Thank you very much. With this, we have concluded all the agenda items for today's AGM. So we would like to close the 34th AGM of Sosei Group Limited. Thank you very much. After this, we are planning for the networking session with the shareholders, the venue is the third floor called [indiscernible] room. We're looking forward to have conversation with the participating shareholders. Executive officers and directors, please rise. Thank you very much for your attendance today. We are committed to the enhancement of the further corporate value with all the members, and we would like to solicit your support. [Statements in English on this transcript were spoken by an interpreter present on the live call.]