Non-Consolidated Financial Results (Japanese GAAP)

for the Six Months Ended June 30, 2020

August 11, 2020

Company Name:

Chiome Bioscience Inc.

Tokyo Stock Exchange

Stock Code:

4583

URL http://www.chiome.co.jp/english/

Representative:

Shigeru Kobayashi, President & CEO

Inquiries:

Arihiko Bijohira, Executive Director & CFO

TEL: +81-3-6383-3746

Scheduled filing date of quarterly financial results: August 11, 2020

Scheduled dividend payment commencement date: －

Supplementary materials prepared for the quarterly financial results: Yes

Holding of the quarterly financial results explanatory meeting:

Yes (For institutional investors and securities analysts)

(Amounts of less than one million yen are rounded down)

1. Financial Results for the Six Months Ended June 30, 2020 (January 1, 2020 to June 30, 2020)

(1) Operating Results (Cumulative)

(% figures are the increase / (decrease) compared with the corresponding period of the previous fiscal year)

Net Sales

Operating Income

Ordinary Income

Net Income

Million yen

%

Million yen

%

Million yen

%

Million yen

%

Six months ended

173

23.1

(735)

－

(735)

－

(736)

－

Jun. 30, 2020

Six months ended

140

51.8

(749)

－

(758)

－

(757)

－

Jun. 30, 2019

Net Income per Share

Diluted Net Income

per Share

Yen

Yen

Six months ended

(22.01)

－

Jun. 30, 2020

Six months ended

(25.49)

－

Jun. 30, 2019

Notes: Despite the existence of shares with a dilutive effect, "Diluted Net Income per Share" is not stated because Chiome incurred a loss for each respective period.

(2) Financial Position

Total Assets

Net Assets

Equity Ratio

Million yen

Million yen

%

As of Jun. 30, 2020

3,054

2,585

83.6

As of Dec. 31, 2019

2,808

2,621

92.6

(Reference) Equity As of Jun. 30, 2020: 2,555 million yen As of Dec. 31, 2019: 2,599 million yen

2. Dividends

Annual Dividends

1Q-End

2Q-End

3Q-End

FY-End

Total

Yen

Yen

Yen

Yen

Yen

Fiscal Year Ending

－

0.00

－

0.00

0.00

Dec. 31, 2019

Fiscal Year Ending

－

0.00

Dec. 31, 2020

Fiscal Year Ending

－

0.00

0.00

Dec. 31, 2020 (Forecast)

Note: Revision to the most

recently announced

dividend forecast:

No

3. Forecasts of Financial Results for the Fiscal Year Ending December 31, 2020 (January 1, 2020 to December 31, 2020)

As it is difficult to provide reasonable estimates for Drug Discovery and Development Business at present, Chiome discloses only business forecasts for Drug Discovery Support Business; net sales ¥480 million. There is no revision to the most recently announced forecasts of financial results.

[Notes]

  1. Application of Special Accounting Practices in the Preparation of Quarterly Financial Statements: No
  2. Changes in Accounting Policies, Changes in Accounting Estimates, and Retrospective Restatements
  1. Changes in accounting policies in line with revisions to accounting and other standards: No

2)

Changes in accounting policies other than 1) above:

No

3)

Changes in accounting estimates:

No

4)

Retrospective restatements:

No

(3) Number of Shares Issued (Common Stock)

1)

Number of shares issued as of the end

As of

35,281,800

As of

33,283,500

of the period (including treasury stock)

Jun. 30, 2020

shares

Dec. 31, 2019

shares

2)

Number of treasury stock as of the end

As of

146

As of

146

of the period

Jun. 30, 2020

shares

Dec. 31, 2019

shares

3)

Average number of shares for the period

Six months ended

33,436,774

Six months ended

29,699,358

(cumulative total for the period)

Jun. 30, 2020

shares

Jun. 30, 2019

shares

*This summary report on Chiome's quarterly financial statements is not subject to quarterly review procedures.

* Explanation Concerning the Proper Use of Financial Results Forecasts and Other Relevant Specific Items

  1. Forward-lookingstatements including forecasts of financial results contained in this report are based on management's assumptions and beliefs that are determined to be reasonable in light of currently available information. Chiome cautions readers that due to a variety of factors actual results may differ materially from forecasts. For the assumptions that underpin financial results forecasts as well as other related items, please refer to the "1. Qualitative Information Regarding Quarterly Financial Results (4) Explanation of Forward- Looking Statements including Forecasts of Financial Results" on page 4 of this report.
  2. Chiome plans to hold a financial results explanatory meeting by online for institutional investors and securities analysts on August 12, 2020. Supplementary materials will be available on the Chiome's website after the meeting.

Contents

1. Qualitative Information Regarding Quarterly Financial Results

2

(1)

Explanation of Operating Results

2

(2)

Explanation of Financial Position

3

(3)

Explanation of Cash Flows

4

(4)

Explanation of Forward-Looking Statements including Forecasts of Financial Results

4

2. Quarterly Financial Statements

5

(1)

Quarterly Balance Sheets

5

(2)

Quarterly Statements of Income

7

(3)

Quarterly Statements of Cash Flows

8

(4)

Notes Concerning Quarterly Financial Statements

9

(Notes regarding going concern assumptions)

9

(Notes regarding substantial changes in shareholders' equity)

9

(Significant subsequent events)

9

1

1. Qualitative Information Regarding Quarterly Financial Results

(1) Explanation of Operating Results

During the six months ended June 30, 2020 (hereinafter, "the period under review"), the outlook for the global economic environment remains unclear due to the pandemic of the Coronavirus Disease 2019 (hereinafter, "COVID- 19"). Under the current business environment, sales in the drug discovery support business achieved Net sales of ¥173,278 thousand, an increase of ¥32,595 thousand year-on-year. Operating loss was ¥735,779 thousand (an operating loss of ¥749,708 thousand previously) mainly for GLP toxicology study and CMC development cost in CBA-1205 program towards initiation of clinical study. Ordinary loss was ¥735,874 thousand (an ordinary loss of ¥758,731 thousand previously), and net loss was ¥736,036 thousand (compared to a net loss of ¥757,110 thousand previously). Chiome's business activities during the period under review are as followings.

Our main focuses are;

  • Drug Discovery and Development in disease area where high unmet medical needs exist
  • Drug Discovery Support Business to support pharma companies by providing technical services relating to antibody drug development

In the Drug Discovery and Development, CBA-1205 project progressed on track. GLP toxicology study to support clinical trials has completed and IND was submitted on March 24, 2020. In July, Chiome and 2 sites of National Cancer Center Hospital (Center and East) have concluded a contract to conduct Phase I Study of CBA-1205. The first patient has already been dosed in early August.

CBA-1535, a multispecific antibody project is making progress in CMC development as planned. For discovery projects, Chiome is continuing research activities to obtain lead antibodies and to build a portfolio of intellectual property assets. Chiome continues making efforts to expand pipelines which address the unmet medical needs, and in R&D, collaboration with bio-ventures and academia aiming to start new projects for novel drug discovery.

  • Development pipeline

With regard to ADCT-701, an ADC format of LIV-1205 that was licensed out to Switzerland-based ADC Therapeutics SA in September 2017, it is under preparation work for the IND submission and clinical development plan.

In CBA-1205 development, as announced on August 3, 2020, patient enrollment for Phase I study has been initiated and the first patient was dosed. In the first part of the trial, safety and tolerability in patients with solid tumor will be evaluated. In the expansion part, safety and efficacy at the recommended dose in patients with advanced and/or recurrent hepatocellular carcinoma will be evaluated.

In relation to the development of CBA-1535, works on CMC development are progressing as well. Submission of Clinical Trial Application (CTA) is aimed for the second half of 2021.

With regard to LIV-2008, foreign pharmaceutical companies are evaluating and testing the antibody.

For the humanized anti-Semaphorin3A antibody, SemaThera Inc., a Canadian biotech company entered the 3rd year of evaluation under a Collaborative Development License and Exclusive Option Agreement concluded in March 2018. Chiome has recognized the option fee corresponding to the period under review as net sales

  • Discovery projects

In addition to the abovementioned programs, several drug discovery projects are being progressed. We are actively pursuing R&D for pipeline expansion. Chiome has completed filing a patent application on one of among projects in oncology area in the end of the 2019. The lead antibody is evaluated its potential as ADC in collaboration with pharmaceutical company.

2

As a result, net sales of the Drug Discovery and Development was ¥1,631 thousand, an increase of ¥350 thousand year on year; research and development expenses of ¥608,705 thousand (a decrease of ¥27,533 thousand year on year), and a segment loss of ¥607,377 thousand (a segment loss of ¥634,982 thousand previously) were recorded

Drug Discovery Support Business contributes to the company's stable earnings. Chiome offers technical support services to pharmaceutical companies and research institutions by leveraging know-hows in protein production and multiple antibody generation technologies including the ADLib® system, our proprietary antibody generation platform, and B cell cloning methods, etc.

In the second quarter of this fiscal year, although temporal slowdown in business activity at Chiome and clients following the Declaration of Emergency due to pandemic of COVID-19 was experienced, its impact to the results in this period was limited. In addition to the stable business with the existing customers, we recorded net sales by antibody generation using the ADLib® system. Also, Chiome is continually working on the antibody generation against COVID-19 for a customer, and we recorded the related sales in the second quarter of this fiscal year.

In this business segment, our service has been assessed favorable and well received, the demand for our service is expected to increase. We expanded working space and increasing equipment and instruments to respond to these needs. We will continue to aim to expand the scale of transactions.

The sales from the Drug Discovery Support Business has grown due to higher transactions with mainly Pharmaceutical companies. As a result, net sales in the period under review was ¥171,647 thousand, an increase of ¥32,244 thousand year on year. Segment profit was ¥64,922 thousand, down by ¥21,896 thousand year on year due to advance investment in abovementioned expansion of capacity in expectation of an increase of business. Segment profit margin was 37.8% (Targeting margin is 50% in FY2020)

  1. Explanation of Financial Position (Assets)
    As of June 30, 2020, assets stood at ¥3,054,227 thousand, up ¥246,137 thousand compared with the balance as of

December 31, 2019. The increase was mainly due to increase in cash on hand and in banks. (Liabilities)

As of June 30, 2020, liabilities stood at ¥468,765 thousand, up ¥282,184 thousand compared to the balance as of December 31, 2019. The increase was primarily due to increased short-term borrowings relating to investments in the Drug Discovery Support Business.

(Net assets)

As of June 30, 2020, net assets stood at ¥2,585,462 thousand, down ¥36,046 thousand compared to the balance of December 31, 2019. The decrease was attributed mainly to an increase in capital stock and capital reserve resulting from the exercise of subscription rights to shares, and a drop in retained earnings reflecting the net loss for the period.

3

(3) Explanation of Cash Flows

The balance of cash and cash equivalents as of the end of the second quarter (June 30, 2020) of the fiscal year under review stood at ¥2,472,406 thousand, up ¥366,430 thousand compared to the balance as of December 31, 2019. Details of cash flows of each activity, as well as major factors behind their movements, are outlined as follows.

(Cash flows from operating activities)

For the six-month period of the fiscal year under review, net cash used in operating activities were ¥528,265 thousand. The major movements were loss before income taxes.

(Cash flows from investing activities)

For the six-month period of the fiscal year under review, there is no increase or decrease in the cash by investing activities.

(Cash flows from financing activities)

For the six-month period of the fiscal year under review, net cash provided by financing activities totaled ¥894,696 thousand. This was primarily due to proceeds from issuance of shares resulting from exercise of subscription rights to shares.

(4) Explanation of Forward-Looking Statements including Forecasts of Financial Results

There are no changes to the financial results forecasts for the fiscal year ending December 31, 2020 announced on February 14, 2020.

4

2. Quarterly Financial Statements

(1) Quarterly Balance Sheets

Thousand yen

As of

As of

Dec. 31, 2019

Jun 30, 2020

Assets

Current assets

Cash on hand and in banks

2,105,976

2,472,406

Accounts receivable

95,138

22,035

Inventories

66,626

76,512

Advance payment-trade

217,658

142,464

Consumption taxes receivable

35,693

42,096

Other current assets

39,934

49,360

Total current assets

2,561,028

2,804,875

Non-current assets

Property and equipment

Machinery

316,629

293,771

Accumulated depreciation

(308,343)

(286,890)

Machinery, net

8,285

6,880

Tools and equipment

103,416

100,746

Accumulated depreciation

(100,595)

(98,633)

Tools and equipment, net

2,820

2,112

Total property and equipment

11,106

8,993

Investments and other assets

Investment Securities

150,000

150,000

Long-term prepaid expenses

12,048

16,451

Lease deposits and others

73,908

73,908

Total investments and other assets

235,956

240,359

Total non-current assets

247,062

249,352

Total assets

2,808,090

3,054,227

5

Thousand yen

As of

As of

Dec. 31, 2019

Jun. 30, 2020

Liabilities

Current liabilities

Accounts payable, trade

29,936

34,958

Short-term borrowings

－

199,000

Accounts payable, other

33,438

133,276

Accrued expenses

17,663

14,549

Income taxes payable

38,106

9,921

Advances received

15,956

26,312

Deposits received

5,239

4,735

Unearned revenue

554

－

Provision for bonuses

4,237

4,389

Total Current liabilities

145,133

427,141

Non-current liabilities

Asset retirement obligations

41,447

41,624

Total non-current liabilities

41,447

41,624

Total liabilities

186,581

468,765

Net assets

Shareholders' equity

Capital stock

6,132,216

846,189

Capital reserve

6,122,216

2,445,969

Retained earnings

(9,654,653)

(736,036)

Treasury stock

(292)

(292)

Total shareholders' equity

2,599,488

2,555,830

Subscription rights to shares

22,020

29,631

Total net assets

2,621,508

2,585,462

Total liabilities and net assets

2,808,090

3,054,227

6

(2) Quarterly Statement of Income

(Second Quarter Cumulative)

Thousand yen

Six Months

Six Months

Ended Jun. 30, 2019

Ended Jun. 30, 2020

(Jan.1, 2019

(Jan. 1, 2020

to Jun. 30, 2019)

to Jun. 30, 2020)

Net sales

140,683

173,278

Cost of sales

52,608

107,027

Gross profit

88,075

66,251

Selling, general and administrative expenses

Research and development expenses

636,238

608,705

Other, net

201,545

193,325

Total selling, general and administrative expenses

837,784

802,030

Operating loss

(749,708)

(735,779)

Non-operating income

Interest income

13

22

Foreign exchange gains

510

362

Subsidy income

－

1,587

Other, net

186

193

Total non-operating income

709

2,165

Non-operating expenses

Interest expenses

－

272

Share issuance expenses

4,007

－

Subscription rights issuance cost

5,724

1,742

Other, net

－

245

Total non-operating expenses

9,732

2,260

Ordinary loss

(758,731)

(735,874)

Extraordinary income

Gain on reversal of share acquisition rights

2,830

1,048

Total extraordinary income

2,830

1,048

Loss before income taxes

(755,900)

(734,826)

Income taxes-current

1,210

1,210

Total income taxes

1,210

1,210

Net loss

(757,110)

(736,036)

7

(3) Statements of Cash Flows

Thousand yen

Six Months

Six Months

Ended Jun. 30, 2019

Ended Jun. 30, 2020

(Jan. 1, 2019

(Jan. 1, 2020

to Jun. 30, 2019)

to Jun. 30, 2020)

Cash flows from operating activities

Loss before income taxes

(755,900)

(734,826)

Depreciation and amortization

2,421

1,867

Decrease (increase) in notes and accounts receivable-trade

20,417

73,103

Decrease (increase) in inventories

(12,826)

(9,886)

Decrease (increase) in advance payments

(15,021)

75,193

Decrease (increase) in consumption taxes refund

13,279

(6,402)

receivable

Increase (decrease) in notes and accounts payable-trade

137

5,021

Increase (decrease) in accounts payable-other

77,453

99,837

Increase (decrease) in accrued expenses

(2,065)

(3,114)

Increase (decrease) in advances received

12,832

10,355

Other, net

(15,928)

(38,333)

Subtotal

(675,199)

(527,183)

Interest income received

11

18

Interest paid

－

(272)

Proceeds from subsidy income

－

1,587

Income taxes paid

(2,420)

(2,420)

Income taxes refund

6

4

Net cash used in operating activities

(677,601)

(528,265)

Cash flows from investing activities

Net cash provided by investing activities

－

－

Cash flows from financing activities

Proceeds from short-term borrowings

－

199,000

Proceeds from issuance of common shares

1,249,640

697,438

Payments for issuance of subscription rights to shares

(1,167)

(1,742)

Net cash provided by financing activities

1,248,472

894,696

Net increase (decrease) in cash and cash equivalents

570,871

366,430

Cash and cash equivalents as of the beginning of the year

2,328,513

2,105,976

Cash and cash equivalents as of the end of the period

2,899,385

2,472,406

8

  1. Notes Concerning Quarterly Financial Statements (Notes Regarding Going Concern Assumptions) Not applicable.

(Notes Regarding Substantial Changes in Shareholders' Equity) ・Capital reduction

At the 16th Ordinary General Meeting of Shareholders held on March 27, 2020, the Company received approval of a resolution on the reduction of the amount of capital stock and capital reserve and the disposal of surplus, and the effect became effective on May 1, 2020. Due to the capital reduction, Capital stock decreased by ¥5,632,216 thousand, and Capital reserve decreased by ¥4,022,436 thousand, and Retained earnings increased by 9,654,653 thousand.

・Exercise of the subscription rights to shares.

The balance of capital stock and capital reserve increased separately by ¥345,441 thousand due to exercise of the Subscription Rights to Shares.

As a result, as of June 30, 2020, the balance of capital stock and capital reserve came to ¥846,189 thousand and ¥2,445,969 thousand, respectively.

(Important subsequent events)

(Capital increase attributed to the exercise of subscription rights to shares)

During the second cumulative period, from July 1, 2020 to July 31, 2020, some of the 17th subscription rights to shares with an exercise price amendment clause were exercised. The summary of the exercised subscription rights to shares is as follows.

  1. Type and number of shares issued: Common stock, 1,361,900 shares
  2. Increased capital stock: ¥184,821 thousand
  3. Increased legal capital reserve: ¥184,821 thousand

As a result, as of July 31, 2020, the total number of the common stock issued is 36,643,700 shares. Capital stock and capital reserve are ¥1,031,010 thousand and ¥2,630,791 thousand respectively.

9

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Chiome Bioscience Inc. published this content on 11 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 August 2020 07:03:05 UTC