Financial Results2015/11/25 · available to management and subject to significant risks and uncertainties. Actual financial results may differ materially Actual financial results

Note: This material includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors including adverse economic conditions, delays in new product launch, pricing and product initiatives of competitors, the inability of the company to market existing and new product effectively.

Financial Results for the Second Quarter of Fiscal Year

2015 ending March 2016

November 25. 2015 TRANS GENIC INC.

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

http://www.transgenic.co.jp

Copyright© TransGenic Inc. All Rights Reserved.

Table of Contents

Ⅰ. Overview of Consolidated Financial Results for the Second Quarter of FY2015

Ⅱ. Consolidated Business Forecast for FY2015

Ⅲ. Business Topics

Ⅳ. Current Status of Research and Development

Ⅴ. Research Topics

1

Copyright© TransGenic Inc. All Rights Reserved. 2

Ⅰ.Overview of Consolidated Results

for 2Q-FY2015


Overview of Consolidated Financial Results

Consolidated Financial Results Highlight of 2Q-FY2015

Unit: thousand yen 2Q-FY2015 2Q-FY2014 Change

Net Sales 717,376 751,584 34,208

Cost of Sales 526,403 563,838 37,435

Gross Profit of Sales 190,973 187,746 ▲3,227

SG&A expenses （R&D expenses）

317,280

（20,485）

321,032

（29,126)

3,752

(8,641)

Operating Profit/Loss ▲126,307 ▲133,285 ▲6,978

Ordinary Profit/Loss ▲132,516 ▲145,310 ▲12,794

Net Profit/Loss ▲130,713 ▲104,990 25,723

Sales amount marked 104.8% over the previous year. Aiming for further growth in the second half year.

Both CRO business and pathological diagnostics business did well, and maintained an upward trend.

Operating profit decreased due to greater burden of fixed cost in association with scale expansion, however final profit /loss improved by recognizing tax effect with profit structure.

3



Consolidated Financial Results of 2Q-FY2015: Sales Amount

Expecting approx. 10% growth for

the full year

Predicting sales expansion of CRO

business which has second-half oriented

business style

Transition of sales amount in the past 3 years

561717 751

1,0561,241

1,399

0

200

400

600

800

1000

1200

1400

1600

FY2013 FY2014 FY2015

First half Second half

(forecast) （million yen）



Consolidated Financial Results of 2Q-FY2015 :Operating Profit/Loss

Expecting operating profit increase for 3

consecutive years

Predicting surplus increase in second half

in association with business scale expansion

Transition of operating profit/loss in the past 3 years

（million yen）

-131 -126 -133

46

149 173

-150

-100

-50

0

50

100

150

200

FY2013 FY2014 FY2015

First half Second half

(forecast)


Sales Amount-2Q Operating Profit-2Q

Sales and profit decreased due to shortage of retained earnings carried forward at the start of the fiscal year, however expect to improve in the second half

Promoting revenue expansion by active introduction of new technologies and enhancement of mouse model lineup

Genomics Business

Overview of Sales Revenue

Performance Summary： Genomics Business

(thousand yen) (thousand yen)

6

179,291

148,010

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

FY2014 FY2015

10,128

8870

2,500

5,000

7,500

10,000

12,500

FY2014 FY2015


Sales Amount-2Q Operating profit/Loss-2Q

CRO Business

7



Performance Summary: Contract Research Organization Business

Revenue increased substantially due to steady order acquisition (increased more than two hundred million yen over previous year including backlog of orders)

Operating profit/loss improved drastically in association with increased revenue

200,488268,104

302,958

448,385

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

FY2014 FY2015

Order backlogSales amount

-52,529

-25,764

-60,000

-50,000

-40,000

-30,000

-20,000

-10,000

0

FY2014 FY2015

503,446

716,489


Sales Amount-2Q Operating Profit/Loss-2Q

Both sales and profit decreased due to poor performance in private genetic analysis service

Further streamlining of business management, expanding contract analysis service, as well as focusing on acquiring orders for drug discovery support service toward individualized medicine with high future growth potential

Advanced medical business


8


Performance Summary : Advanced Medical Business

147,923137,605

0

25,000

50,000

75,000

100,000

125,000

150,000

FY2014 FY2015

-2,225

-25,145

-26,000

-16,000

-6,000

FY2014 FY2015


Sales Amount-2Q Operating Profit/Loss-2Q

Both sales and profit increased due to growing number of orders received in the context of thorough quality control

Promoting revenue expansion by acquiring more orders and launching new service

Pathological diagnostics business


9


Performance Summary: Pathological Diagnostics Business

195,533 201,660

0

50,000

100,000

150,000

200,000

250,000

FY2014 FY2015

14,842

19,892

0

5,000

10,000

15,000

20,000

25,000

FY2014 FY2015


Ⅱ.Consolidated Business Forecast for FY2015


Unit：thousand yen FY2014

（result）

FY2015

（forecast） Change Future effort

Sales amount 1,958,554 2,150,000 191,446

Genomics 414,699 424,000 9,301 Secure orders for genome editing technology-related service, strengthen sales of mouse model, introduce new mouse model

CRO 799,183 880,000 80,817 Expand business with existing customers, acquire new customers, develop contract non-clinical study service using disease mouse model

Advanced medical 369,779 446,000 76,221

Integrate analysis technologies of gene

analysis business division, streamline

operations

Pathological diagnostics 396,779 400,000 3,221 launch new service

Reconciliation ▲21,272 ー 21,272

Operating expenses 1,934,861 2,110,000 175,139

Operating profit 23,693 40,000 16,307

Ordinary profit 9,396 35,000 25,604

Net profit 17,824 18,000 176

It is believed that business performance of FY2015-2Q generally worked out as planned and order acquisition is satisfactory, considering TRANS GENIC’s second-half oriented business style. Maintaining this trend in order to reach sales of 2.15 billion yen, expand surplus in operating/ordinary profit, and improve the bottom line.

Consolidated Business Forecast for FY2015


Ⅲ. Business Topics


Exploratory research

Drug discovery research

Non-clinical test using

small animals

Non-clinical test using

large animals

Clinical test Diagnosis

New Drug Research Center GeneticLab TRANS GENIC

Drug discovery bio-venture companies with unique and predominant technologies

Collaborative development Sales

support

Generate additional value of seeds for drug discovery

Venture capital firms, industrial companies

Fund raising Corporate alliance

Management guidance (such as advice for

preparing business plan), dispatch of human

resources

To accomplish Medium-term business planning, actively-participating in management/ development of drug discovery bio-venture companies as “unique business group providing full support in drug discovery“, and aim to improve

corporate value.

TRANS GENIC Group

Drug discovery

Improve corporate value

Acquiring new technologies

Licensing to pharmaceutical companies

Business Topics

Capital and Business Alliance with Medicinal Chemistry Pharmaceuticals, Co., Ltd.

Medical Chemistry Pharmaceuticals Co., LTD.C


Capital and business alliance

（investment・collaborative development・sales

support）

Ven

ture

Cap

ital

investment

Business Topics

Capital and Business Alliance with Medicinal Chemistry Pharmaceuticals, Co., Ltd.

Drug efficiency evaluation by non-clinical study

Researchers in clinical study / basic

study

Pharmaceutical/ food/ chemical companies

customers

Contract service of sugar chain analysis/ synthesis

○Establishment of quality control system for protein formulation by sugar chain analysis ○Pharmacokinetic analysis service customers

【Example for antibody drug development】

【identification of sugar chain structure】

Identifying the change in protein conformation by cancer-specific glycosylation

【Production of Sugar chain-recognizing antibody】

Antibody against altered conformation recognizes only cancer cell, but does not recognize normal cell

【Antibody evaluation】 Non-clinical study/clinical study using antibody recognizing cancer-specific sugar chain to add value

Medical Chemistry Pharmaceuticals Co., LTD.

Medical Chemistry Pharmaceuticals Co., LTD.


Business Topics

Participation in Hokkaido Bio-consortium

New Drug Research Center and GeneticLab participate in

“Effort toward bioindustrial development in Hokkaido” by

Hokkaido Bureau of Economy, Trade and Industry (METI

Hokkaido)

※ “Effort toward bioindustrial development in Hokkaido” With a goal of bioindustrial development in Hokkaido, METI Hokkaido

enhances matching between companies and academic research

institutions, and establishes consortium in order to promote research

and development in medical field and business alliance of research

support companies. New Drug Research Center and GeneticLab

participate in this effort.

Publicly announced on June 23, 2015

Basic research support Non-clinical study Clinical study

Screening etc.

GeneticLab Co., LTD.

New Drug Research Center, Inc.

Safety/functional test （animal/human intervention trial etc.)

Positioning of TRANS GENIC Group in evaluation/analysis consortium

Adopted as R&D aid project by

NOASTEC Foundation

“Development of method for

accessing/analyzing functional

ingredient of food made in Hokkaido

utilizing nuclear receptor, and

organization of contract trial system

conducted by private companies”

Creation of ”functional food” from

Hokkaido-grown agricultural

products Publicly announced on October 21, 2015

Providing on-stop service that accommodates customer’s needs from basic examination to non-clinical/clinical study,

which is the strength of TRANS GENIC


Business Topics

Self-Sampling Test Service with a Combination of Cytodiagnosis and HPV Testing

Participation rate of cervical cancer screening (age of 20~69, female）【Cervical cancer】

Estimated number of affected individuals are 10,000, and fatalities

are about 2,700 per year in Japan.

It is demonstrated that cervical cancer screening is effective to

prevent the progression of cancer and reduce the death. However,

the rate of cervical cancer screening in Japan is quite low among

the developed countries. Reducing the death rate by the

improvement of screening rate is an issue.

reference： OECD Health Data 2013

【Cervical cancer screening】 Cervical cancer can be prevented and detected in an early

stage by periodic cervical cytology (pap smear) and human

papillomavirus (HPV) infection test , which is the primary

cause of cervical cancer.

Pathological diagnosis of cervical

dysplasia Cytodiagnosis

HPV testing Diagnosis of HPV infection by gene

analysis

Development of self-sampling kit

Targeted to non-attenders of cervical cancer screening,

marketing to clinics without gynecology and health checkup

centers in order to acquire new customer segment

85

68.5 66.1 56.8

75 68.7 68.7

0

50

100(%)


Ⅳ. Current Status of

Research and Development


Overview of Research & Development Pipeline

Status of the Development Pipeline：Model Mouse Strains

18

Target gene

Knockout or Transgenic

Phenotype analysis

Verification of model

Distribution CRO

Approx. 2 years Approx. 2 years

Development of

model mouse strains

Mouse model of obesity

suppressing

Liver humanized mouse Kumamoto Univ.

TRANS GENIC

Already in practical use Recombination at

ROSA26 locus TRANS GENIC

TRANS GENIC

Development of

genetic engineering technology

CRISPR/CAS9 method Already in practical use

ER stress indicator mouse

Oxidation stress

indicator mouse

Inflammation

indicator mouse

Mouse model of breast cancer

Mouse model of Eveningness

RIKEN Available for

sale

Gunma Univ.

Gunma Univ.

Kyushu Univ.

AIST

TRANS GENIC

Available for

sale

Available for

sale

Available for sale

Available for

sale

Available for

sale

In-house Development or

Introduction from external research institutions

Mouse model of atopic dermatitis

Behavioral and

Medical Sciences

Research Consortium

Hyogo College

of Medicine

Mie Univ.

Mouse model of dementia


Target

identification

Antibody

production Utility

verification

Assay system

establishment

Licensing &

clinical

development

Market

launch

Approx. 3 years Approx. 2 years

Cancer marker in urine Kyushu

University etc.

Pancreatic cancer marker National Cancer

Center

Urological organ

cancer marker Juntendo

University

Bile duct cancer marker Kumamoto

University

Lung cancer marker Kumamoto

University

Development of

antibody product Develop the product from external

research institutes

Mid

term

S

ho

rt term

In progress to launch

(domestic diagnostic

company）

*Under negotiation with

potential licensees

*Accumulating additional data

*Assay kit available for sale

Assay kit available

for sale

Considering utility

Considering utility

※Collaboration with IBL

※Began clinical trial at Chinese company

Small-cell

lung cancer marker National Cancer

Center Considering utility

Metabolic syndrome

marker：AIM The University

of Tokyo Assay kit available for sale

※Joint Patent Filing with National Cancer Center

※Exclusive license agreement

with Chinese company

※ Exclusive license agreement

with Chinese company

Overview of Research & Development Pipeline

Status of the Development Pipeline: Antibody and Diagnostic Agent

Clinical depression marker AIST Preparing antibody

Follicle Function Marker St. Marianna

University Preparing antibody


May

Jun.

Entered into collaborative research agreement on the mouse model of dementia

Oct.

Apr.

Entered into non-exclusive licensing agreement on genome editing technology

(CRISPR/Cas9)

Launched new product of TRECK system and contract service using it

Launched 3 new mouse model strains

Entered into collaborative research agreement with Medicinal Chemistry Pharmaceuticals

Co., Ltd. on the antibody medicine seeds

Filed an international patent application on organ-humanized mouse

Entered into exclusive licensing agreement on the mouse model of atopic dermatitis

Nov.

Ran a booth at BioPharma Japan 2015

Hosted luncheon seminar at 62th general meeting of Japanese Association for Laboratory

Animal Science

Participated in the 23th annual meeting of Japanese Breast Cancer Society

Ran a booth at 29th International Mammalian Genome Conference

Issued patents are listed in the next page.

Research and Development Topics in FY2015

Agreement Patent Product/service Academic conference

Others


『JP3816512』granted in Japan 『US7,700,741』granted in USA 『JP4608432 』granted in Japan（diagnosis for early stage cancer）

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

Jun. 2006 Apr. 2010 Nov. 2010 Sep. 2015

『JP4319700』granted in Japan 『US8,883,972』granted in USA

Jun. 2009 Nov. 2014

Cancer marker in urine： Assay system for cancer diagnosis using urine sample

Pancreatic cancer marker： Antibody and its diagnostic application

『AU778719 』 granted in Australia『US7,312,075 』 granted in USA 『EP1201759』 granted in Europe 『ZL00812904.5』 granted in China 『HK1048830B』 granted in Hong Kong 『JP4664554』 granted in Japan『ZL200510084464.6』granted in China 『US8,722,408』granted in USA

Apr. 2005 Dec. 2007 Mar. 2010 Jun. 2010 Dec. 2010 Feb. 2011 Apr. 2013 Apr. 2014

Exchangeable gene-

trap mouse technology

『ZL2003801028324』granted in China 『AU2003277620』granted in Australia『EP1559318』granted in Europe 『JP4426728』granted in Japan 『KR941905』granted in Korea 『JP4478577』granted in Japan 『US7,919,674』granted in USA 『ZL200710193915.9 』granted in China『HK1124363B』 granted in Hong Kong 『JP5080597』granted in Japan

Jul. 2008 Feb. 2009 Apr. 2009 Jan. 2010 Mar. 2010 Apr. 2010 Apr. 2011 Sep. 2011 Dec. 2011 Sep. 2012

ＧＡＮＰ® mouse

technology

『JP5716257』granted in Japan Apr. 2015

『JP5800176』granted in Japan Sep. 2015

New bile duct marker

Technology for high-level

protein expression system

Our Intellectual Property

Current Status of the Major Patents


『JP3816512』granted in Japan Jun. 2006

『JP4319700』granted in Japan Jun. 2009

『AU778719 』 granted in Australia『US7,312,075 』 granted in USA 『EP1201759』 granted in Europe

Apr. 2005 Dec. 2007 Mar. 2010

『ZL2003801028324』granted in China 『AU2003277620』granted in Australia 『EP1559318』granted in Europe 『JP4426728』granted in Japan 『KR941905』granted in Korea

Jul. 2008 Feb. 2009 Apr. 2009 Jan. 2010 Mar. 2010

Our Intellectual Property

Status of the Major Patents (Oct. 2010)

Exchangeable gene-

trap mouse technology

ＧＡＮＰ® mouse

technology

Cancer marker in urine： Assay system for cancer diagnosis using urine sample

Pancreatic cancer marker： Antibody and its diagnostic application


Ⅴ.Research Topics


Introduction of New Mouse Models

24

Genomics Business CRO Business

Distribution ・Stress indicator mouse ・Inflammation indicator mouse ・Mouse model of breast cancer ・Nocturnal mouse model

・Accumulation of pharmacological data ・Construction of test model ・Introducing to pharmaceutical companies

October 20, 2015

Launched New mouse model 「Mouse Model of Atopic Dermatitis 」

Developed by the research group of Dr. Kiyofumi Yamanishi,

Hyogo College of Medicine

Entered into exclusive licensing agreement on the worldwide use


Technical Expertise

Atopic Dermatitis

• Prevalence : 10～20％ of the entire population in the world

• Age：All ages including infants, children, adult

• Symptoms：Intense itching

Chronic skin inflammation (eczematoid dermatitis)

Repeating the remissions and exacerbations

of symptoms

• Medical findings：

Blood eosinophilia

Increased immunoglobulin E (IgE)

• Medical treatment：Symptomatic treatment only

• The development of remedy based on the clinical condition is

imperative.


Technical Expertise

Traditional Mouse Models of Atopic Dermatitis and Problems

NC/Tnd (NC/Nga) mice

Mouse model of dermatitis with mite infestation.

Developing dermatitis only under non-SPF condition, but not under SPF condition.

Skin symptom is inhomogeneous.

Repeated application of OVA, DNFB, Staphylococcus aureus Protein A

Cumbersome work is needed. The result depends largely on the skill of experimenter.

CASP1 transgenic mice

Caspase 1 that converts cytokines such as IL-1α, IL-1β and IL-18 to activated form is

expressed forcibly in mouse epidermis.

Non-physiological for mouse model.

IL-18 transgenic mice

Activated IL-18 is specifically expressed in epidermis.

It takes 24 weeks to develop dermatitis. Skin symptom is mild.

Mutant mice induced by chemical substance（patent publication No. 2007-75033)

Mice with dermatitis produced by the administration of N-ethyl-N-nitrosourea (chemical

mutagenic compound)

Mutations are introduced randomly in sperm.

Pathogenic mechanism is unclear because mutant gene is unknown.


High expression of IL-33

Technical Expertise

Expression of Human IL-33 is Associated with Atopic Dermatitis

Red: IL-33

skin of healthy individual

Atopic dermatitis

High expression of IL-33 is observed

in the skin with atopic dermatitis.

Human Interleukin 33 (IL-33)

Savinko et al. 2012; Meephansan et al. 2012


Technical Expertise

Function of IL-33 and ST2

Pollen allergy

Asthma

Allergic rhinitis

Epithelial cell

Th2 cytokine Eosinophil

Mast cell

Th2 cell

Basophil

Eosinophil

Innate

lymphoid cell

etc.

IL-33

nucleus

IL-33

ST2 IL-1Rb

MyD88 TIR

NF-kB AP-1

-27639 -26999 -26733

-26999 Cont AD OR

G/G 0.36 0.23

G/A 0.46 0.53

1.86 A/A 0.18 0.24

-27639 -26999 Cont AD OR

A G 0.56 0.48 1.37

G A 0.41 0.50 1.41

G G 0.025 0.019 1.32

SNPs of human ST2 gene and

atopic dermatitis

ST2=IL1 receptor like 1 (IL1RL1)

Shimizu et al. 2005


Technical Expertise

Transgenic Mouse Producing Large Amount of IL-33 in the Skin

Skin of wild-type mouse Skin of transgenic mouse

Producing large amount of IL-33 in the skin using gene control region of keratin,

the protein which is found largely in epidermal keratinocyte of skin

pink：IL-33

blue：nucleus of cell

human keratin 14 promoter b-globin intron Mouse IL-33 cDNA


Technical Expertise

Onset of atopic dermatitis in Tg(IL-33) mouse


Thickening of epithelium and infiltration of inflammatory cell

Technical Expertise

Dermal Tissue of Tg Mouse: Increase of Eosinophil

Eosinophil：

7.4-fold increase

Increase of cytokine that activates eosinophil

Infiltration of eosinophil

Change in skin


Technical Expertise

Response Similar to Human Atopic Dermatitis is Induced

Histamine concentration

in the blood Mast cell

Threefold increase

（observation for 20 minutes）

Time spent on scratching


Technical Expertise

Drug Efficiency Evaluation using Tg Mouse

Antihistamine

before

administration after

administration (6 - 26 minutes)

Intraperitoneal administration

（diphenhydramine dihydrochloride 2mg)

Steroid ointment

Betamethasone butyrate propionate

white petrolatum

Exan

them

score

before application after application

before application

after application


Technical Expertise

Expanding to CRO Business as a Model of Atopic Dermatitis

Transgenic mouse “Tg(IL-33)” that expresses a large amount of IL-33 in

epidermal cells, which exists in the nucleus of keratinocyte, was produced.

Cytokine induction as well as found in human atopic dermatitis was observed in

Tg(IL-33) mouse.

As a result, dermatitis associated with AD-like intense itching occurred in the

face and legs of Tg(IL-33) mouse.

Since high expression of IL-33 is observed in human AD, Tg(IL-33) mouse is

considered to be the best physiological model that reflects human pathological

condition.

In fact, it was useful for drug efficiency test of anti-allergic agent and ointment.

This mouse model is expected to be applied to the development of new

technology regarding the medication of atopic dermatitis.


http://www.transgenic.co.jp

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

Documents

Financial Results2015/11/25 · available to management and subject to significant risks and uncertainties. Actual financial results may differ materially Actual financial results