SanBio Company Limited (4592) Earnings Call Transcript & Summary

Good afternoon. This is Keita Mori, Founder and CEO from SanBio. As usual, thank you very much for coming to this meeting and your interest to SanBio and our brain regeneration initiative. We're extremely happy that we're able to announce that as of on July 31 this year, 2024, we got the marketing approval for our first brain regeneration drug, named AKUUGO. I'll go over more details in the later presentation, but I wanted to open from -- by this excellent and exciting news for us as well as all the patients throughout the world. Today, we've got the 4 topics, the financials, then the second one is the story about the birth of our new drug for brain regeneration. The third topic is how we envision to become a global leader in regenerative medicine. And fourthly, we'll talk about the steps in expanding AKUUGO in Japan. Financials, income statement. In the past 6 months, we used approximately JPY 1 billion for the R&D expenses. As of the total operating expense, we used approximately JPY 1.5 billion. This money has gone into our initiatives in the Japan TBI. Balance sheet. At the end of this -- the latest quarter, we had about JPY 3 billion cash and cash equivalent. We believe this is a good and a stable level to continue our important initiatives in this coming future. Now I'd like to talk about the -- how we came about realizing world first-ever brain regeneration drug, which I announced at the beginning of this presentation. So as I mentioned, on July 31, 2024, we got the marketing approval for AKUUGO, our cell-based regenerative medicine for brain regeneration. We were -- we're truly the first company ever to get approval, marketing approval for brain regeneration drug. We've many, many competitors throughout the world, United States, Europe or China, but we're proud that, that we were the first to be able to get this approval for the patients in need. The product AKUUGO, I'd like to introduce to everyone. This drug, the indication is the improvement of motor functions or improvement of the motor paralysis for the patients who have these deficits as the results of the brain injury. And the -- in the name of the AKUUGO, we've put in to -- put in our aspiration. Our aspiration is that, that we want patients to be able to walk again or move again or communicate again to get the life back that they used to have. So to put our aspiration into the name of this product, we took in the active movement in English, and ugoki in Japanese, both of which means active movement. So together, we came up with this brand name AKUUGO. And I'd like many patients to remember this name, in case you come across with the patients who are in need. Because of this innovative nature of this product and the fact that this was the world first drug in the brain regeneration, we got the feature coverage by major television media. And these media examples are listed here. These television media casted a message that emphasized the fact that this AKUUGO is within the brain regeneration, it's the first ever in the world and also the message that this product has the benefit for the patients for motor function recovery. Now with this drug approved, obviously, we continue and we'd like to refresh ourselves that we've always wanted to serve the patients throughout the world. And as a result, we always have the vision to become the global leader in regenerative medicine. I mentioned about the brain regeneration again and again in this presentation. But what does this mean? Brain regeneration has been believed to be impossible for over 100 years. This was triggered and started by the famous quote or statement by a famous researcher or doctor who even got the Nobel Prize in 1906, Dr Cajal, at the time said the brain does not regenerate. And this is true for adult humans and also adult mammals. So because of this, patients and the families have given up the recovery of the functions after brain damage. And because of this, throughout the time that we, SanBio has been trying, we got the feedback from many people, including doctors who are experts in this field that we -- what we're trying -- what we've been trying to do is crazy. Regenerating brain is a crazy idea, it is something that we've gotten feedback again and again. But about 25 years ago in 1998, SanBio's founding scientist, Professor Hideyuki Okano found a breakthrough finding, which was he was the first researcher to isolate the human stem cells in adult human. And he found that dividing cells in human brain, which indicates the possibility of the brain regeneration. 3 years later, in 2001, we established the SanBio. I, myself, as well as Chairman, Toru Kawanishi, 2 founders got together and decided to go after this impossible challenge. In the subsequent year, 2002, we successfully acquired technology that have now become the basis for AKUUGO. In the next 9 -- 8 to 9 years, we worked in the lab in California. And this is where we started SanBio. We worked stem cells, animals, production development. And finally, in 2010, we obtained permission to start the clinical trial, IND approval from the FDA. So it took us about 9 years to get to the point where we can treat the first human subject. Since then, we started human clinical trial for stroke recovery. And in 2014, something spectacular happened in Japan, something which we were -- it was hard to believe for us. The Japanese government passed a law, which is going to foster the development and commercialization of the cell therapy regenerative medicine. This reform took place in 2014, which accelerated the commercialization of the regenerative medicine. We saw this as a huge opportunity, and we quickly set up a company in Japan, SanBio KK or Kabushiki Kaisha. And then in 2014, we took the Japanese company as the headquarter and the made the U.S. company a subsidiary. Around this time, we got the positive outcome from the stroke study -- stroke trial, demonstrating a clear functional improvement with our product. With this milestone, we took the company public in Tokyo Stock Exchange in 2015. After IPO, we were able to access to an increased amount of funding and launched 2 big clinical trials, one in stroke and another one in TBI. And then we got the successful outcome from the TBI study in late 2018. With this, in 2019, we were able to get the Sakigake Designation from the Japanese agency, and this is equivalent to a breakthrough therapy designation in the United States. This is a demonstration that our product is very innovative and can potentially bring important therapy to the human society. With the clear efficacy and the safety data in hand, we prepared for the marketing approval in Japan. A few things happened. In 2022, we presented at the American Neurology Conference in Seattle, the outcome of the TBI clinical trial. This was the first time that we announced this outcome, and we got the plenary presentation to present this data in front of thousands of exciting audiences. In the same year, we got to file -- make a submission for this product, AKUUGO, BLA submission to the Ministry of Health in Japan. And this year, in 2024, we got the marketing approval for AKUUGO. With this approval, we believe that, that we demonstrated the drug ability of our products and it's our turn to take this product globally and help the patients in need worldwide. As you can see, the number of patients in the U.S. and other markets are much, much larger than that of the Japan. And this means that there are so many patients that we're able to help. And from now, we'll go full speed with the global expansion. So how are we going to realize the global leader position in regenerative medicine? There are 3 actions that we'll be taking. One is United States initiative. We'll be restarting the initiatives in the U.S. U.S. is, without question, the largest market of the new drugs. People say about 40% of the revenue come from the U.S. and 80% of the profit comes from the U.S. So we'll restart the U.S. Second action, we'll be taking is stroke, ischemic stroke. We'll be reengaging in ischemic stroke treatment. Stroke is among the brain regeneration-related diseases, this is -- actually comes with the largest number of patients. So we need to tackle this stroke. And third action is Japan. And Japan, we regard Japan as the innovation engine, which is going to help our global initiative. This is our plan to get the global leader in regenerative medicine. So the first action is the U.S. And as I mentioned, it's the largest market. And also, as I mentioned upfront, U.S. is actually the birthplace of SanBio. We've many, many years of operating in the U.S. We know a lot of people, a lot of people have been engaged, doctors, KOLs, a lot of the companies that we work with. So we've a deep and tight network within the United States. To date, we've experiences in working and engaging with people who have been, for example, the head of the FDA or the head of NIH and so forth or people who have engaged with many of the IPOs, for example, in the U.S. Also, during the clinical studies, we opened and operated about 20 university hospitals and others for the TBI study. For the stroke study, we engaged with about 60 university and other sites. So in total, we've experiences with -- working with 80 clinical sites and the KOLs. And finally, with the FDA, we've been working extensively. Already -- we've already discussions with the FDA in 2019 and also 2022. We plan to consult with the FDA as soon as possible to conduct the Phase III clinical trial to get the approval and to serve patients in the United States. I mentioned about the many KOLs, key opinion leaders and doctors that we work with. The leadership in TBI is with Dr. David Okonkwo, professor from the University of Pittsburgh. He was the lead PI of our TBI clinical trial. And recently, we've the publication out in the field, we had successfully got the paper accepted in the very prestigious publication of neurology. Professor Okonkwo is without question, very famous and influential doctor in the field of TBI. He has led many brands and projects, currently is leading the U.S. National initiative of tracking the TBI and coming up with the treatment. He is also a team doctor for football team, Pittsburgh Steelers. And he is also in the media, very frequently has the leading voice in the field of TBI. Therefore, he is very influential. And with this kind of publication out there, these will be very helpful in our U.S. initiatives. Second action is ischemic stroke. As I mentioned, ischemic stroke has the largest number of patients within the brain regeneration type of diseases. And we've lots of experiences, good and bad, and to refresh everybody's mind, we had one successful clinical trial in stroke and one failure. But together, we've lots of knowledge. And as of today, we do have a winning strategy for the next clinical trial. This slide is the same content as something that we presented a couple of years ago to the investor meeting like this one. And this describes our winning strategy in stroke. It is a busy slide, but basically, the winning strategy is in the patient segmentation. What we've come to know is that in the Phase II study, which was a failure, we now know the reason. We expanded the patient segment too large. And now we know that by limiting the patient segment to about half the population for this upcoming clinical trial, we believe that this will be a winning strategy. And the reason is that we now know that why we didn't do well in the previous study is that we treated patients with too large stroke infarct. And by limiting the infarct size, we believe that we can do a good study and come to a successful outcome, it is something that we believe. To describe this slide, out of the 163 subjects, if we limit the patient segment to about half size, 77 and also if we treat the upper motor scale and the lower motor scale separately, which is something that we learned from the experts in the field that, that's something that we should do, we'll be able to meet the primary endpoint. And this is an ad hoc analysis that we did post hoc. We were able to demonstrate that this study would have made a successful outcome with a p-value of 0.02. So I think bottom line is, I think we know a lot about the ischemic stroke and that we've a winning strategy to tackle this important disease. We've also been working with the patent strategy. With the new finding that I just described in the previous study -- previous slide and also study, we filed the patent. And very lately, we got issuance on this patent. So this means that we've a much extended patent life, which is going to help us with the life cycle management. Well, in terms of the business protection and life cycle management, we always believe and we continue to believe that the best way to protect our business is the production and production know-how. And this is going to protect our business for 30, 40, 50 years, is the norm in this field. However, patent protection is always a nice second protection in our life cycle management and that we'll continue to work on this patent strategy as well. The third action in the global success is Japan. And we regard Japan as the innovation engine. Over the many years, we've accumulated lots and lots and lots of know-how, which are unique to the regenerative medicine. And we'll continue to do so by treating patients and generating data and also the manufacturing and logistics and entire system that we've established, and we'll be running in the very near future. So to summarize for the global winning strategy, we've 3 actions. One is U.S., United States, second is a stroke and the third is Japan. Now, I'd like to turn over to Naoki Tsukahara, and he's going to talk about Japan innovation engine that we've. So Naoki please.

Okay. Thank you, Keita. So my name is Naoki Tsukahara. I'm a Senior Corporate Officer for -- responsible for mainly Japan market. Now let me explain what SanBio plan to do to penetrate AKUUGO into Japan market. Here is the product overview of AKUUGO. We obtained conditional and time-limited marketing approval from MHLW on July 31. Indication is for improvement of chronic motor paralysis associated with traumatic brain injury. For adults, 5 million of live human allogeneic bone marrow-derived MSCs should be implanted to perilesional brain tissues via stereotactic brain surgeries. One of the conditions that was imposed on AKUUGO was to evaluate the equivalence or homogeneity between the products for clinical trial use and commercial use before shipping to the market. We plan to run 2 batches of production to accumulate inventories and at the same time, collect data to prove the equivalence or homogeneity for partial change application. With this data, we expect we'll be able to ship AKUUGO by April 2025. In order to obtain the full approval, we've required to conduct post-marketing clinical trial named PMCT. This table shows how -- the summary of the design of PMCT. Actually, we already set up website and call center on August 8 to answer inquiries from patients with -- for the patients who wish to participate in this PMCT. And actually, there's many patients who called this call center. This slide illustrates the distribution system of AKUUGO. AKUUGO consists mainly of 3 components: vial containing cell suspension, dedicated preparation solutions and dedicated device set. Once the TBI patient is registered for R-SAT system, 4 vials are stored in dry shipper to keep them frozen and ship to medical institution via wholesalers. Here, we use R-SAT system. We developed this system from scratch with Suzuken. And R-SAT enables us to register a patient and track product delivery, administration and post administration follow-up. This slide shows the concept of SanBio's Smart Regional Medical Corporation. AKUUGO is indicated for chronic TBI. So most of them usually don't see neurosurgeons, but go to recovery or chronic care facilities. At this Smart Regional Medical Corporation, we'll make sure the referral from patients nearby consultation facility like a clinic to surgical facilities, and then we've facilities. In order to make this loop work, involvement of HCPs such as therapists and medical social workers and also patient advocacy group is essential to -- is essential. So we -- once this system is activated, I think that there's a lot of -- we can make sure that the patient will consistently starting to use the AKUUGO. This is a website called tbi-navi. And this is a disease awareness and support site for patients and their families. We expect potential AKUUGO patient will learn more about the TBI and motivate it to see a doctor for a new treatment. We launched this website last week. And in fact, there's many patients who visited this website and registered for -- to get more information. So we'll consist -- continue consistently to give -- send an e-mail or to get -- learn more about the state-of-art treatment and when -- which facilities or hospitals they should go to see a doctor. This is the last page of my part. Since we obtained approval, we started promotion of AKUUGO. This is a really big thing, especially to health care professionals, the promotion to the health care professionals is very important. Some of the sponsored seminars listed here is already confirmed with academic societies. And we also plan to have our own AKUUGO launch commemorative meetings and also the website -- web-based lectures to regions. So okay, let me give back to Keita for closing of this whole presentation.

Thank you, everyone, for joining this meeting. Final note, we SanBio in the latest quarter, we were able to finally obtain approval, marketing approval for AKUUGO in the field of brain regeneration. This is the world's first ever drug in the brain regeneration and we're extremely proud and excited that we'll be able to serve patients in need. We, as the global leader in regenerative medicine, we'll continue to innovate and deliver new drugs to patients all over the world. Thank you. Thank you, everyone.