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Message from Our CEO

 Today, on April 26, 2019, we have announced the results for the first three months of the fiscal year ending December 31, 2019. First of all, we would like to share some points on the progress of the first quarter and future outlook.

 Although there were no net sales recorded in the first quarter, Basic research on fundamental core technology and development candidates has been generally proceeding as planned based on the capital and business alliance with Shionogi & Co., Ltd. (hereinafter referred to as “Shionogi”) .

 R&D expenses and general and administrative expenses came to decrease compared to the same period of the previous year due to efforts to reduce costs and delay in the use of some expenses. Since the second quarter, expenses are expected to increase compared to the first quarter in order to further accelerate research and development.

 With regard to the application of regulatory guidelines that are important in establishing basic technology, we discussed with regulatory authorities and have confirmed that the development of fundamental core technology that we have currently been in progress is generally in accordance with the regulatory guidelines.

 The next third milestones set every half year is expected to achieve in the second quarter as planned.

 We are preparing to discuss with Shionogi regarding the transition to the second phase; we have already agreed with Shionogi that we are aiming for the transition during fiscal 2019 and will move earlier than originally expected.

 We have positioned the fiscal year 2019 as the “the first year of full-scale development” by a transition to the second phase of the alliance, and will take necessary measures based on the recognition that we will progress to a new business stage.

 Next, we would like to explain the details of the business progress.

 As the first phase based on the capital and business alliance by promoting development of fundamental core technology and basic research of development candidates, we have set as our business policy in our next-generation biopharmaceutical in-house development business. We have been advancing to create “Next-generation logical vaccine” aiming at achieving high efficacy and productivity by integrating peripheral technology, such as adjuvants, preparations, and devices. In addition, we re-organized existing partnership and we have been promoting research & development, setting new development pipelines, such as Recombinant seasonal influenza HA vaccine (UMN-101), Recombinant H1N1 influenza HA vaccine (UMN-102), Recombinant Rotavirus vaccine (UMN-103), and Recombinant Norovirus vaccine (UMN-104).

 In the first quarter, we conducted trial production and confirmed them applicable, using small scale of development candidate products by basic technology under maintenance. In addition, we have started trial production in a 600-L full scale culture tank and have been promoting confirmation to apply.

 In terms of basic research on development candidates, we have been studying on the selection of optimal adjuvant from plural candidate adjuvants and on the application of drug delivery technology. In a plurality of development candidates, we are about to acquire important knowledge concerning the creation of next generation logical vaccine, and is making progress in examination regarding selection of development candidates products. In addition, we are discussing with Shionogi development plans for priority and final formulation selection regarding expected development candidates, including new plural ones.

 As described at the beginning, it was our great achievement at the moment that we were able to confirm with regulatory authorities regarding the application of the regulatory guidelines to the development of fundamental core technology. We believe that we will be able to move to the second phase and will be able to be close to the goal of the capital and business alliance with Shionogi to apply, approve and launch development products.

 We have agreed with Shionogi to proceed with the concreate preparation for the second phase of the alliance, which is aimed for the transition during 2019, taking into consideration the above progress of development of fundamental core technology. In the transition discussions, our biggest goal is to maximize our corporate value in collaboration with Shionogi. We believe that building a medium- to long-term win-win relationship by utilizing the mutual strengths of Shionogi and UMN will lead directly to maximizing our corporate value.

 On the financial aspect, as of the end of March 2019, we have maintained positive net assets; however, as CB conversion is expected to be in the fourth quarter, it is assumed that positive net assets cannot be maintained temporarily at the end of the second and third quarters. We will continue to make progress in research and development scheduled for 2019 as our top priority, and will steadily achieve the third and fourth milestones. Furthermore, we have been aiming to secure long-term business funds from fiscal 2020 by realizing not only CB conversion but also the transition to the second phase of the alliance.

 The current holding ratio by Shionogi to our stock is 20.27% with 3,100 thousand shares, and Shionogi has become a “major shareholder” and an “other related company” for us. The two companies will further strengthen the medium- and long-term strategic partnership through the capital and business alliance, and will work toward to improve mutual corporate value. In addition, as long as the capital and business alliance continues, Shionogi’s holding shares have provisions that cannot be sold without the prior consent of us. We believe that Shionogi will contribute the stability of our business as a long-term stable shareholder.

 We would like to show our medium-to long-term scenario mainly on this capital and business alliance again as follows;

Our medium- to long-term scenario

  

 Until fiscal 2019, it is the first phase of the capital and business alliance, and we will decide the items to be developed during 2019, in order to develop, apply and launch next-generation logical vaccine, as business restructuring and basic research on business candidates by development of fundamental core technology.

 We will advance to the second phase of this capital and business alliances, at the stage of judging that certain results have been obtained for fundamental core technology, and we are expecting to initiate the second phase during 2019. In the second phase, we will decide items to be actually developed that were determined from basic research as a development pipeline, and will cooperatively promote development, application, and launch, after the GLP examination.

 Finally, I would like to explain the prospect and business directions of the fiscal year 2019.

 As already announced, we are considering commencement of consultation with Shionogi so that we can proceed to the second phase earlier than originally planned. Our significant goal is to maximize our corporate value in alliance with Shionogi, and we believe that establishing a medium- to long-term win-win relationship that takes advantages of both companies’ strengths will lead directly to maximizing our corporate value, and we will discuss with Shionogi to shift the second phase.

 In terms of the prospect for the fiscal year 2019, we conservatively set a sales plan based on only the third and fourth milestones based on the achievement of the first phase. In addition, R&D expenses and general administration expenses are also planned on the premise of expenses necessary for achieving the milestones in the first phase. As a result, R&D expenses etc. will increase than those of the fiscal year 2018 and accordingly net loss is expected to increase. As explained above, in the first quarter, research and development activities are progressing in line with the plan.

 On the other hand, by entering into discussions on the second phase early, and establishing a new framework for collaboration based on exclusive license contracts and other forms related to development and launch of pipelines, we will aim to improve the profit and loss through adding net sales, although depending on the contents of the second phase, alliance scheme, and economic conditions, etc. In addition, we will aim to further strengthen our financial base by acquiring long-term business funds after fiscal 2020. We believe that we will announce the medium-term management plan for after fiscal 2020 at an appropriate time after the realization of the transition to the second phase.

 We will advance this capital and business alliance as planned and enter into the second phase earlier than initially plan so that we will promote research and development under business policy that the fiscal year 2019 is positioned as the first year for full-scale development business”. To promote R&D and successful business, we will achieve steadily the third and fourth milestones, the selection of development pipeline, and the agreement of the transition to the second phase. In addition, as a souse of the medium- to long-term growth, in order to deepen, apply and expand development of fundamental core technology, and to advance development pipeline’s portfolio, we will proactively advance to strengthen the medium- to long-term financial base, and to train and improve necessary R&D human resources.

 We appreciate your continued support and understanding in the future.

April 26, 2019
Tatsuyoshi Hirano
Chairman and CEO

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