NON-CONFIDENTIAL

FY2019 Financial Results
12-month period ended December 31, 201917 February 2020 | Sosei Group Corporation (TSE:4565)

Disclaimer
The material that follows is a presentation of general background information about Sosei Group Corporation and its subsidiaries (collectively, the “Company”) as of the date of this presentation. This material has been
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unforeseen safety issues resulting from the administration of our products in patients, uncertainties related to product manufacturing, the lack of market acceptance of our products, our inability to manage growth, thecompetitive environment in relation to our business area and markets, our inability to attract and retain suitably qualified personnel, the unenforceability or lack of protection of our patents and proprietary rights, ourrelationships with affiliated entities, changes and developments in technology which may render our products obsolete, and other factors. These factors include, without limitation, those discussed in our public reports filedwith the Tokyo Stock Exchange and the Financial Services Agency of Japan. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonably based on
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considered as replacements or alternatives profit, or operating profit, as an indicator of operating performance or as replacements or alternatives to cash flow provided by operating activities or as a measure of liquidity (ineach case, as determined in accordance with IFRS). Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, analysis of the Company's results reported in accordance with IFRS.
References to "FY" in this presentation for periods prior to 1 January 2018 are to the 12-month periods commencing in each case on April 1 of the year indicated and ending on March 31 of the following year, and the 9 month
period from April 1 2017 to December 31 2017. From January 1 2018 the Company changed its fiscal year to the 12-month period commencing in each case on January 1. References to "FY" in this presentation should beconstrued accordingly.
© Sosei Group Corporation. Sosei Heptares is the corporate brand of Sosei Group Corporation. Sosei, Heptares, the logo and StaR® are Trade Marks of Sosei Group companies.

2

Agenda1

Overview of Financial Results

2

Operational Highlights and Strategic Outlook

3

Q&A

4

Appendix

Note: This material was created to explain the details of our company and is not intended to be used for investment decisions. In addition, the contents reflect the views of our company at the time of the creation of the material, and the accuracy of
the information is not guaranteed. Investments should be made based on the independent views of investors3

1
Overview of Financial Results
Chris Cargill, CFO

4

Summary Financial Highlights
12 months ended 31 December 2019

1

Significantly improved financials in FY2019 – successful execution of corporate strategy

2

Cash Profit of ¥2,802m ($25.7m) vs. loss of ¥5,704m ($51.7m) in prior corresponding period1, due tostrong revenue growth and rigorous focus on costs

3

Net Profit of ¥1,432m ($13.1m), successfully achieved our corporate goal of profitability in the Full Year

4

Term loan facilities fully repaid. New ¥5bn ($45m) commitment line (undrawn) established with
Mizuho Bank provides financial flexibility for the future

5Group will continue to pursue profitability in 2020

Strategic focus on our core competencies in drug discovery and early-stage development
drove significant turnaround in financial performance
Note: 1 Proforma comparative period represents the 12 month period ended 31 December 2018 to aid comparability of the same corresponding 12 month period. The statutory comparative
period (9 month period ended 31 Dec 2018) is provided in the Appendix. USD:JPY FX rates used – 109.035 (FY2019) and 110.291 (FY2018)5

Significant improvement in FY2019

Our strategy is driving more sustainable financial metrics
Revenue (JPY million)

Cash Profit1 (JPY million)

2,802

9,726
3,550

12m to 31-Dec-18

12m to 31-Dec-19

Cash Operating Expenses1,2 (JPY million)

8,966(5,704)12m to 31-Dec-18

12m to 31-Dec-19

Net Profit (JPY million)

1,432

-13%

6,101

(6,919)12m to 31-Dec-18
Note: USD:JPY FX rates used – 109.035 (FY2019) and 110.291 (FY2018)
1 Non-IFRS measure
2 Cash Operating Expenses = Cash R&D + Cash G&A

612m to 31-Dec-19

12m to 31-Dec-18

12m to 31-Dec-19

Consolidated Income Statement

Significant upfront/milestone payments and prudent cost management delivers profitability
JPY million

USD million

Revenue by Type12m ended
12m ended1
31 Dec 2019 31 Dec 2018

12m ended
12m ended1
31 Dec 2019 31 Dec 2018

Revenue

9,726

3,550

89.2

32.2

Cash Cost of Sales

(851)

(492)

(7.8)

(4.5)

Cash R&D(3,937)(6,487)(36.1)(58.8)Cash G&A(2,164)(2,479)(19.8)(22.5)

28

204

0.2

1.9

Cash Profit

2,802(5,704)25.7(51.7)

Non-Cash Costs(2,418)(2,228)(22.2)(20.2)

Financing Costs

331

(480)

3.0

(4.4)

Equity Accounted
Investments

(181)

(635)

(1.7)

Tax Expense

898

2,128

Net Profit

1,432(6,919)Other Cash Income

3%

25%

10%

15%

12m ended
31 Dec 2019

12m ended
31 Dec 20181

62%

74%
12m ended 31 Dec 19

12m ended 31 Dec 18

Milestone¥6,013m$55.1m

¥397m

$3.6m

(5.8)

Royalty¥2,406m$22.1m¥2,612m$23.7m8.3

19.4

Product Sales

¥276m

$2.5m

–

–

13.1

(62.7)

Other¥1,032m

$9.5m

¥541m

$4.9m

Note: 1 Proforma comparative period represents the 12 month period ended 31 December 2018 to aid comparability of the same corresponding 12 month period. The statutorycomparative period (9 month period ended 31 Dec 2018) is provided in the Appendix. USD:JPY FX rates used – 109.035 (FY2019) and 110.291 (FY2018)7

11%

Consolidated Balance Sheet

Cash liquidity and operational flexibility greatly improved due to debt refinancing
JPY million

Cash Flow Bridge (12m ended 31 Dec 2019)As of
31 Dec2019

As of
31 Dec2018

As of
31 Dec2019

As of
31 Dec2018

Goodwill & intangibles

27,36428,544

249.8

257.4

Property, plant & equip.

4,120

2,715

37.6

24.5

Cash at hand

15,37518,760

140.3

169.1

Equity Acc. investments

3,539

3,644

32.3

32.9

Other financial assets

2,053

1,515

18.7

13.7

Other assets

4,229

3,809

38.6

34.2

Total Assets

56,68058,987

517.3

531.8

Bank loans

–

6,927

–

62.5

Other liabilities

11,602

10,480

105.8

94.4

Total Liabilities

11,602

17,407

105.8

156.9

Net Assets

45,07841,580

411.5

374.9

Note: USD:JPY FX rates used – 109.55 (FY2019) and 110.91 (FY2018)

8

USD million

USD Millions

Cash balance
31 Dec 2018

Operatingcash flow

Debt
servicing

Othercash flows

Cash balance
31 Dec 2019

FY2019 Results – Top-end guidance met for key costs

Reaching profitability by achieving a sustainable balance of resources and capital

Q3 2019
Guidance

Actualresults(Dec-19)

Total R&D expenses1

Cash G&A expenses¥4,320 to 4,860m¥1,620 to 2,160m¥4,786m¥2,164m

 Rigorous focus on costs
 Stricter investment allocation andprioritization process acrossportfolio
 Closure of Zurich operations

 Overall costs declined (13)% yearon-year Unforeseen $3.5m increase in UK
National Insurance charges due to+172% share price increase

Note: 1 Includes (i) Cash R&D costs; (ii) Cost of Sales (reallocated from Cash R&D); (iii) R&D facility lease costs (reallocated to non-cash categories in accordance with IFRS 16)

9

FY2020 Financial Guidance (12m to 31-Dec-20)
Sustainable growth strategy to pursue profitability in 2020

Guidance(Dec-20)

Cash R&D expenses

Cash G&A expenses¥4,200 to 4,700m¥1,800 to 2,300m

 Increase number of programs fully
funded by partners
 Extract savings from enhanced
procurement practices
 Invest for growth while maintaining
rigorous cost control

 New ERP investment to drive
efficiencies Group-wide andeliminate control issues
 Replace legacy IT systems
 Hire to strengthen capabilities incompliance and support functions

Investing for the future whilst maintaining a focus on costs and extracting efficiencies

10

2
FY2019 Operational Highlights and
FY2020 Strategic Outlook
Shinichi Tamura, Chairman and CEO

11

We achieved a lot in FY2019$15m milestone
Initiation of Phase 2
trials of I/O program
in solid tumors€40m collaboration
Creation of two assetcentric companies with
Medicxi

SSTR5 agonist
First subject dosed inPhase 1 study of
HTL0030310$2.5m milestone
Submission of QVM149
MAA to the European
Medicines Agency$6m milestones (total)
Nomination of first twocandidates for clinicaladvancement

January 2019

February 2019

February 2019

May 2019

May / June 2019$26m UF/Near term
Multi-target researchand license agreement,
worth potential $1bn+$26m UF/Near term
Multi-target researchand dev. partnership,
worthpotential$1.2bn+$3m milestone
Nomination of new
GPCR disease target$5m milestone
Initiation of Phase 1
trails for first
nominated candidate$3m milestone
Nomination of third
candidate for clinicaladvancement

July 2019

August 2019

October 2019

December 2019

December 2019

Existing Partnership

In-house Program (to be partnered)

New Partnership12Highly productive drug discovery engine generating next wave ofhigh-value, novel candidates to fuel partnering activity
Pre-Discovery /Discovery
Multi-target
Collaborations

Preclinicaldevelopment

Asset-centricCompanies

Immunology
GI / Inflammation
Neurology

13

Phase 3A2a ant. combo(s)Single target

M1 ag.

M1 ag1

Single target

M4 ag.

Oravi®

CXCR4 mAb

Single target

NorLevo®

CGRP ant.

mGlu5 NAM

GLP-1 ant.

SSTR5 ag.

Undisclosed

Immuno-oncology

Metabolic diseases

Solid tumors

Alzheimer’s

mCRPC

QVM149Marketed

A2a ant.

Alzheimer’s

Migraine

15+ programs ongoing

Phase 2

M1M4 dual ag.

Metabolic

Single-target
Collaborations

Phase 1

AsthmaDLB

Alzheimer’s

Undisclosed

Neurology

Endocrine

GLP-2 ag.

Intestinal failure

1 Phase 2 trial of HTL0018318 for DLB in Japan has been withdrawn. The Group plans to resubmit a new clinical trial notification for HTL0018318 (or another novel M agonist) to the1
Japanese Pharmaceuticals and Medical Devices Agency (PMDA) in the future

Ultibro®
COPD

Seebri®
COPD

Mouth candidiasis

Emergency contraception

Quality, not just speed, is what provides an edge in drug discovery
Successful drug discovery is best measured by the number of drug candidates delivered
Path to Preclinical Candidate– Pharma Industry Standard
Drug Discovery

Path to Preclinical Candidate – Sosei Heptares

Preclinical

Drug Discovery

Pre-clinical

25

<500
Compounds

IND

Preclinical
Candidate

LAST 10 YEARSPre-Discovery>1,000Compounds

IND

Pre-Discovery

PCCs1

Preclinical
Candidate

7

INDs

0

1

2
~4 YEARS34

5~2 YEARS

60

1
2–3 YEARS

23

4~2 YEARS

One of the most productive drug discoverers in the world for our size.
Implementing new tools in 2020 and beyond the further enhance our productivity
Source: Management estimates
Note: PCC is short-hand for Preclinical Candidate

14

CLINICALCANDIDATESIN THE LAST 7 YEARSStrategy leverages proprietary technology and core competencies
Extend technology/platform leadership
EXECUTE NEW
PARTNERSHIPS AND
PROGRESS EXISTINGPARTNERSHIPS

Generate high quality novel candidates
that are attractive partnering opportunities
Enhance focus on high value
collaboration or long term ventures

Executing new partnered programs and progressing existing programs is at the heart of what we do15Extend technology/platform leadershipTechnology-led discovery engine has revolutionized GPCR-targeted discovery
NEW TECHNIQUE TO
IMAGE BIOMOLECULESEXPANDSCAPACITY TO
EXPLORE MORE
GPCRs

CHESS

?

CryoEMSTAR®
GPCRTECHNOLOGY

SaBRESMARTER DRUG DESIGN16ADDING NEWTECHNOLOGIES, TOOLSAND CAPABILITIES IN 2020

AI

DNA
EncodedLibraries

ACCELERATES AND
IMPROVESDRUGDISCOVERYACCELERATEDCOMPOUND SCREENING

Concentrating our efforts in small molecule discovery
Small molecules remain of great significance for the industry – and patients
Global Pharmaceutical Market Sales (2019)1,2

Small molecules1
Other modalities

Small molecules
Other modalities# FDA Novel Drug Approvals

59
48

46

63%

63%
2017

63% of global pharmaceutical sales2 are
generated from small molecules…
Source: EvaluatePharma; US Food and Drug Administration
Note: 1 Represents total conventional sales. 2 Excludes sales not classified by EvaluatePharma

17

64%

69%

2018

2019

… and continue to represent the majority of
new FDA drug approvals every year

Narrowing focus going forward on novel targets acrossimmunology and inflammation
GPCR
Targets

25%

FUTURE

20%
50%

Therapeutic
Areas

30%

FUTURE
9%37%75%

Neurology
Immunology / Inflammation

54%

Other

Significant untapped target opportunity.
Confidently going after “high hanging fruit”
Source: Management estimates

18

Rich source of exciting targets inimmunology and inflammation particularly

Generate high quality novel candidates attractive to partners
Our core competencies are drug discovery and early development
DRUG DISCOVERYEARLY DEVELOPMENTTECHNOLOGYDISCOVERYPRECLINICALHEALTHY
VOLUNTEERS

PATIENTS











LATE STAGE DEVELOPMENT
PH 2

PH 3

APPROVALBIG BIOTECH / PHARMA PARTNER

2 – 3 YEARS

1 –2 YEARS

2 YEARS

Lower costs, lower risks, faster progression, favorable
growth trends, increasingly funded by partners

19

5+ YEARS

MARKET

Targeting high value collaborations & long term ventures
Unique focus on lower cost, high value add programs

Approaches to drug discovery and development

Strategic focus on executing new
programs to be funded by partners

COST
Wholly-ownedPrimary goal is $500m+ deals withworld-leading pharma and biotech
Alternatively, seed novel candidates
into long term ventures with upside

Aiming to execute 2 to 3 new high value
partnerships and/or ventures with upside in 2020

20

High cost /High valueFee-for-service

Partnered/ co-owned

Low cost /Low value

Low cost /high value

OUR
UNIQUE
FOCUS

VALUE

Steady state business model generating multiple value inflection points
4
Programs
Programs

New programs every 2 years(to Lead Optimization stage)
$

$

$

$

$

$

$

$

PARTNERPARTNERPARTNERPARTNERPROGRESSFURTHER

2x
PCC1
p.a.

Programs$

Programs

Pool of programs
that can bepartnered
immediately
PCC = Preclinical Drug Candidate ready for testing per year

21

15+
TODAY

$

2 YEARS

Healthy
Volunteers
2 YEARS

Patient
StudiesPerfectly positioned to be an innovation partner of choice
Big pharma are exiting UK/EU research… to close UK
research site

… to close UK
R&D site… to close UK
R&D facility… to shut UK
neuroscience
research center… to cut vaccine
division in
Belgium• R&D facility in Kent

• R&D facility in Horsham• R&D facility in Cambridge• R&D facility in Surrey• R&D facility in Belgium• Employs 2,400 people• Employs 370 people• Employs 270 people• Employs 720 people• Announced February
2011• Announced February
2014• Focus R&D operationsin Japan and U.S.

• Announced October
2019• Announced February
2020• Announced July 2016

Shrinking UK/EU research capabilities creates a huge opportunity for Sosei Heptares to growSource: Company news; Press articles

22

Continuing this year’s strong momentum into FY2020

23

1

2

3

4

5

6

Maintaintechnology
and platform
leadership in
our chosen
fieldEnter new highvalue drug
discovery anddevelopment
partnerships
with pharma/biotechAchieve
importantmilestones on
existing
partneredprograms

Seed multiple
new in-housediscovery
candidates instrategic areas
for futurehigh value
partnering

Advanceselected inhouseprograms inearly-stage
clinical studies
for higher value
partnering

Create newlong-term
asset-centriccompanies
backed byventure capital

3
Q&A

24

4
Appendix25

Statutory disclosure of financials

12 months ended 31 Dec 2019 vs 9 months ended 31 Dec 2018
JPY million
12m ended 31 Dec 2019

9m ended 31 Dec 2018

12m ended 31 Dec 2019

9m ended 31 Dec 2018

Revenue

9,726

2,872

89.2

25.9

Cash Cost of Sales

(851)

(335)

(7.8)

(3.0)

Cash R&D(3,937)(5,187)(36.1)(46.7)Cash G&A(2,164)(1,611)(19.8)(14.5)

28

136

0.2

1.2

Cash Profit

2,802(4,125)25.7(37.1)

Non-Cash Costs(2,418)(1,610)(22.2)(14.5)

Financing Costs

331

(955)

3.0

(8.6)

Equity Accounted Investments

(181)

(553)

(1.7)

(5.0)

Tax Expense

898

1,265

8.3

11.4

Net Profit

1,432(5,978)13.1(53.8)

Other Cash Income

Note: USD:JPY FX rates used – 109.035 (2019) and 111.122 (2018)26

USD million

Developing new therapies for areas of high unmet medical need

~42M
affected
globally~3.1M
affected
globally~1.6M
affected in
US (mod-sev~1.1B
affected
globally~50M
affected
globally~450K
affected
globally~300K
affected
globally~50K
affected
globally

CancerIBD

AtopicDermatitis

Migraine

Dementia

ALS

Cushing’s

PAH• A2a antagonist• CXCR4 mAb• GPR35 agonist• H4 antagonist• PAR2 mAb• CGRP antagonist• M1 agonist• M4 agonist• M1/M4 agonist

uncontrolled)• mGlu5 NAM• SSTR agonist

Our mission is to make a significant contribution to improving the quality of lifeand health of people around the world
Sources: World Health Organization, EvaluatePharma, Management Estimates. Notes: Sosei Heptares may choose to only target a segment of the specific market.

27• Apelin agonist

Successful drug discovery is measured by the number of drugcandidates delivered
Number of programs in Sosei Heptares pipeline

28

PRECLINICAL

PHASE 1PHASE 2

PHASE 3

7

6

2

1

Locations
SOSEI HEPTARESPMO Hanzomon 11F

Steinmetz Building

North West House

2-1 Kojimachi, Chiyoda-ku

Granta Park, Cambridge

119 Marylebone RoadTokyo 102-0083

CB21 6DG

London NW1 5PU

Japan

United Kingdom

United Kingdom