Kidswell Bio (TYO: 4584)
KIDS WELL, ALL WELL
Creating new value with Regenerative Medicine(Cell Therapy) and New Biologics

Coverage start
Healthcare

Summary◇ Kidswell Bio (KWB or the Company) is a drug discovery venture company originatedfrom Hokkaido University. It was established for the purpose of developing diagnostic andtherapeutic medicines based on the research and development results of the Institute of
Genetic Medicine, Hokkaido University. Research on biosimilars started in 2002. Up to now,
two products have already been developed and launched. Multiple products are in thepipeline for new biopharmaceutical development and are aimed for launching in the 2030s.
The Company is strengthening development of regenerative medicine focusing on thetherapeutic agents for diseases of high unmet needs using stem cells from human
exfoliated deciduous cells (SHED) and cardiac stem cells (CSC). The Company was listed on
TSE Mothers in 2012. In February 2021, it announced a new Mid-Term Strategic Plan. In July
the same year, the Company renamed itself to Kidswell Bio looking to provide new medicalcare for pediatric diseases and rare diseases of all generations.

As of Sep. 28, 2021

¥635

Share price (9/27)

52weeks high/low¥864/393
ADVT (¥ mn, monthly)¥378 mn
Mkt cap¥19.4 bn
Shrs out.
30.640 mn, shrs
PER (22/3 CE)–X
PBR (21/3 act)
12.66 XROE (21/3 act)
-68.5 %
DY (22/3 CE)–%
Shr eqty ratio (21/6)
43.0 %
Foreign shareholding ratio
3.2 %Listed market◇ The Company operates the following three main businesses.
Biosimilar: Development of follow-on products for bio medicines. The Company is a pioneerin the biosimilar products in Japan that offers alternative options amongst bio medicines,
which tends to be very expensive. Two products have already been sold by the affiliatedpharmaceutical companies, and the third product is expected to be launched in 2021. Drugdiscovery ventures need to finance new drug development hugely. The earnings from thesale of biosimilars lessen this financial burden.
Regenerative medicine (cell therapy): In recent years, the Company has been endeavoring toestablish a cell therapy platform that utilizes stem cells. Utilizing stem cells from human
exfoliated deciduous teeth (SHED), which mainly use deciduous teeth, eight products are in
the pipeline and the company is accelerating out-licensing activities to pharmaceuticalcompanies. Also, the Company is developing a master cell bank to build a stable supply
system for milk teeth. As for cardiac stem cells (CSC), JRM-001 has advanced to phase III
clinical trials and is expected to be launched.
New biologics: Multiple new medicines under in-house research and development are in
the pipeline. GND-004 (anti-RAMP2 antibody) is a drug candidate for eye diseases andoncology, and nucleic acid drug candidate GND-007 is in research to cure immune diseases.
Once a new biologic medicine becomes successful, great returns can be expected. But it isstill in the research stage and is expected to be launched in the early 2030s.
◇ Mid-Term Strategic Plan: In February 2021, the Company announced a new Mid-Term
Strategic Plan from FY2021 to FY2025. Maximizing the profits from the abovementioned
three business models, the Company plans to achieve profitability ahead of schedule. It
expects operating surplus in FY2023/3, sales of ¥3bn and operating profit of ¥1bn in
FY2026/3. Development of biosimilars and regenerative medicine is expected to proceed
well in the future. It is critical to secure reliable partners for out-licensing from the pipeline.
◇ In FY2021/3, sales were ¥990mn, R&D expenses were ¥960mn, operating loss was¥960mn, and net loss was ¥1bn. Operating income came in above the Company estimate
because some R&D expenses were delayed to the next fiscal year. By the stock rights
exercises, the Company raised ¥740mn. As a result, the cash and deposits at the end of
March 2021 was ¥1.46bn. In FY2022/3, the Company guidance is sales of ¥1.9bn (+91% yoy)and operating loss of ¥1.72bn.
◇ Stock price move: The Company’s stock price rose significantly on the back of theannouncement of the strategic plan and the announcement of full-year financial results.
Year-to-date the stock price increased by 60%, which should reflect investors’ positive
expectations on the strategic plan. Results in accordance with the revealed roadmap must
be demonstrated going forward.

Kidswell Bio| 2021/9/28

TSE Mothers

Stock price performance
Stock
株価pricevs.
TSE Mothers Index (RHS)
対東証マザーズ指数（右目盛）

1,300

160

1,100

140

900

120

700

100

500

80

300

60

100

40
9/20

11/20

1/21

%
Stock price
Relative stock price

3/21

1 mo.
-21.2%-25.7%

5/21

7/21

3 mo.
9.1%
13.7%

12 mo.
0.8%
3.3%

Points of interest
A drug discovery venture company originatedfrom Hokkaido University. Leading biosimilar
and delivered some products. Focuses onregenerative medicine applying SHED anddevelopment of new biopharmaceuticals.
Aiming to return to profitability in FY2022/3
by expanding biosimilars. In July 2021, thecompany renamed itself from Gene Techno
Science to Kidswell Bio to devote itself more
into pediatric diseases.

This report (Company note) has beencreated at the request of Kidswell Bio. For
details, refer to the disclaimer on the last
page.

1

Table of contents
Summary

1

Key financial data

2

Business summary
Business model3

Biosimilar

4

Regenerative medicine (Cell Therapy)

7

New Biologics

7

Mid-Term Strategic Plan

11

Financial results trends
FY2021/3 financial results actual13

FY2022/3 Q1 financial results actual14

FY2022/3 financial forecast

14

Stock price trends

15

Financial data

16

Company Profile
Company profile/History

17

Management/Corporate governance system

18

Status of major shareholders/Initiatives for SDGs

19

Key financial data

(Unit: ¥mn)

Fiscal Year

2016/32017/3

2018/3

2019/32020/32021/3

Net sales

1,160

1,089

1,059

1,021

1,077

996

Cost of sales/SG&A expenses

1,981

2,273

1,973

1,827

2,249

1,966

R&D expenses

1,075

1,433

1,107

945

898

963

Others

906

840

865

882

1,350

1,002

Operating loss

-820

-1,184-913-805-1,161-969

Ordinary loss

-785

-1,176-903-816-1,187-991

Net loss-787-1,224-904-856-7,316-1,001

Current assets

1,520

3,421

2,692

2,821

3,322

3,346

817

2,379

1,891

2,009

2,032

1,461

1,694

3,706

3,025

3,151

3,592

3,933

Total shareholder’s equity

403

3,500

2,604

2,731

1,487

1,610

Equity ratio (%)

22.6

93.8

85.0

85.6

39.8

38.0

Cash flow from operating activities-607-1,759-438-860-1,325-1,267

Cash flow from investing activities

-121

-149

-50

0

-137

-22

Cash flow from financing activities

946

3,471

–

978

1,221

718

Increase/decrease in cash and cash equivalents

817

2,379

1,891

2,009

2,033

1,461

Cash and cash equivalents
Total assets

Notes) Consolidated financial statements from the FY2020/3. There is no continuity before.
Cash flow from operating activities：Expenditures such as R&D expenses and SG&A expenses mainly centering on drug development.
Cash flow from financing activities：Income from issuance of shares associated with the exercise of stock rights
Source: Omega Investment from Company materials

Kidswell Bio| 2021/9/28

2

Business summary
Business model: Hybrid business structure
Drug discovery ventures take about 10 years to launch a new drug going through the process of basic research,out-licensing, and clinical trials, and there must be financing of R&D in billions of yen every year for the wholeprocess. The Company started research on biosimilars in 2002 and is a pioneer of biosimilar business in Japan.
It has already launched two products and generates annual sales of over ¥1bn. Revenues from biosimilars help
business finance, which is critically important for drug discovery ventures. It establishes a hybrid businessstructure in which the development of new bio medicines, which will drive the future growth, is supported by
the biosimilars, which will generate stable profit much earlier.
The table below shows the detail of the business line.
Rate ofreturnBusiness

PeriodRisk

Biosimilar

Short
term

Low

Already launched 2 products. Sales to increase as the
Low→Mid. line-up expands to 3 to 4 products. Profitability rises as
R&D expense and manufacturing costs are cut back.

New biotech business(Regenerative
medicine/ celltherapy)

Midterm

Middle8 pipelines for SHED are in progress. To establish aplatform for SHED by building a master cell bank. CSC
Mid→High
JRM-001, currently under phase III clinical trial, willcontribute to sales after launching.

New biologics

Long
term

High

High

Pipeline, etc.

Pipelines of multiple products are in the R&D stage.
Launching is expected in the early 2030s.

Thanks to the operation of three different businesses, the Company can keep the drug portfolio well-balanced
by proper mix of timespan, risk and return. As a result, it does not suffer long-term deficit due to low or nosales, which is not unusual for drug discovery ventures.
In addition, the dilution by new shares resulting from the exercising of stock rights is of great concern toshareholders. The earnings contribution of biosimilars in the portfolio should moderate this concern.

Hybrid business structure

Source: Company materials

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3

Business model: Virtual business development
Development of new drugs requires significant R&D expenditure, investment in clinical trials andmanufacturing facilities, etc., and venture companies alone cannot bear the burden. Thus, there exists a
system of cooperation among venture companies, academia, CRO/CMO and out-licensed pharmaceuticalcompanies that allocate the burden in accordance with the expertise of each party. In the case of Kidswell Bio,it has built a collaborative system with best partners by utilizing its research and development capabilities, aswell as the experience, know-how, and networking capabilities nurtured through business. By developing avirtual business that needs no manufacturing facilities, the Company delivers high capital efficiency by lightequipment.

Virtual business development x Project management ability

Source: Company materials

Biosimilar
The term generic drug has become commonplace. It is a medicine with the same active ingredients, quality,
efficacy and safety as the new drug, and is sold after the patent for the original drug is expired. The
development of new medicine requires huge R&D expense and clinical costs, their prices become very
expensive. Therefore, the use of generic medicines is recommended from the viewpoint of controlling medical
costs.
Traditional pharmaceuticals are for general diseases and are produced mainly by chemical synthesis of small
molecule compounds. But in recent years, bio medicines produced by recombinant proteins has progressed.
Biomedicines are produced by purifying polymer compounds synthesized in microorganisms and cells. They
are therapies for intractable diseases and rare diseases. Biomedicine has become even more expensive due tothe difficulty of its manufacturing process, and there is a need to develop biosimilars, such as generics asagainst the traditional medicines.
Current status

The manufacturing and approval process is sodifficult than generics that it is not widely used.

Ideal

More use of biosimilars will reduce theburden of medical expenses

Source: Company materials

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4

The production of biomedicine requires high technology, and it is produced by gene recombination technology
or cell culture, therefore, unlike generics for the traditional small molecule drugs, it is not possible to produce
the same product. Compared to the predecessor, it is possible to produce the same protein with similar
efficacy and safety, but it is difficult to show identity due to the complicated molecular structure. Biosimilar isrequired to show equivalence and homogeneity. Unlike generic drugs, biosimilar development must meet therequirements as rigid as those for new drug development, and the hurdles are high.

Comparison of generic drugs and biosimilars
Generic drug

Biosimilar

Drugs with the same active ingredient, route ofadministration, usage/volume, efficacy/effect as
the original drug

If a safe volume exerts a sufficient effect, there arefew side effects.

Small molecule compound

Polymer compound

ProductcharacteristicsStableIngenuity required for stabilization

Easy to show identity

The molecular structure is complicated, and it isdifficult to show identity. So, it is necessary toshow equivalence/homogeneity.

ManufacturingManufactured by chemical synthesis

Manufactured by using cell culture technology,
etc.

Bioequivalence test

Comparison of quality characteristics
equivalence/homogeneity
Comparison of pharmacological actions andconfirmation of safety in non-clinical studies
Equivalence/homogeneity comparison and safety
confirmation in clinical trials
Post-marketing surveillance

50% of the original product

70% of leading biomedicine

Definition

Development
requirements

NHI pricelisting

Source : Omega investment from various materials
In recent years, biosame (biomedicines that are produced by the same manufacturing equipment for theoriginal biomedicine, and have the same molecular structure, but are sold by the original drug pharmaceuticalcompany via its group companies) has emerged. Biosames are currently listed at 70% of the original drug price,which is the same as biosimilars. The appearance of biosame poses a threat to biosimilars as a competitor, andbiosimilar manufactures are required to take actions such as further reduction of manufacturing costs.
Biosimilar’s revenue model consists of revenue from main drug substance supply to manufacturing
pharmaceutical companies, and milestone revenue paid in accordance with the progress of drug development.
The Company also earns revenue by concluding a joint R&D contract to provide its know-how topharmaceutical companies.
As described above, the development of biosimilars requires advanced R&D capabilities and cost reduction
know-how at the manufacturing stage, so only those with real experience can enter the market. The entry
barrier is high. The Company was one of the first to pay attention to biosimilars and developed it by utilizing
the technology, knowledge and know-how cultivated in new biomedicine development. The launch of GBS-001
in May 2013 marked the Company’s great achievement as a pioneer in the Japanese biosimilar market.
Currently, the Company is the only bio-venture company that sells more than ¥1bn in biosimilars. It is ahead ofother companies in the biosimilar competition.
See the table on the next page for the Company’s current biosimilar pipeline. Two products, GBS-001 and GBS011, have already been launched, and GBS-007 is scheduled to be launched within this fiscal year.
☆ GBS-001 (Filgrastim BS (biosimilar), target disease: cancer)
A successor to predecessor GRAN® (Kyowa Kirin)/NEUPOGEN® (Amgen, USA). GRAN is preparation of G-CSF(granulocyte colony stimulating factor) used for neutropenia caused by cancer chemotherapy, which increases
neutrophils. A joint research with Fuji Pharma Co., Ltd. started in October 2007, and Fuji Pharma and MochidaPharmaceutical Co., Ltd. obtained domestic manufacturing and marketing approval in November 2012, and the
medicine was launched in May 2013.

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5

Biosimilar pipeline

Source: Company materials（As of August 31, 2021)

The Company provides a stable supply of undiluted solution to Fuji Pharma, and Fuji Pharma and MochidaPharmaceutical sell it in two brands and via two channels. The GBS-001-producing cell line is introduced fromDong-A ST Co., Ltd. (formerly Dong-A Pharmaceutical Co., Ltd., South Korea).
☆ GBS-011 (Darpeboetin alpha BS, coping disease area: renal disease)
Epoetin Alpha, a treatment for renal anemia, enhances the sustainability of the effect. Its predecessor is NESP®
(Kyowa Kirin) /Aranesp® (Amgen, USA). It was jointly developed with Sanwa Kagaku Kenkyusho Co., Ltd, which
later in September 2019 obtained domestic manufacturing and marketing approval. It was launched in
November 2019. Sanwa Kagaku Kenkyusho is solely responsible for manufacturing and sales, and the Company
shares profits based on the sales.
☆ GBS-007 (Ranibizumab BS, Target Disease Area: Eye Disease)
An angiogenesis inhibitor for the treatment of vision loss such as age-related macular degeneration. The
predecessor is LUCENTIS® (Novartis, Switzerland). In November 2015, the Company signed a basic agreement
on a capital and business alliance with Senju Pharmaceutical Co., Ltd., which has a high level of expertise in thefield of ophthalmology. The two companies signed a joint commercialization agreement in May 2016. In
September 2020, Senju Pharmaceutical applied for domestic drug manufacturing and marketing approval andit’s been approved in September 2021. It is scheduled to be launched within this fiscal year and is expected tocontribute to the sales from this fiscal year. In addition, GBS-007 will be outsourced to Ocumension Theraputics
for overseas marketing and will be sold in China and Taiwan.
In addition to the above three products, the Company schedules to launch four products by FY2025, and plans
to promote the development of highly cost competitive biosimilars. Candidates include Nivolumab BS (Opdivo),
Pembrolizumab BS (Keytruda), Ravulizumab BS (Ultomiris), Brolucizumab BS (Beobu) and Ustekinumab BS(Stelara).

Regenerative medicine
In the field of regenerative medicine, the Company aims to establish a cell therapy platform that utilizes stem
cells from human exfoliated deciduous cells (SHED) and cardiac stem cells (CSC).
Regenerative medicine (cell therapy) is a medical treatment that repairs and regenerates the functions of lost
tissues and organs by using the cultured and processed cells and tissues of the patient or others. Research anddevelopment of stem cells are progressing rapidly thanks to the advancement of cutting-edge biotechnology.
Stem cells include pluripotent stem cells (ES cells, iPS cells) and somatic stem cells. The Company is looking at
regenerative medicine applied to the SHED in each of the latter stem cells.

Kidswell Bio| 2021/9/28

6

Image of Cell Therapy Platform

Source: Company materials
The Company has been working on regenerative medicine centered on SHED since 2019. In April 2019, theCompany acquired Advanced Cell Technology and Engineering Ltd., which was developing medical technology
and regenerative medicine products using SHED. The Company made it a fully owned subsidiary and has been
accelerating the research and development of SHED-related business. In November 2020, the Company
reorganized Cell Technology business, focusing only on areas related to cell therapy platforms.
Regarding cardiac stem cells (CSC), Japan Regenerative Medicine Co., Ltd., which was conducting research on
cardiac stem cells within the Noritsu Koki Group, became a 100% owned subsidiary in February 2020. Noritsu
Koki was the Company’s parent. The Company aims to launch regenerative medicine development (JRM-001)
using the cardiac stem cells that Japan Regenerative Medicine is developing.
The pipeline of regenerative medicine is shown in the figure below.

Regenerative Medicine (cell therapy) pipeline

Source: Company materials

Kidswell Bio| 2021/9/28

7

SHED project list

Source: Company materials
See the table above for details on the SHED project. The Company plans to start clinical trials by FY2022 andaims to launch three products by FY2030. Of these, the followings are expected to make early development
progress.
☆ GCT-101（Development of products such as regenerative medicine utilizing SHED, target diseases: cleft lip andpalate）
Cleft lip and palate is a congenital disease caused by a congenital abnormality of the oral cavity, and thenumber of patients in Japan is about 2,000 a year. Pulp stem cells have excellent bone regeneration ability andcan be the optimal cell source for regenerative medicine of cleft lip and palate. In collaboration with
ORTHREBIRTH Co., Ltd., the Company is conducting research and development on a new treatment methodthat combines the artificial bone filler possessed by ORTHREBIRTH with SHED.
☆ GCT-102（Development of products such as regenerative medicine utilizing SHED, target diseases: intestinal
ganglion cell deficiency）
Congenital isolated hypoganglionosis is an intractable disease that presents with intestinal obstruction due to alack of nerve cells that control the peristaltic movement of the intestine, and an effective treatment method
has not yet been established. SHED are cells derived from the same nerve as intestinal ganglion cells, and byadministering SHED to supplement the deficient intestinal ganglion cells, recovery of peristaltic movement canbe expected. The Company has entered into a joint commercialization agreement with MochidaPharmaceutical, aiming to create a new treatment method by combining the Company’s SHED with MochidaPharmaceutical’s knowledge and achievements in the gastrointestinal field.
MCB establishment
In advancing regenerative medicine using SHED, establishing a stable supply system for deciduous teeth, which
are raw materials for various regenerative medicine products, is indispensable. The Company is building amaster cell bank through the acquisition and reorganization of Advanced Cell Technology and Engineering Ltd.,
partnership with medical institutions and an alliance with with Nikon CeLL innovation Co., Ltd. This project isprogressing well. See the figure above on the next page for the structure of the master cell bank.

Kidswell Bio| 2021/9/28

8

Establishing a SHED development platform

Source: Company materials
The project JRM-001 related to cardiac stem cells (CSC) is as follows.
☆ JRM-001 (Development of products such as regenerative medicine utilizing intracardiac stem cells, target
diseases: pediatric congenital heart disease)
The world’s first regenerative medicine using cardiac stem cells for pediatric congenital heart disease, which is
being researched and developed by subsidiary Japan Regenerative Medicine. Childhood congenital diseases
that have some abnormality in the heart by birth occur in newborns at a rate of 1%. In order to alleviate these
symptoms, cardiac stem cells are cultured from a section of the heart obtained by surgery and areadministering to the patient to improve cardiac function.

Treatment image of JRM-001

Source: Company materials
JRM-001 is already in the phase III clinical trial stag. It will be completed early and by FY2022, an out-licensing
partner will be selected to start a collaboration. The Company wants to obtain manufacturing and marketing
approval by FY2024. Initially, JRM-001 is for in-house use, but by conducting joint research with the partnering
company, the Company is considering application to other heart diseases, allogenic development and overseas
expansion.

Kidswell Bio| 2021/9/28

9New biologics pipeline

Source: Company materials（As of August 31, 2021)

New biologics
The development of antibody drugs has been the main business since the Company was founded. Currently,
biomedicine comprises over 30% of the global pharmaceutical market, and 7 of the top 10 large-scale
pharmaceuticals (blockbusters) are biomedicines.
The revenue model of the new biologics business can be divided into two. One is a service revenue, which isgained by concluding a joint R&D agreement at the research and development stage and providing theCompany’s know-how to pharmaceutical companies. The other revenue comes from out-licensing patent topharmaceutical companies. This includes lump-sum contract payments, milestone payments paid according todevelopment progress, and royalty payments paid in accordance with sales after launch.
See the figure above for the Company’s new biopharmaceutical pipeline.
☆ GND-004 (Anti-RAMP2 antibody, target disease: eye disease, cancer)
The Company succeeded in creating candidate antibodies for epoch-making new antibody drugs that inhibit
neovascularization on a new mechanism, and applied for domestic and international patents. The Company isproceeding with non-clinical trials for a therapeutic drug candidate for patients with ophthalmology-relateddiseases for which existing preparations do not work and those cancer patients for whom Bevacizumab does
not work. The Company will continue out-licensing activities to pharmaceutical companies.
☆ New antibody
The Company concluded a joint research agreement with Sapporo Medical University for developing anticancer drugs using antibodies that invade cancer cells in January 2020. Another joint research agreement for
the acquisition of new antibodies that kill cancer cells was signed with MabGenesis Inc. in January 2020. The
Company aims at out-licensing to pharmaceutical companies from both projects.
Also, the Company disclosed the research and development of new biopharmaceuticals in its Mid-Term
Strategic Plan revealed in February 2021. Specifically, it plans to develop antibody drugs in the fields ofmalignant lymphoma, vasculitis, and pulmonary hypertension, and aims for early launch (for details, refer tothe chapter of the Mid-Term Strategic Plan).

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10

Mid-Term Strategic Plan
In February 2021, the Company announced a Mid-Term Strategic Plan from FY2021 to FY2025.
Key points are;1) Driving the growth of the business model that consists of the current three business lines, aiming for early
profitability (operating profit in FY2022)
2) Achieving sales of ¥3bn and operating income of ¥1bn in FY2025.
3) For this end, by FY2025, the Company will have launched four biosimilar products including the existing
three products, out-license in the field of regenerative medicine, develop new biologics and find outlicensing partners, and spend on research and development necessary for growth. The Company willcontinue to review costs such as SG&A expenses as well.
4) From after FY2026, the Company will continue its focus on the development of regenerative medicine andnew biologics to achieve high returns.

Mid-Term Strategic Plan roadmap

Source: Company materials
The robust growth of biosimilars will be a major factor to achieve profitability. As mentioned earlier, most of
the drug discovery venture companies earn little sales until launching any drug. By contrast, Kidswell Bio
generates cash flow from its biosimilars, which have been developed for nearly 15 years. As a result, theCompany’s profitability is becoming more likely and that ahead of schedule. Since biosimilars have passed the
top of their investment cycle they are expected to add to bottom-line profit more in the future.
Kidswell Bio also disclosed the development of new biologics which includes three new products.

New biologics planned for new development
Target disease

Current treatment challenges

MalignantlymphomaLess radical treatment and higher
mortality CAR-T cell therapy wasdeveloped, but side effects are strong
and treatment costs are highVasculitis(Kawasaki
disease, etc.)

Immunoglobulin administration. In
addition to concerns about safety, theeffect is not sufficient, and thedevelopment of radical treatment is anurgent issue.

Pulmonary
hypertension

There are treatments with vasodilators,
but the effect is limited

No. of patients/marketDevelopment direction

30,000 people
/year
¥72bn
(FY2020)

Research and development of antibodies
with a new mechanism of action thatbinds to malignant lymphoma anddirectly kills it, independent of thepatient’s immune system

40,000 people
About ¥4bn

Identify the root cause substance andcreate an inhibitory antibody against it

250,000 people
About ¥250bn

Creating an inhibitory antibody against a
substance that is a candidate for the root
cause

Source: Omega Investment from Company materials

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11

For investors in drug discovery ventures, enormous returns from the launch of new biopharmaceuticals must
be the biggest attraction. Until now, the Company’s new biologics pipeline was small, therefore theannouncement of the development of three new products is positive for the Company’s valuation. We would
like to pay close attention to the progress of these R&D and the possibility of out-licensing partners.
Regarding regenerative medicine、
1) Clinical trials will start by FY2022 aiming at launching 3 products by FY2030
2) The Company will also work on the development of designer cells as the next generation cell therapy3) Out-licensing partners for JRM-001 will be confirmed by FY2022 and manufacturing and marketing
approvals will be obtained by 2024

New Drug Pipeline (SHED) Aiming for Early Out-licensing
TargetdiseaseSymptoms

Existing
treatment

Number of patients

Existing partners

The goal

Cerebralpalsy

Tetraplegia,
Posturalinstability

None

Cumulative total of
30,000 people a year

Nagoya University,
Tokyo Medical and
Dental University

Maintaining posture andimproving limb athletic
ability

Spinal cord
injuryLoss ofmotor andsensoryfunction

None

Cumulative 100,000
peopleNagoya University

Recovery of perception,
improvement of walking
ability

Non-Union
Fracture

External
chronic pain,
SurgeryGait
disturbance

100,000 cases a year

Hokkaido University
General Spinal Injuries
CenterAvoiding surgery, free fromchronic pain

Source: Omega Investment from Company materials
Regenerative medicine is a relatively new business operating for just a few years. However, the construction ofa master cell bank is progressing well and so is the alliances with research institutes such as universities. We
should like to keep a close eye on the progress of regenerative medicine as well.
As per biosimilar
1) Add one more product to the current three products to launch four by FY2025.
2) Operate joint research with chromocenter Inc. and SOLA Biosciences to reduce manufacturing costs to an
overwhelming levels and achieve cost competitiveness and profitability.
3) Develop new biosimilars with much higher cost competitiveness.
In drug discovery ventures, few companies can deliver satisfying returns to shareholders who take high risk,
while spending ¥1bn in R&D expenses every year and earning almost no sales. The fact that Kidswell Bio canfinance its new drug development costs partially by the sales of biosimilars differentiates itself from the peers.
If the profitability shown in the Mid-Term Strategic Plan becomes more visible, the stock price should react
positively.

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12

Financial results
1) FY2021/3 financial results; 7.5% decrease in sales, operating loss reduced by ¥190mn
The Company’s full-year financial results for FY2021/3 are net sales of ¥996mn (down 7.5% YoY), operating lossof ¥969mn (operating loss of ¥1,161mn in the previous year), and ordinary loss of ¥991mn (ordinary loss of¥1,187mn in the previous year) and net loss of ¥1,001mn (net loss of ¥7,316mn in the previous year).
Sales were almost in line with the Company forecast revealed at the beginning of the term. As the manufacturing
cost of GBS-001 was cut back as planned, the gross profit margin improved significantly from 39.4% in FY2020/3
to 88.0% YoY. R&D costs were significantly below the budget thanks to the increased efficiency of thedevelopment process. Personnel expenses rose due to new hires to promote R&D, but part of the R&D expenses
for biosimilars was carried over to the next fiscal year to the tune of a little less than ¥100mn, and costs werelower in other pipelines, too. As a result, the operating loss was ¥969mn, improving from the loss of ¥1,161mn
in the previous fiscal year.
Cash and deposits at the end of March 2021 was ¥1,461mn, a YoY decrease of ¥571mn. Operating cash flow was
negative ¥1,267mn. Cash flow from financial activities was ¥718mn, resulting from the income by the issuance of
convertible bond-type bonds with stock rights and the issuance of shares by exercising of stock rights totaled¥738mn.
The business highlights are as follows.
a) Regenerative medicine (cell therapy)• Started clinical research to be supplied with deciduous teeth, which are raw materials for pulp stem cell
production, in collaboration with the University of Tokyo Hospital.
• Concluded a joint research agreement with Hokkaido University and the General Spinal Injuries Center tocreate a treatment method for intractable fractures using SHED.
• Significantly accelerated moves toward JRM-001 manufacturing and marketing approval application aimed at
FY2023 by adding a factory for phase III clinical trial.
b) Biosimilar• Cancelled the alliance for joint commercialization of adalimumab biosimilar products with Changsheng BioTech Co., Ltd.
• Application for domestic drug manufacturing and marketing approval of biosimilars in the field of ophthalmic
treatment with Senju Pharmaceutical Co., Ltd. (approved in September 2021)c) New biology• Cancellation of license agreement for development, manufacturing and marketing rights of anti-human α9integrin antibodyd) Cell bank/Culture supernatant• Establishment of new SHED business structure with Reverse Co., Ltd. and Dojin Group Co., Ltd.

Revenue trends
JPY, mn, %Net sales

YoY
%

Oper.
profitYoY%

Ord.
profitYoY%Profit
ATOP

YoY
%

EPS
(¥)

DPS
(¥)

2018/3

1,059

-2.7

-913

–

-903

–

-904

–

-47.270.00

2019/3

1,021

-3.6

-805

–

-816

–

-856

–

-43.840.00

2020/3

1,077–-1,161–-1,187–-7,316–-264.650.00

2021/3

996

-7.5

-969

–

-991

–

-1,001–-34.790.00

2022/3 (CE)

1,900

90.7

-1,720–-1,740–-1,741–-58.180.00

2021/3 Q1

121

-57.3

-237

–

-244

–

-244

–

-8.72

–

2022/3 Q1

303

150.1

-309

–

-313

–

-314

–

-10.50–Note) Consolidated financial statements from the FY2020/3, there is no continuity before FY2019/3.
Source: Omega Investment from Company materials

Kidswell Bio| 2021/9/28

132) FY2022/3 Q1 financial results – Sales of ¥300mn (2.5 times YoY), operating loss of ¥300mn (improved by¥70mn)In FY2022/3 Q1, sales were ¥303mn (up 150.1%), operating loss was ¥309mn (operating loss of ¥237mn in theprevious year), and ordinary loss was ¥314mn (ordinary loss of ¥244mn in the previous year), and net loss of¥314mn (net loss of ¥244mn in the previous year).
Sales came in line with the Company forecast recording revenue for GBS-001 and GBS-011. Cost of sales
increased significantly YoY (+¥110mn) due to the final development cost to complete MCB (¥96mn). Also, R&D
expenses rose by booking expenses for GBS-007 approval this year instead of last year. The Company
continued the overall cost cutting efforts and cut back other SG&A expenses but allowed operating loss todeteriorate.
The business highlights during Q1 are as follows.
a) Regenerative medicine (cell therapy)• JRM-001 was designated as a product for regenerative medicine for rare diseases.
• Appointment of academic advisor specializing in research on practical application of regenerative medicine
technology.
b) Others• Establishment of ChiVo Net Future Medical Children Volunteer Network to build regenerative medicine
business model utilizing SHED and started a collaboration with Showa University Dental Hospital.
3) Full-year forecast for FY2022/3: Sales ¥1.9bn (+91% YoY), operating loss ¥17.2bn.
The Company forecasts for FY2022/3 are sales of ¥1,900mn (+ 90.7%), operating loss of ¥1,720mn (operating
loss of ¥9,69mn in the previous year), and ordinary loss of ¥1,740mn (ordinary loss of ¥991mn in the previousyear) and net loss attributable to owners of the parent of ¥1,741mn (net loss of ¥1,001mn in the previous year).
Sales of existing biosimilar drug substances and royalty income are expected to grow steadily, and the launchof GBS-007 is expected to contribute to sales. In addition, sales of APIs related to the API manufacturing
process for the fourth biosimilar product and profits related to the completion of Master Cell Bank are
expected.
The Company forecasts R&D expenses in SG&A to be ¥1,800mn (¥969mn in the previous year). In addition to
the carry-forward expenses from the last fiscal year, final development expenditure for commercial productionof GBS-007 and the costs related to clinical trial and final production of JRM-001 are included.
However, the Company showed, as the numbers excluding one-time factors, sales ¥1,350mn, gross profit¥1,000mn and operating loss of ¥520mn. One-offs include establishment costs of the manufacturing process
for the fourth biosimilar product, sales and COGS resulting from the completion of the master cell bank. These
adjusted numbers suggest that the Company may post surplus in FY2023/3, as it indicated in the Mid-Term
Strategic Plan.

Kidswell Bio| 2021/9/28

14

Stock price trends
Drug discovery bio-ventures are not able to raise sales over short-term and suffer long-term deficits, valuation
by ordinary financial analysis is usually difficult. It is not easy to calculate by various corporate valuation
methods, considering the uncertain sales after a drug launch and the uncertainties until the launch. There will
be no choice but to make a comprehensive judgment by carefully examining the pipeline progress and thefinancing of R&D expenditures necessary for new drug development.
The Company’s stock price rose sharply following the announcement of the FY2021/3 financial results. The
stock price continued to rise after the Q1 result announcement. In the Mid-Term Strategic Plan announced in
February 2021, the Company indicated profitability in FY2023/3. Investors appears to have rated the businessprogress well, which included the financial results, the launch of new biosimilars, development of otherpipeline products and the master cell bank business. The share price was up more than 60% year-to-date,
which is a significant outperformance over the Japanese stock market.
It is still a long time before the new biology, which is the greatest hope of shareholding investors, willcontribute to profits. In the foreseeable future more reality in the roadmap indicated in the Mid-Term Strategic
Plan i.e., early profitability and profit growth, should prove positive for the stock price.

Stock price transition (last 5 years)(¥)

Moving average (13 weeks)Moving average (26 weeks)Moving average (52 weeks)(million shares)

Mothers Index Chart for TSE (last 3 years)
140(9/27/2018=100)

TSE Mothers Index
120

100

80

Kidswell Bio(4584)

60

40

20

0
9/27/18

Kidswell Bio| 2021/9/28

12/27/18

3/27/19

6/27/19

9/27/19

12/27/19

3/27/20

6/27/20

9/27/20

12/27/20

3/27/21

6/27/21

15

Financial data
FY (¥mn)[Statements of income]Net sales
Cost of sales
Gross profit
SG&A expenses
R&D expenses
Operating loss
Non-operating income
Non-operating expenses
Ordinary loss
Extraordinary income
Extraordinary expenses
Loss before income taxes
Total income taxes
Net loss[Balance Sheets]
Current assets
Cash and cash equivalents
Non-current assets
Tangible assets
Investments and other assets
Total assets
Current liabilities
Short-term borrowings
Non-current liabilities
Total liabilities
Total net assets
Total shareholders’ equity
Capital stock
Legal capital reserve
Retained earnings
Evaluation/conversion difference
Subscription rights to shares
Total liabilities and net assets[Statements of cash flows]
Cash flow from operating activities
Loss before income taxes
Cash flow from investing activities
Purchase of investment securities
Cash flow from financing activities
Proceeds from issuance of common shares
Net increase in cash and cash equiv.
Cash and cash equiv. at beginning of period
Cash and cash equiv. at end of period
FCF

Kidswell Bio| 2021/9/28

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/3

207
91
115
432
264
-316
0
1
-317

60
15
45
403
206
-358
0
16
-373

301
141
159
671
412
-512
0
5
-516

321
147
174
998
689
-824
34
0
-790

1,160
500
660
1,480
1,075
-820
50
15
-785

1,089
397
692
1,876
1,433
-1,18435
27-1,176

1,059
422
637
1,550
1,107
-913
11
0
-903
0

-373
3
-377

-517
2
-519

0
-790
1
-792

-785
1
-787

45
-1,222
2-1,224

-902
1
-904

1,077
653
424
1,585
898
-1,161
1
27-1,187
5
6,132-7,3142-7,316

996
119
876
1,846
964
-970
2
24
-991

-317
3
-320

1,021
412
609
1,414
945
-806
3
14
-816
7
45
-854
1
-856

504
285
3
1
2
508
160

919
887
3
1
2
922
24

1,881
1,610
4
0
3
1,886
50

1,092
599
54
0
53
1,146
92

6
166
341
341
778
681
-1,118

9
34
888
888
1,239
1,143
-1,495

783
833
1,052
1,031
1,571
1,474
-2,014

783
876
270
249
1,576
1,479
-2,806

508

922

21
1,886

3,322
2,032
269
1
267
3,592
880
25
1,223
2,104
1,487
1,451
611
9,917
-9,077
-21
57
3,592

-362
-317
-0

-304
-373
-0

-729
-517
-1

346
346
-15
301
285
-362

907
917
601
285
887
-305

1,454
234
722
887
1,610
-732

3,421
2,379
284
1
282
3,706
189

2,692
1,891
332
1
330
3,025
404

2,821
2,009
329
1
328
3,151
400

21
1,146

1,520
817
173
2
171
1,694
1,279
810
11
1,290
403
383
2,037
1,940
-3,594
-0
21
1,694

16
205
3,500
3,472
4,194
4,097
-4,818
3
23
3,706

16
421
2,604
2,568
100
3,372
-904
2
32
3,025

19
420
2,731
2,695
591
3,864
-1,760
1
34
3,151

-970
-790
-49
-49
9
9
-1,0101,610
599-1,021

-607
-785
-121
-116
946
486
217
599
817
-729

-1,759-1,222
-149
-149
3,471
3,932
1,562
817
2,379
-1,909

-438
-902
-50

-860
-854
-0

-488
2,379
1,891
-488

978
973
118
1,891
2,009
-860

-1,325-7,314
-137
-100
1,221
40
-240
2,009
2,032
-1,4628-999
1-1,001

3,346
1,461
587
3
581
3,933
1,114
1,209
2,323
1,610
1,291
1,032
10,337-10,078
202
116
3,933

-1,267
-999
-22
718
138
-571
2,032
1,461
-1,28916

Company Profile
Company Profile

Main business image

Kidswell Bio Corporation【Head Office】
1-2-12, Shinkawa, Chuo-ku, Tokyo, 104-0033, Japan
https://www.kidswellbio.com/en/【Laboratory】
Kita 21-jyo, Nishi 11-chome, Kita-ku, Sapporo
Center for Promotion of Platform for Research on
Biofunctional Molecules, Creative Research Institution,
Hokkaido University
Number of Employees : 39
HistoryMonth/Year
Mar. 2001

Jun. 2002

Event
Gene Techno Science Co., Ltd. in Kita-ku, Sapporo City, with the aim of developing the results of functional research on
immune-related proteins at the Institute for Genetic Medicine, Hokkaido University as diagnostic and therapeutic
agents, and providing contract service services in drug development. Established (capital 10,000 thousand yen)
Established a new research institute in the Hokkaido Center of the National Institute of Advanced Industrial Science andTechnology to strengthen research and development of new biopharmaceuticals and start considering entry into thebiosimilars business.

Nov. 2003

Moved the head office to the laboratory

Jun. 2007

Licensed out anti-α9 integrin antibody to Kaken Pharmaceutical Co., Ltd. in the new biopharmaceutical business

Oct. 2007

In the biosimilar business, licensed in with Fuji Pharma Co., Ltd. for production cells and basic production technology forfilgrastim biosimilars.

Apr. 2008

Moved the head office to Chuo-ku, Sapporo

May 2008

Relocated to the Institute for Genetic Medicine, Hokkaido University

Jun. 2008

Established Tokyo office in Chuo-ku, Tokyo

Nov. 2012

Fuji Pharma Co., Ltd. and Mochida Pharmaceutical Co., Ltd. acquired domestic manufacturing and sales products forfilgrastim biosimilar products jointly developed with Fuji Pharma Co., Ltd. (launched in May 2013)

Dec. 2012

Listed on the Tokyo Stock Exchange Mothers

Sep. 2013

Relocated the research institute to the Center for Promotion of Biological Functional Molecular Research andDevelopment, Hokkaido University Research Organization

Jan. 2014

Concluded a joint development contract with Sanwa Kagaku Kenkyusho Co., Ltd. for darbepoetin alfa in the biosimilarbusiness (launched in November 2019)

Mar. 2016

Concluded a capital and business alliance agreement with NK Relations Co., Ltd. and Launchpad 12 GK (both areaffiliated companies of Noritsu Koki Co., Ltd. and are currently absorbed and merged with Noritsu Koki Co., Ltd.).

Jun. 2016

As a result of a tender offer for the Company’s shares by Noritsu Koki Bio Holdings GK (a company whose trade namewas changed from GK Launchpad 12), the voting rights of the Company became over 50%, and Noritsu Koki Bio Holdings
GK became the parent company of the Company together with NK Relations and Noritsu Koki.

Apr. 2019

Made Cell Technology Co., Ltd. a wholly owned subsidiary of the Company through a share exchange. Due to theissuance of new shares in connection with the share exchange, Noritsu Koki Bio Holdings LLC and Noritsu Koki Co., Ltd.
will have less than 40% of voting rights, and will no longer be the parent company and will become other affiliatedcompanies.

Jul. 2019

Moved the head office to Chuo-ku, Tokyo

Feb. 2020

Made Japan Regenerative Medicine Co., Ltd. a wholly owned subsidiary by transferring shares from Noritsu Koki Co., Ltd.

Nov. 2020

Cell Technology Co., Ltd. no longer an affiliated company as the Company sold all the stock of Cell Technology.

Feb. 2021

Formulation of medium-term management plan (FY2021-2025), FY2022, operating profitable, FY2025, targeting sales of¥3bn and operating income of ¥1bn

Jul. 2021

Company name changed to Kidswell Bio Co., Ltd.

Sep. 2021

Concluded a joint research agreement with NanoCarrier Co., Ltd. for the development of the next generation celltherapy “designer cells” based on SHED.

Kidswell Bio| 2021/9/28

17

Management (Officer)
President & CEO: Masaharu Tani

Corporate Officer, CTO, Research & Development Div.: Masayuki Kawakami
Kyoto Univ. Graduate School of Engineering, Ph.D
Worked for research laboratories of FUJIFILM
Corp. mainly in oncology area with Harvard Univ.
and Novartis (then Sandoz). Worked for Toyama
Chemical Corp. and then for FUJIFILM
Pharmaceuticals USA to promote an anti-influenza
drug clinical development. Joined GTS (currently
KWB) in April 2017 and appointed as CTO in April
2018.

The Univ. of Tokyo, MSc, MBA
Joined the Clinical Development Dept. at Suntory,
implementing clinical trials and moved to Takeda
Pharmaceutical, where worked at the Business
Development Dept. and Strategic Product
Planning Dept. After Takeda, joined Whiz Partners,
a Japanese investment company in 2013 andjoined GTS (currently KWB) in 2014. Appointed as
CFO in 2015 and CEO in 2017 at GTS.

Corporate Officer, CFO, Business Administration Div.: Yasuo Sakae

Corporate Officer, CBO, Business Development Div.: Shinya Kurebayashi

Graduated from the Faculty of Sociology,
Hitotsubashi University. After being in charge of
securities sales at the Tokyo branch ofCommerzbank (a subsidiary of Commerzbank) andthe head office in Germany, Sakae joined
Yamanouchi Pharmaceutical Co., Ltd. (currently
Astellas Pharma Inc.), mainly promoting the
globalization of the finance division andestablished CVC (Corporate Venture Capital) andtook the lead. Joined the Company in 2018 afterworking as CFO at Astellas US, General Manager ofProcurement Department and General Manager ofManagement Promotion Department (in charge ofbudget and finance) at Astellas Pharma Inc., andVice President, Corporate Strategy &Communications at Astellas Europe.

Massachusetts Institute of Technology, MSc,
Physics
Worked in Investment Banking Div. at Goldman
Sachs Japan and involved in M&A, IPOs and bondofferings of pharmaceutical and medical devicecompanies at Morgan Stanley (Mitsubishi UFJ
Morgan Stanley Securities). A member oflaunching ImPACT of Cabinet Office. In 2015,
joined Advanced Cell Technology And Engineering
Ltd. (ACTE) and established Administration Dept.
and led business development and IPO
preparation at ACTE. Joined GTS (currently KWB)
in March 2019.

Corporate governance system
General meeting of shareholders

Appointment /dismissal

Appointment /dismissal

ReportAlignment

Audit

Alignment
ReportInstructions

Audit

Internal audit
department

Representative director/president

Alignment

Accounting auditor

Board of Corporate
Auditors

Board of directors
Appointment /dismissal

Appointment /dismissal

ReportInstruction /supervision

ReportInstruction /supervision

ReportInternal audit

AdviceEach department

Corporate lawyer, etc.

Consultation

Management meeting

Members of each institution (◎ is the chair)
Title

Name

Board of directors

Board of Corporate
Auditors

Management
meeting

Representative director

Masaharu Tani◎

Outside director

Norikazu Eiki〇◎

Outside director

Aya Chiba〇

full-time auditor

Osamu Sugawara◎

outside auditor

Masato Mori○

outside auditor

Hiroshi Shinagawa○

Operating officer

Masayuki Kawakami○

Operating officer

Shinya Kurebayashi○

Operating officer

Yasuo Sakae○

Note) KWB is a company with a board of auditors, separated the management supervision function and theexecutive function, and introduced an executive officer system. There are three directors, including two
outside directors. Of the total of six directors and corporate auditors, one is female.

Kidswell Bio| 2021/9/28

18

Status of major shareholders

Name
Noritsu Koki Co., Ltd.
Yuichi Otomo
NanoCarrier Co., Ltd.
Custody Bank of Japan, Ltd. (Securities Investment Trust Unit)
Nomura Trust & Banking Co., Ltd. (Trust Unit 2052241)
JSR Corporation
SBI Securities Co., Ltd.
Senju Pharmaceutical Co., Ltd.
Koike Taro
Tsuda Makoto
計

Number of shares owned
9,471,832
1,685,750
1,000,000
834,200
721,000
686,814
638,774555,200
520,000
436,800
16,550,370

Ratio of thenumber of shares
owned to thetotal number ofissued shares (%)
31.97
5.69
3.38
2.82
2.43
2.32
2.16
1.87
1.76
1.47
55.87

Note) The ratio (%) of the number of shares owned to the total number of issued shares excludes treasury stock (92 shares)
Source : The Company annual report (FY2021/3)
Initiatives for SDGs

As shown in the figure above, the pursues contributions to the S (Social) by delivering new medical care.
Specifically, the Company will maintain the health of children, families, and people in the local community
while providing necessary therapeutic agents and treatments. It will continue healthy growth as an enterpriseand contribute to maintaining the sustainable social security system.
To realize new medical care from the perspective of children, as expressed in the corporate slogan “Kids Well,
All Well”, the Company provides inexpensive and high-quality medical services by biosimilar business andreduces medical expenses for the elderly. The reduced costs can be allocated to pediatric diseases that tend tobe neglected. This enhances pediatric disease medical care. Young stem cells that many children, including
those saved by the improved medical care, can provide new medical care for intractable diseases that peopleof all ages could suffer. In its new company name, Kidswell Bio puts its wish to save children responsible fortomorrow by maintaining this cycle, and this is in addition to the wish to provide therapies for intractable andrare diseases, which the Company has been chasing since its inception. The Company is decided to contributeto developing new medicines and cures by making full use of its biotechnology nurtured up to now.

Kidswell Bio| 2021/9/28

19

General disclaimer and copyrightThis report was created and displayed based on interviews with the company concerned and financial
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This report is for informational purposes only and is not intended to solicit or recommend investment.
Omega Investment is not responsible for the consequences of using this report.
This report is informed by the target company through interviews with the target company, but the
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