ANALYST NET Company Report

Kidswell Bio Co., Ltd
Issued: Jan. 18, 2023

(4584 Growth）

SHED: Star Performer in Regenerative Medicine
Summary 1: SHED, with superior proliferative and tissue regenerative ability
Kidswell Bio Corporation is accelerating the development of a regenerative medicine known
as SHED (stem cells from human exfoliated deciduous teeth) by generating the profit frombiosimilar business. Attempts are being made to use bone marrow-derived mesenchymal
stem cells in the most difficult of procedures, the regeneration of nerves after cerebral
infarction and spinal cord injuries. These are being watched with interest, but none have yet
been officially approved.
Establishing a manufacturing process for commercial production is essential for approval ofregenerative medicine products, but it takes time and effort to obtain biological components
such as bone marrow as raw materials. The stem cells are, in general, difficult to obtain, have
limited proliferative capacity, and are prone to senescence, thus posing high hurdles toestablishing commercial production which can produce at a sufficient level for numerous
patients. In the case of SHED, proliferative capacity is higher than for other mesenchymal
stem cells (MSC’s) and relatively easier to obtain, thus providing the prospect of relatively
lower hurdles.
SHED is also regarded as appropriate for nerve regeneration since it has a superior ability tosecrete neurotrophic factors than other mesenchymal stem cells. Further, it has also been
established that SHED acts in the acute phase of the initial onset to reduce inflammation andprotect nerves. Also, in the chronic stage after inflammation subsides, it can contribute tonerve regeneration. In the future, the accumulation of SHED itself, or SHED-induced
immune system cells, in the brain, may help provide an amelioration of symptoms.

R&D Report
Fair Research Inc.
Tsuyoshi Suzuki

Company Outline
Location

Chuo-ku Tokyo

President

Masaharu Tani

EstablishedMarch 2001

Capital

JPY1,433 million

ListedNovember 2012

URL

www.kidswellbio.com

Summary 2: First generation -regenerative medicine

Industry

PharmaKidswell Bio is carrying out a number of projects to develop "first-generation SHEDs" thatuse unmodified SHEDs as cell therapy drugs. The illnesses targeted using SHED attributes
are related to neurology and osteogenesis, many of which are classified as pediatric or orphan
diseases and for which there is no effective cure, creating an area of high unmet medical need.
Many development projects are being conducted under medical leadership in collaboration
with academia, and the clinical studies will start in the coming year. From the 2024 fiscal
year, there will be a shift to company sponsored clinical trials on multiple disorders for which
proof of concept (POC) has been established. The target date for a final commercial productis estimated to be 2030. In order to avoid what has been called the “Galapagos effect”, there
has from the start been a focus on building human resources and platforms with an eye tooverseas development. With regard to establishing critical manufacturing processes thecompany in August 2022 has established the world’s first SHED master cell bank, thereby
overcoming the first hurdle. In addition, in order to reinforce GMP-compliant manufacturingof investigational new drugs, the plan is to initiate development initiatives with Minaris
Regenerative Medicine and other partners.

Employees

39(non-consol)

Summary 3: Second generation - “designer cell “applications

Key Indicators (Jan. 17, 2023)
Share price254 JPY

52-week high494 JPY

52-week low
Sharesoutstanding
Trading unit

201 JPY
31,896thousand

Market cap

JPY8,102 mil.

100 shares

The development of SHED modified by gene transfection (second generation SHED) is also
Dividend (est.)
0.0
making progress. In November 2022 it was disclosed that, in collaboration with Hamamatsu
University School of Medicine, SHED, modified by gene transfection and incorporating a
Forecast EPS-31.8 JPY
suicide gene, was effective against glioma cells. This research also demonstrated theexistence of a “bystander effect”, killing not only the cancer cells to which SHED is induced
Forecast PERNA
but also neighbouring cells successively. Using the fact that SHEDs are attracted to thecytokines secreted from tumour cells, SHED has demonstrated a bystander effect by using
Actual BPS
47.66 JPY
the toxin produced by the suicide gene as a DDS to induce suicide genes into tumour cells.
The expectation is that SHED will be used with other techniques, not just suicide genes. The
Actual PBR
5.33X
company is currently targeting various diseases with a view to introducing external
technologies.
(Note: EPS 、 PER 、 BPS 、 PBR based onshares outstanding (excl. treasury shares)
Note: This report is the English-language version of the original Japanese-language
report issued on January 18, 2023, to which you should refer for precise details.
Op.
Stock Price
Revenues YoY
YoY Rec. Profit YoY Net Income 自己株式数除く発行済株式数ベース。
YoY
EPS
IncomeResults
JPY-mil.
％％
JPY-mil.
％
JPY-mil.
％
JPY
High
Low
JPY- mil
2021/3 Actual2022/3 Actual

996
1,569

-7.5
57.5

-969
-919

NM
NM

-991
-952

NM
NM

-1,001
-535

NM
NM

-34.7
-17.3

888
858

466
410

2023/3 Forecast

2,900

NM

-980

NM

-999

NM

-1,000NM-31.8

2021/9 1-2Q Actual

740

324.5

-450

NM

-463

NM

-462

NM

-15.3

858

410

2022/9 1-2Q Actual

1,116

NM

11

NM

-42

NM

-42

NM

-1.3

480

231

1/13
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

Company Outline and Management Philosophy＜Company outline＞
Solid earnings frombiosimilars business

Kidswell Bio Corporation started out as Gene Techno Science Co., Ltd., a bioventure launched by Hokkaido University to pursue the development of biosimilars
and new biologics. After starting its biosimilars business in 2007 it received its first
regulatory approval, for the filgrastim biosimilar, in 2012 and now has three
products on the market, with a plan to increase this to four products within a few
years. The biosimilars business has already generated profits that exceed working
capital (fixed costs), and in fiscal 2025 the company is aiming to achieve sales of
JPY3 billion and operating income of JPY1 billion yen. Looking ahead, thecompany’s plan is to deploy its advanced manufacturing technology, and its
accumulated know-how and experience of development and commercialization, to
expand its business with new biosimilars and reduced manufacturing costs.

Moving into the area ofregenerative medicine as its
next earnings driver

In addition, in 2021 it expressed its intention of lifting corporate value by using theproceeds of its biosimilars business to develop a new earnings driver in the form ofcell therapy business (regenerative medicine). Around the same time, it formallychanged its name to Kidswell Bio Corporation and made pediatric medicine,
particularly rare pediatric disorders, its main area of interest.

Pediatric diseases, with aparticular focus on rarediseases
Developing stem cells fromhuman exfoliated deciduous
teeth (SHED), a novel
modality
With a view to overseas
development, it is now
concentrating thecompany’s internal
resources on SHED’srealisation and market
launch by 2030

In the company’s cell therapy business Kidswell Bio uses mesenchymal stem cells
for regenerative medicine. However, it is distinguished by its development of a novel
modality known as SHED (Stem cells from Human Exfoliated Deciduous teeth).
Since 2021, the company has been accelerating investment in SHED as aregenerative medical product based on the favorable results of non-clinical trials. It
aims to market a product in 2030 and is currently focusing its internal resources onachieving that. Development in Japan has advantages, such as a conditions-based
rapid approval system to support the commercialization of regenerative medicine
products. However, market growth will necessitate development in the overseas
markets also, notably the US market. For that reason, Kidswell Bio is now preparing
to undertake R&D overseas in addition to its development work in Japan.
Kidswell Bio strategy(Source: Kidswell Bio company briefing)2 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

＜What is SHED?＞
There are two types of regenerative medicine: cell transplantation, which aims to
In regenerative medicine,engraft cells to function as part of the tissue at the site of the damage or defect; andthe use of allogeneic cells in cell medicine, which involves the release of growth factors to enhance thecell therapy is mainstream
regenerative power of the remaining tissue. Further, there are two methods: one
using autologous cells, and a second using allogeneic cells. In the former case, thepatient’s own cells are cultured, processed and returned to the patient. This method
tends to be high cost. However, in the case of allogeneic cells, mass cultured cells
taken from healthy donors are administered to patients. The cells can be used fornumerous different patients and high volume production keeps the costs down.
The business model for autologous and allogeneic cell transplants
Autologous stem cell transplant
Culturing/processing（For 1 patient at a time）

Providers ofregenerative medicine

Delivery

Cell collection

Medicalfacility

DeliveryTransplantaton
Patients

Allogeneic stem cell transplant
Culturing/processing

Delivery

Providers of（For many 000's of patients） regenerative medicine

FreezeRefrigerate

Medicalfacility

Transplantation
Patients

Cell bank(Source: Compiled by Fair Research Inc.)

Much was expected ofpluripotent stem cells, suchas induced pluripotent stem
cells (iPS), but a variety ofproblems have croppped up

Cells used for cell transplantation may be somatic cells in skin transplantation, or
pluripotent stem cells such as iPS cells or ES cells. Somatic cells have low
proliferative capacity, and are mostly autologous because of the problem ofrejection. What is really needed are pluripotent allogeneic stem cells, but thesepresent a variety of problems in terms of bioethics, cancer risk, production
methodology and production cost, and we are still a long way from realisation.
Types of cell
Tissue stem cells

Mature cells

Pluripotent stem cells

Somatic cells

Somatic stem cells

Various tissue

Various tissue

Bone marrow , dental pulp,
adipose tissue etc.

Fertilised eggs

Proliferation

Low

Depends on tissue

Very highVery highVery highVery highDifferentiation

None

LimitedLimitedUnlimited

Unlimited

Unlimited

Viral infection

None

None

None

No riskNo riskNo risk

Cancer risk

None

None

None

No riskYes

No risk

Bioethics

None

None

None

Problematic

None

None

OriginMesenchymal
stem cells

ES cells

iPS cells

MUSE cells

Slight presence
Genetic
manipulation of in mesenchymal
stem cells
somatic cells(Source: Compiled by Fair Research from various sources)

Much development work
uses MSCs

A lot of attention is focusedon bone marrow-derived
MSCs (BMMSC) to treat
nerve regeneration

In cell medicine, however, mesenchymal stem cells (MSC’s) are often used. These
are somatic cells derived from mesenchyme, widely found in bone marrow, adipose
tissue, placenta, umbilical cord and dental pulp and capable of self-replication(proliferation). When cultured in a flask, MSC’s attach themselves to the bottom
surface exhibiting a spindle shape, and can differentiate into various lineages suchas osteoblasts, adipocytes, and chondrocytes depending on the culture conditions.
Allogeneic bone marrow-derived MSCs have already been approved andadministered in Japan (Temcell® 2015; indication for acute graft-versus-hostdisease after hematopoietic stem cell transplantation: GVHD).
Recently, with the aim of regenerating the central nervous system, which is the mostdifficult organ to repair, the development of regenerative therapeutic drugs fortreating cerebral infarction and spinal cord injury has attracted attention. Examples
include SanBio’s SB623 and Helios’s HLCM051, both of which are bone marrowderived MSCs (BMMSCs).
3 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

<SHED characteristics>
Kidswelll Bio is focused on
SHED: Stem cells from
Human ExfoliatedDeciduous teeth

SHED are superior to other
MSCs because it is easier toobtain and has a higher
proliferative capacity

As noted above, unlike other companies, Kidswell Bio uses stem cells from human
exfoliated deciduous teeth (SHED). Below we compare the characteristics of SHED
with other MSCs.
(1) Ease of availability and high proliferation
Bone marrow-derived mesenchymal stem cells are a potent source of stem cells, but
the burden imposed on patients by bone marrow aspiration, the reduction in stem
cells due to ageing and the relatively long culturing period make them expensive tomanufacture. Meanwhile, umbilical cord blood or umbilical cord-derived stem cells
can have a low frequency of mesenchymal stem cells, which affects the reliabilityof collection. Additionally, adipose-derived stem cells (adipose tissue MSC –ATMSC) require liposuction or other surgery at time of extraction, and this can put
a heavy burden on the patient. Dental pulp stem cells, however, are from permanent
teeth that are no longer needed (dental pulp stem cells – DPSC), or deciduous dental
pulp cells from deciduous teeth that have been discarded after falling out (SHED).
These cells, therefore, are relatively easy to obtain.
Further, compared to BMMSC, ATMSC and DPSC, SHED has a much higher
proliferative capacity.
Comparison of proliferative capacity(Source: Kidswell Bio company)

Drugs from othercompanies that use
BMMSCs are finding it
difficulet to get approval,
but this is due to thedifficulty of establishing asystem for mass-productionof homogeneous cell
medicines.
In August 2022 Kidswell
Bio became the firstcompany in the world tocomplete construction of a
SHED master cell bank

SanBio’s SB623 was submitted for approval under the fast track system in March
2022, but six months after the priority review deadline it has still not received
approval. We assume the reason for this is that, in the case of BMMSCs, there are
difficulties in establishing a system for stable commercial production and supply,
such as limited proliferation. We believe Kidswell Bio’s SHED is superior to othermesenchymal stem cells because of the ease with which it may be obtained and its
high proliferative ability.
In the field of cell medicines, many companies are struggling to build amanufacturing process capable of providing a stable supply. Kidswell Bio, however,has already overcome this first hurdle by establishing, in August 2022, a master cellbank of GMP standards. It has also built the world’s first system called S-Quatre®
to link up partners who develop the pharmaceuticals using the master cell bank byteaming up with an organization (ChiVo Net) to obtain deciduous teeth donors,
Tokyo University Hospital and Showa University Dental Hospital to extract teeth,and Nikon Cell Innovation Co., Ltd. to manufacture the SHED master cell bank.

4 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)
The system is now in place– from engaging donors to
manufacture and supply

Issued: Jan. 18, 2023
S-Quatre®（SHED Source Supply Service）(Source: Kidswell Bio company briefing)

MSCs release various
cytokines to promote tissue
regeneration(2) Tissue repair function
Mesenchymal stem cells (MSCs) have the ability to differentiate into not only
mesodermal cells such as osteoblasts/bone cells, cardiomyocytes, chondrocytes, andadipocytes, but also different germ layer cells such as glial cells and hepatocytes.
The mechanism involved does not differentiate MSCs into various cells in the bodyto replace damaged cells. Instead, it is thought that various cytokines secreted by
MSCs act on the cells of the patient to promote tissue regeneration.
As shown in the table below, the various cytokines secreted by the MSCs exhibit
various therapeutic effects, including the promotion of tissue repair and theregulation of inflammation and immunity
Effects of cytokines secreted by MSCs
Anticipated effectTissue repair

Effective factors secreted

Angiogenesis

VEGF, FGF2 ,ANG-1, MCP-1, EPO, HGF

Cell proliferation

SCF, LIF, M-SCF, SDF-1, FGF2, VEGF, IGF, PDGF, HGF

Anti-apoptosis of weak cells

FGF2, IGF, ANG-1, IL-6, VEGF, MCP-1, G/M-CSF, STC-1 ,EPO, TGF-β, HGF

Nerve cell protection

BDNF, NGF, GDNF

Suppression of liver fibrosis

IL-10, TNF-α, HGF,MMP-9

Suppression of scarring

HGF,FGF2, ANG-1

Stem cell support

TPO, SCF, TGF-β

Accumulation at target site

SDF-1, HGF, LIF IGF, G/M-CSF, VEGF

Immunoregulation Immune cell suppression

TGF-β, PGE-2, HGF, IDO etc.

Suppression of inflamatory factors
MCP-1etc.

(Source: Compiled by Fair Research Inc. using Atsushi Yokoyama, J-Vet 2013)

Compared to other MSCs, SHED have a greater ability to secrete neurotrophic
factors (BDNF and NGF) and also have a higher expression of neurogenesis-related
genes. It is expected therefore they will offer treatment for neurological conditions
SHED are believed to be(spinal cord injury, cerebral infarction, cerebral palsy). In addition, SHED are
better than other MSCs fortreating nerve disorders, and reported to have a greater bone regeneration ability than other MSCs and can be
expected to play a role where such regeneration is called for (intractable bone
have a greater ability to
fractures, femoral head necrosis).
rebuild bone

5 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

(Source: Kidswell Bio company briefing)
References⚫ On the comparison of nervous system gene expression levels:
Terunuma et al., Journal of Stem Cells and Regenerative Medicine May 2019, P10, Figure 2「Comparative transcriptomic analysis of human mesenchymal stem cells derived from dental
pulp and adipose tissues」⚫ On the comparison of nervous system growth factors:
Mead et al. PLOS ONE, October 2014, P7 Table 2「Paracrine-Mediated Neuroprotection and Neuritogenesis of Axotomised Retinal Ganglion
Cells by Human Dental Pulp Stem Cells: Comparison with Human Bone Marrow and AdiposeDerived Mesenchymal Stem Cells」

In addition, in the same way as with other MSCs, immunoregulatory and antiinflammatory effects can also be expected. These are extremely important in thecontext of spinal cord injury and cerebral infarction.
Immunoregulatory function
and anti-inflammatory
effect are also important
In the acute phase of brain
injury, macrophage type 1(M1) releases inflammatory
cytokines

In the acute phase of spinal cord injury or cerebral infarction, an injury or
inflammation can cause a number of events around the area of the injury. This causesa sharp halt to the repair of the damaged neural circuits. For example, inflammatory
cells such as macrophage type I (M1) and neutrophils infiltrate the brain 1 to 3 days
after brain tissue necrosis. M1 stimulates inflammation by producing inflammatory
cytokines such as IL-1β, IL-23 and TNF-α. From day 3 onwards, IL-1β and IL-23
stimulate γδT cells to produce IL-17 (which activates neutrophils and promotes
inflammation).
Image of infiltration of cells in the inflammatory process after cerebral infarction
M1 macrophage
Regulatory T cells (Tregs)
M2 macrophageγδT cells

Recovery of neurological symptoms
Acute phase
Day0

Day3

Chronic phase
Day7

Day14

Day30

(Source: Compiled by Fair Research Inc. from Experimental Medicine, August 2019:“Innate and Acquired Immunity in Repairing Brain Injury”, etc.)

SHED secretes MCP-1 (monocyte chemoattractant protein-1) and sSiglec-9(secreted ectodomain of sialic acid-binding Ig-like lectin-9), which have an antiinflammatory effect, and convert pro-inflammatory M1 into macrophage type II(M2). M2 has been shown to act in inflammatory resolution and neuronal repair. It
6 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

In SHED, M1 converts tois expected to be effective in the subacute stage when M1 infiltration peaks. (FromM2, which acts inFumiya Kano et al. Stem Cells 2017;35).
inflammatory resolution andneural repair
Of course, in SHED, as in other MSCs, cytokines such as TGF-β and PGE2 cansuppress the proliferation of T cells and NK cells, and the operation of
immunoregulatory functions can be expected through the induction of Tregs(regulatory T cells). The accumulation of Tregs in the brain in the chronic stage after
In addition, it accumulates
inflammation subsides controls excessive activation of astrocytes, and is expected
regulatory T cells (Treg) in to control the deterioration of nerve functions and regenerative disorders due to thethe chronic stage after
formation of glial scars, as well as supporting an improvement of neurologicalinflammation subsides andsymptoms.
supports improvement ofneurological symptoms(3) Intercellular communication
Tunneling nanotubes is one method of direct communication between adjacent cells.
These are thin tubules that connect cells to each other and are made up of actin.
Numerous studies have shown that these tunneling nanotubes transport various
substances from one cell to another.
Mesenchymal stem cells

Various substances aretransferred from MSCs toinjured cells through thintubules that directly connect
cells.

Damaged stem cells
Mitochondria

nucleus
Ca2＋、Mg2＋
Proteins

nucleus

PeptidesRNA

Generally, not only SHED but also BMMSC-derived cell drugs developed by othercompanies are administered intravenously (not locally). These MSCs migrate closer
to damaged cells (homing effect) and supply mitochondria from MSCs to damaged
cells via tunneling nanotubes, and transport intercellular signals such as calcium
signals and intracellular proteins. The transduction of information is thus achieved
and tissue repair promoted.

Transmission of
information between widely
separate cells through therelease of exosomes
Development of exosome
drugs is also a promisingpossibility(4) Exosomes secreted from MSCs
Exosomes are a type of extracellular endoplasmic reticulum with a lipid bilayer
membrane structure of about 30-100nm secreted from cells and containing
numerous proteins and micro-RNAs. It is now thought that they may contribute totransmitting information between widely separate cells, and there is a recent viewthat MSC-derived exosomes have a therapeutic effect on various diseases. Kidswell
Bio is now considering providing SHED to a partner for the purpose of developing
an exosome drug derived from SHED.
Mesenchymal stem cells

Damaged cells

nucleus
Exosomes

nucleus7 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

＜First generation SHED＞
Developing SHED itself asa cell therapy for paediatricand rare diseases with highunmet medical needPhysician-led clinicalresearch to start within ayear, followed by companysponsored trials of POCqualified product candidates
To avoid the “Galapagos
effect” developers haveeyed international
development from the start
The company is at the sametime progressing an
upgrade to manufacturing
processes

Kidswell Bio is now carrying out a number of trials using the peculiar features of
SHED to develop cell therapy drugs, dubbed “first generation SHED”. The diseases
being targeted, shown in the chart below, are in areas where SHED’s attributes aremost effective, such as neurology and bone repair. Many are classified as paediatricor rarely occurring and for which no effective treatment exists, constituting areas ofhigh unmet medical need.
As of December 2022, many product pipelines are being developed in collaboration
with physicians under tie-ups with academia. Within the next year, physician-led
trials will start and from the second half of FY2024 the plan is to progress withcompany-sponsored trials on some diseases for which POC has been confirmed.
Kidswell Bio is positing FY2030 as the target date for a final commercial product.
Preparations are being made to undertake SHED research and development beyond
Japan. Development in Japan has some systemic advantages, such as the existenceof an expedited approval system to support the development of regenerative
medicine. But this also limits the market to Japan and, to avoid this, overseas
development is also being eyed.
Therefore, in the next two to three years, in line with overseas expansion and thestart of company-sponsored clinical trials, it will be necessary to develop the
manufacturing process for a scale up of GMP manufacturing of SHED
investigational drugs as well as additional manufacturing of master cell banks. At
the present time, the company is scheduling the process development of GMP
products with several companies, including Minaris Regenerative Medicine, asubsidiary of Showa Denko Materials.

Note*1 Not disclosed *2 Kidswell Bio’s estimation using publically available information(Source: Kidswell Bio company briefing)

On December 7, 2022, Kidswell Bio published a research paper jointly with Nagoya
University Hospital demonstrating that SHED improve neurological symptoms inan animal model of chronic cerebral palsy. Kidswell Bio is thus actively promoting
the acquisition of intellectual property related to SHED. Below is an except fromthat paper.
Reference: Outline of results from research collaboration with Nagoya University
Cerebral palsy is a disease in which neurological symptoms, such as mobility
problems, manifest themselves as a result of oxygen deficiency or contraction of an
infectious disease during the perinatal period before and after birth. The symptoms
are often not clearly apparent in the acute phase immediately after birth. What isneeded is a new method of treatment that is effective even if initiated in the chronic

8 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

phase, after the acute phase has passed and the disease has taken hold. Research onstem cell treatments for perinatal brain injury has so far been mainly directed at theacute phase, and there have been no reports of animal experiments demonstrating theefficacy of later interventions. In the research under consideration here, when SHED
was administered at a later phase to perinatal encephalopathy model animals which
had developed neurological symptoms, brain weight was restored, and motor deficit
and learning/memory were improved.

＜Second generation SHED＞
Anti-cancer drug using
SHED as a DDS also underdevelopment

In November 2022 Kidswell Bio revealed the details of a second-generation SHED
being developed. According to this, the second-generation SHED focuses on
SHED’s attractiveness to cytokines secreted by tumour cells, thus acting as a DDS(drug delivery system).

Suicide gene therapy using
HSVtk and GCV also acts
on healthy cells

Originally, suicide gene therapy using herpes virus-derived thymidine kinase(HSVtk) and ganciclovir (Gancicolovir, GCV) was noted for its “bystander effect”
in that it could treat many cancer cells rather than only some. It utilizes the fact that
ganciclovir is converted by thymidine kinase into a highly toxic substance called 3phosphorylated ganciclovir. A “bystander effect” is produced by transferring thetoxic substance from cell to cell without flowing out of the cells. However, theproblem is that HSVtk expression is also induced in healthy cells and 3phosphorylated GVC causes various forms of cytotoxicity.

Uses the fact that SHED are
attracted to cytokines
secreted by tumour cells

Kidswell Bio and Hamamatsu University School of Medicine then jointly conducted
research focusing on the properties of SHED being induced by four growth factors(SCF, PDGF-BB, CXCL12, VEGF) and attracted to tumor cells. Specifically, SHED
(SHED-TK), genetically modified to express thymidine kinase, was administeredlocally to mice with brain tumours, and GCV was then intravenously administered.
As a result, a remarkable reduction in tumour size was observed and tumour cells
were killed successively by bystander effects (note: SHED was administered locallybecause it cannot penetrate the blood-brain barrier).

Tumour shrinkage by
SHED-TK also
confirmation of bystander
effectTumours eradicated with SHED+TK+GCV (images framed in green)

9 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023
Effect also confirmed for lung cancer brain metastases(Source: Both from Kidswell Bio R&D briefing materials)

Secondary effect of nerve
regeneration by SHED is
also expected
In addition to SHED-TK,
the company is also looking
at the development of“designer cells”
incorporating various
genetic modifications andexosome drugs derived
from SHEDIn addition, a secondary effect is expected by which the nerve regeneration actionof SHED leads to the regeneration of nerves destroyed by brain tumours.
As part of second generation SHED, Kidswell Bio is also planning to develop“designer cells” incorporating a variety of genetic modifications, and will
aggressively pursue tie-ups with other companies, thereby maximising the value of
SHED. Targeted diseases include not only cancer, but could also include genetic
diseases and neurodegenerative diseases. In addition, the emergence of therapies
using SHED-derived exosomes and other SHED applications could generate new
business opportunities.

(Source: Kidswell Bio company briefing)

Kidswell Bio estimates that first generation SHED has a market potential of JPY
700-800 billion, and for second generation SHED a market potential in excess of
JPY1 trillion. In addition, other SHED businesses are thought to have potential in
the region of several hundred billion yen.
10 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

＜Concluding Remarks＞
Kidswell Bio is accelerating the development of SHED, a regenerative medical
product, using revenues from its biosimilars business.
SHED could prove to be amajor force in regenerative
medicine

In the field of regenerative medicine, attention is being paid to the development ofbone marrow-derived mesenchymal stem cells (BMMSC) for the regeneration of
nerves, said to be the most difficult to regenerate (for cerebral infarction and spinal
cord injury). This development has, so far, not received complete regulatory
approval. To receive such approval in cell medicine a manufacturing process capableof commercial production is essential, but the stem cells are difficult to obtain, have
limited proliferative capacity, and are prone to senescence, thus posing high hurdles
to establishing commercial production. SHED is expected to overcome this hurdle
relatively easily because it has a higher proliferative capacity and is relatively easier
to obtain than other mesenchymal stem cells (MSCs). In addition, SHED is moresuitable for nerve regeneration than other mesenchymal stem cells because of its
superior ability to secrete neuroprotective factors (e.g., BDNF and NGF).
Furthermore, SHED has been shown to be effective in the early acute phase of
disease onset, inflammatory convergence, and nerve repair. Hence, its reputation asa major force in regenerative medicine.

Avoiding the “Galapagos
effect” restricting use to
Japan only

In addition, in order to avoid the “Galapagos effect” which restricts application to
Japan alone, Kidswell Bio has, from the beginning, been focusing on building
human resources and platforms with a view to overseas development and expansion.

Establish POC in 2 years
and move on to corporate
clinical trials

In the summer of 2022, Kidswell Bio was the first in the world to establish a SHED
master cell bank (MCB), overcoming a major hurdle. The company plans toestablish proof of concept (POC) and move ahead with corporate clinical trials in
the next two years, and hopes to achieve the world's first launch of a regenerative
medicine product utilizing SHED by FY2030.
Medium term management plan

(Source: Kidswell Bio company briefing materials)

11 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
whatsoever for any results including direct or indirect damage arising from the use of, or reliance to, this report. Investors should take their own responsibility for securities and other transactions. The
intellectual property right of this report belongs to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited.

Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

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12 / 13This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is basedon the information and materials that Fair Research judged reliable, there is no guarantee of accuracy, credibility, completeness, suitability and timeliness. Fair Research shall not take any responsibility
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Kidswell Bio Co. Ltd. (4584, Growth)

Issued: Jan. 18, 2023

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