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Non-Consolidated Financial Results (Japanese GAAP) for the Three Months Ended March 31, 2022


  1. Financial Results for the Three Months Ended March 31, 2022 (January 1, 2022 to March 31, 2022)



    1. Operating Results (Cumulative)


      (% figures are the increase / (decrease) compared with the corresponding period of the previous fiscal year)






































      Net Sales



      Operating Income



      Ordinary Income



      Net Income






      Million yen



      %



      Million yen



      %



      Million yen



      %



      Million yen



      %



      Three months ended


      Mar. 31, 2022



      128



      (47.8)



      (486)



      %uFF0D



      (491)



      %uFF0D



      (492)



      %uFF0D



      Three months ended Mar. 31, 2021



      246



      171.1



      (155)



      %uFF0D



      (149)



      %uFF0D



      (160)



      %uFF0D






















      Net Income per Share



      Diluted Net Income per Share






      Yen



      Yen



      Three months ended


      Mar. 31, 2022



      (11.66)



      %uFF0D



      Three months ended Mar. 31, 2021



      (4.00)



      %uFF0D


      Notes: Despite the existence of shares with a dilutive effect, “Diluted Net Income per Share” is not stated because


      Chiome incurred a loss for each respective period.




    2. Financial Position























    Total Assets



    Net Assets



    Equity Ratio






    Million yen



    Million yen



    %



    As of Mar. 31, 2022



    2,126



    1,653



    76.3



    As of Dec. 31, 2021



    2,339



    1,893



    79.4


    (Reference) Equity As of Mar. 31, 2022: 1,621 million yen As of Dec. 31, 2021: 1,857 million yen




  2. Dividends






























    Annual Dividends






    1Q-End



    2Q-End



    3Q-End



    FY-End



    Total





    Fiscal Year Ending Dec. 31, 2021


    Fiscal Year Ending Dec. 31, 2022



    Yen


    %uFF0D




    %uFF0D



    Yen


    0.00



    Yen


    %uFF0D



    Yen


    0.00



    Yen


    0.00















    Fiscal Year Ending


    Dec. 31, 2022 (Forecast)






    0.00



    %uFF0D



    0.00



    0.00


    Note: Revision to the most recently announced dividend forecast: No




  3. Forecasts of Financial Results for the Fiscal Year Ending December 31, 2022 (January 1, 2022 to December 31, 2022)



As it is difficult to provide reasonable estimates for Drug Discovery and Development Business at present, Chiome discloses only business forecasts for Drug Discovery Support Business (net sales of ¥620 million). There is no revision to the most recently announced forecasts of financial results.




[Notes]



  1. Application of Special Accounting Practices in the Preparation of Quarterly Financial Statements: No




  2. Changes in Accounting Policies, Changes in Accounting Estimates, and Retrospective Restatements



    1. Changes in accounting policies in line with revisions to accounting and other standards: Yes




    2. Changes in accounting policies other than 1) above: No




    3. Changes in accounting estimates: No




    4. Retrospective restatements: No





  3. Number of Shares Issued (Common Stock)



















1) Number of shares issued as of the end of the period (including treasury stock)



As of


Mar. 31, 2022



42,409,900


shares



As of


Dec. 31, 2021



40,781,500


shares



2) Number of treasury stock as of the end of the period



As of


Mar. 31, 2022



146


shares



As of


Dec. 31, 2021



146


shares



3) Average number of shares for the period (cumulative total for the period)



Three months ended Mar. 31, 2022



42,226,599


shares



Three months ended Mar. 31, 2021



40,155,278


shares




*This summary report on Chiome’s quarterly financial statements is not subject to quarterly review procedures.


* Explanation Concerning the Proper Use of Financial Results Forecasts and Other Relevant Specific Items


Forward-looking statements including forecasts of financial results contained in this report are based on management’s assumptions and beliefs that are determined to be reasonable in light of currently available information. Chiome cautions readers that due to a variety of factors actual results may differ materially from forecasts. For the assumptions that underpin financial results forecasts as well as other related items, please refer to the “1. Qualitative Information Regarding Quarterly Financial Results (3) Explanation of Forward-Looking Statements including Forecasts of Financial Results” on page 4 of this report.


Contents





























1. Qualitative Information Regarding Quarterly Financial Results



2



(1) Operating Results



2



(2) Financial Position



4



(3) Explanation of Forward-Looking Statements including Forecasts of Financial Results



4



2. Quarterly Financial Statements



5



(1) Quarterly Balance Sheets



5



(2) Quarterly Statements of Income



7



(3) Notes Concerning Quarterly Financial Statements



8



(Notes Regarding Going Concern Assumptions)



8



(Changes in Accounting Policies)



8



(Notes Regarding Substantial Changes in Shareholders’ Equity)



8



(Important subsequent events)



8



  1. Qualitative Information Regarding Quarterly Financial Results



    1. Operating Results


      The economic environment in Japan and overseas in the first quarter of the year under review remains uncertain because of the concerns about the impact on the global economy due to the worsening situation in the conflict in Ukraine as well as the reemergence of COVID-19 infections.


      In this external environment, the Company’s performance in the first quarter under review was as follows: net sales of ¥128,571 thousand (a decrease of ¥117,509 thousand compared to the same quarter last year, “year-on-year”), research and development costs of ¥446,004 thousand (an increase of ¥229,677 thousand year-on-year), operating loss of ¥486,520 thousand (operating loss in the same quarter last year was ¥155,257 thousand), ordinary loss of ¥491,189 thousand (ordinary loss of the same quarter last year was ¥149,640), and quarterly net loss of


      ¥492,441 thousand (quarterly loss in the same quarter last year was ¥160,704 thousand).


      Net sales decreased in the current period compared to the same quarter last year. even with the limited impact experienced from COVID-19 infections and the worsening situation of the conflict in Ukraine on the Company’s results, partially because there was an upfront license payment in the drug discovery business which was recorded in the same period last year. As a result, the net sales in the first quarter of the current fiscal year decreased by 47.8% compared to the same quarter last year. In terms of profit and loss, the operating loss, ordinary loss and net loss had all increased compared to the same quarter last year. This is mainly due to the recording of expenses in research and development costs associated with the completion of the manufacturing of the study drug for CBA-1535.


      An overview of the Company’s business activities in the first quarter of the year under review is as follows.


      In the drug discovery business, the in-house development of first-in-class antibody CBA-1205 has moved to the second part of Phase I clinical study, the clinical operation is being coordinated including the addition of clinical study sites, as well as the promotion of joint research for the development of new indications other than hepatocellular carcinoma and the development of the new drug targeting DLK-1. We are promoting activities to increase the value of this asset towards out-licensing. The second clinical pipeline, CBA-1535, a multi-specific antibody, has completed the submission of its clinical study plan to the Pharmaceuticals and Medical Devices Agency (PMDA) as of February 16, 2022. Currently, all administrative works are in progress at the clinical sites towards the first dosing to the subject, including the importation of the study drug which was manufactured by CMO.


      In drug discovery projects which are in the exploratory stage, we continue the R&D work on the generation of lead antibodies and on filing new intellectual properties. We will strive to expand the number and quality of our development pipelines by collaborating with drug discovery companies and academia to launch new projects, as well as promoting new themes using our Tribody technology.



      • Drug Discovery Pipeline (out-licensed products)


        Regarding ADCT-701, an ADC format of LIV-1205 that was licensed out to Switzerland-based ADC Therapeutics SA, IND preparation work is in progress. It’s been announced that the National Cancer Institute (NCI) in the US will be a sponsor of Phase 1 in collaboration with ADC Therapeutics for neuroendocrine cancer.


        For LIV-2008/2008b, we signed a license agreement with Shanghai Henlius Biotech, Inc. of China (hereinafter “Henlius”) and the development plans are under development. In addition, there are pharmaceutical companies that continue to conduct in-licensing evaluations. We will primarily focus on alliance management under the


        agreement with Henlius so that they will exercise the option right, and in parallel, continue to pursue the out-licensing opportunity in maximizing the business values of this pipeline.




      • Drug Discovery Pipeline (In-house programs, out-licensing candidates)



      For CBA-1205, we have been conducting a Phase I clinical study in Japan. As the first part of the study showed high safety and tolerability, the decision was made to move to the second part in December 2021. During the year under review, we will promote the enrollment of patients with hepatocellular carcinoma in the second part by adding clinical study sites.


      For CBA-1535, under the circumstances where new coronavirus is unlikely to be brought under control, we have considered submitting an application for clinical study in Japan, rather than in the UK which was originally planned, as this would have a relatively low impact on development. The application for a Phase I study to the Pharmaceuticals and Medical Devices Agency (PMDA) was submitted on February 16, 2022. This would be the first clinical study in the world to validate the mechanism of action of Tribody, which binds to both cancer cells and immune cells (T cells) and activate T cells to kill cancer cells. If this concept is proved in CBA-1535, this will open up the possibility of applying Tribody format to many other tumor antigens.


      For the humanized anti-Semaphorin 3A antibody, BMAA, we carry out BD activities using the data of BMAA evaluation and exploratory study on the Semaphorin family molecules, which we have obtained to date.


      For PCDC, we are currently conducting additional animal studies and other activities that are important to the progress of our R&D activities, while seeking the opportunities for out-licensing or collaboration with external companies, mainly in the field of ADC application.




      For two of our drug discovery projects in the exploratory stage we have been focusing on, we will continue to promote research activities that will contribute to out-licensing and development plans. Among these, a new patent application has been completed for an oncology project. Research on new drug discovery projects related to Tribody is also progressing and we are going to file patent applications. The Company will expand its new pipeline and search for out-licensing opportunities by continuously creating new drug seeds and making them into intellectual property. We are also participating in a research program in the field of infectious diseases and technology development in collaboration with academia in Japan, which is supported by a grant from the Japan Agency for Medical Research and Development (AMED).


      As a result of the above, the results for the first quarter of the year under review in the drug discovery business were as follows: net sales was decreased by ¥103,013 thousand year-on-year, due to the upfront payment recorded in the same period last year from the conclusion of the LIV-2008 and LIV-2008b license agreement. Research and development costs amounted ¥446,004 thousand (an increase of ¥229,677 thousand year-on-year), segment loss was ¥446,004 thousand (segment loss was ¥113,415 thousand in the same period last year).




      Drug discovery support business contributes to the Company’s stable earnings. We offer technical support to pharmaceutical companies and research institutions by undertaking antibody production work using ADLib system, our proprietary antibody production expertise, as well as protein preparation work and antibody affinity maturation work based on the ADLib system. We are also promoting the development of new clients to strengthen our earnings base.


      As a result of the above, in the drug discovery support business, net sales for the first quarter under review


      amounted to ¥128,571 thousand (a decrease of ¥14,496 thousand year-on-year), segment profit was ¥70,840 thousand (a decrease of ¥8,448 thousand year-on-year) and segment profit margin of 55.1% (target 50%) due to continued stable transactions with existing clients, mainly domestic pharmaceutical companies.






    2. Financial Position (Assets)


      Total assets at the end of the first quarter of the current fiscal year amounted to ¥2,126,576 thousand, a decrease of ¥212,863 thousand compared to the end of the previous fiscal year, mainly due to a decrease in advance payments. (Liabilities)


      The balance of liabilities at the end of the first quarter of the current fiscal year amounted to ¥473,032 thousand, an increase of ¥26,642 thousand compared to the end of the previous fiscal year. This was mainly due to an increase of ¥36,730 thousand accounts payable related to clinical development.


      (Net assets)


      The balance of net assets at the end of the first quarter of the current fiscal year amounted to ¥1,653,544 thousand, a decrease of ¥239,505 thousand compared to the end of the previous fiscal year. This was mainly because of a decrease in retained earnings after recording the net loss in the period under review, even though capital stock and capital reserves were increased as a result of the exercise of subscription rights.






    3. Explanation of Forward-Looking Statements including Forecasts of Financial Results


      There are no changes to the financial results forecasts for the fiscal year ending December 31, 2022 announced on February 14, 2022.





  2. Quarterly Financial Statements




  1. Quarterly Balance Sheets


























































































    Thousand yen






    As of Dec. 31, 2021



    As of Mar. 31, 2022



    Assets









    Current assets









    Cash on hand and in banks



    1,790,988



    1,744,576



    Accounts receivable



    25,456



    47,867



    Inventories



    59,049



    68,972



    Advance payment-trade



    270,440



    65,641



    Consumption taxes receivable



    36,050



    46,446



    Other current assets



    34,898



    31,835



    Total current assets



    2,216,883



    2,005,340



    Non-current assets









    Property and equipment









    Machinery



    291,571



    291,571



    Accumulated depreciation



    (287,372)



    (287,757)



    Machinery, net



    4,199



    3,814



    Tools and equipment



    95,820



    95,820



    Accumulated depreciation



    (95,820)



    (95,820)



    Tools and equipment, net



    0



    0



    Total property and equipment



    4,199



    3,814



    Investments and other assets









    Long-term prepaid expenses



    5,544



    4,610



    Lease deposits and others



    112,811



    112,811



    Others



    0



    0



    Total investments and other assets



    118,355



    117,421



    Total non-current assets



    122,555



    121,236



    Total assets



    2,339,439



    2,126,576
































































































    Thousand yen






    As of Dec. 31, 2021



    As of Mar. 31, 2022



    Liabilities









    Current liabilities









    Accounts payable, trade



    29,809



    41,369



    Short-term borrowings



    183,000



    183,000



    Accounts payable, other



    81,549



    118,280



    Accrued expenses



    39,636



    29,062



    Income taxes payable



    16,745



    8,000



    Advances received



    30,523



    25,600



    Contract liabilities



    %uFF0D



    4,603



    Deposits received



    6,453



    5,625



    Provision for bonuses



    4,821



    2,780



    Others



    %uFF0D



    756



    Total Current liabilities



    392,540



    419,077



    Non-current liabilities









    Asset retirement obligations



    53,849



    53,954



    Total non-current liabilities



    53,849



    53,954



    Total liabilities



    446,390



    473,032



    Net assets









    Shareholders’ equity









    Capital stock



    1,515,929



    1,642,383



    Capital reserve



    3,115,710



    3,242,163



    Retained earnings



    (2,773,693)



    (3,262,686)



    Treasury stock



    (292)



    (292)



    Total shareholders’ equity



    1,857,654



    1,621,568



    Subscription rights to shares



    35,394



    31,975



    Total net assets



    1,893,049



    1,653,544



    Total liabilities and net assets



    2,339,439



    2,126,576




  2. Quarterly Statement of Income (First Quarter Cumulative)



















































































    Thousand yen



    Three Months Ended Mar. 31, 2021


    (Jan. 1, 2021


    to Mar. 31, 2021)



    Three Months Ended Mar. 31, 2022


    (Jan. 1, 2022


    to Mar. 31, 2022)



    Net sales



    246,081



    128,571



    Cost of sales



    63,879



    57,730



    Gross profit



    182,201



    70,840



    Selling, general and administrative expenses









    Research and development expenses



    216,327



    446,004



    Other, net



    121,131



    111,357



    Total selling, general and administrative expenses



    337,458



    557,361



    Operating loss



    (155,257)



    (486,520)



    Non-operating income









    Interest income



    14



    10



    Foreign exchange gains



    6,408



    %uFF0D



    Other, net



    93



    5



    Total non-operating income



    6,517



    15



    Non-operating expenses









    Interest expenses



    313



    321



    Subscription rights issuance cost



    586



    1,185



    Foreign exchange losses



    %uFF0D



    3,176



    Total non-operating expenses



    900



    4,683



    Ordinary loss



    (149,640)



    (491,189)



    Loss before income taxes



    (149,640)



    (491,189)



    Income taxes-current



    11,064



    1,252



    Total income taxes



    11,064



    1,252



    Net loss



    (160,704)



    (492,441)




  3. Notes Concerning Quarterly Financial Statements (Notes Regarding Going Concern Assumptions) Not applicable.





(Changes in Accounting Policies)


(Application of Accounting Standard for Revenue Recognition, etc.)


The company has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020, hereinafter referred to as “Revenue Recognition Accounting Standards”) from the beginning of the first quarter of the current fiscal year and recognizes revenue as the amount expected to be received in exchange for the promised goods or services when the control of the goods or services is transferred to the customer.


The application of the Revenue Recognition Accounting Standards etc., is in accordance with the transitional treatment based on the proviso to paragraph 84 of the Revenue Recognition Accounting Standards, and the cumulative effect of retroactive application of new accounting policies prior to the beginning of the first quarter of the current fiscal year is added to or subtracted from retained earnings at the beginning of the first quarter of the current fiscal year, and the new accounting policies are applied from the opening balance of this period. However, the Company has applied the method stipulated in Paragraph 86 of the Revenue Recognition Accounting Standards and has accordingly not retroactively applied the new accounting policy to contracts for which almost the entire amount of revenue had been recognized prior to the beginning of the first quarter of this fiscal year.


In addition, the Company has applied the method stipulated in proviso (1) to Paragraph 86 of the Revenue Recognition Accounting Standards, wherein accounting procedures are conducted based on contract conditions after reflecting any changes in contracts made prior to the beginning of the first quarter of this fiscal year and then the cumulative effect is added to or subtracted from retained earnings at the beginning of the first quarter of this fiscal year.


As a result, net sales for the first quarter of this fiscal year increased by ¥38,151 thousand, cost of sales increased by ¥16,015 thousand, operating income, ordinary income and quarterly net profit before taxes increased by ¥22,136 thousand, respectively. The opening balance of retained earnings at the beginning of the period increased by ¥232 thousand.


Because Revenue Recognition Accounting Standards were applied, some liabilities for "Advances received" presented in "Current liabilities" in the balance sheet for the previous fiscal year, are now included in "Contract liabilities" from the first quarter of this fiscal year.


In accordance with the transitional treatment stipulated in Paragraph 89-2 of the Revenue Recognition Accounting Standards, figures for the previous fiscal year have not been rearranged using the new presentation method.




(Notes Regarding Substantial Changes in Shareholders’ Equity)


During the first three months, the balance of capital stock and capital reserve increased separately by ¥126,453 thousand due to exercise of the Subscription Rights to Shares. As a result, as of March 31, 2022, the balance of capital stock and capital reserve came to ¥1,642,383 thousand and ¥3,242,163 thousand, respectively.




(Important subsequent events) Not applicable.