MEDINET 2370
メディネット
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2021-11-15
2021-09-08
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TRC Center Bldg, 9F 6-1-1 Heiwajima, Ota-ku Tokyo, Japan 143-0006
Summary
Shifting from Immuno-Cell Therapy Total Support Service to the Contracted Cell Manufacturing Business; sale and development of cell medicinal products
Life Sciences Tools & Services
Key dates
2010-09-30
Coverage initiation
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate year-on-year changes.
Note: The company moved to unconsolidated accounting beginning in FY09/19 following the merger with two consolidated subsidiaries. YoY figures for FY09/19 are comparison with consolidated results including these two subsidiaries.
Recent updates
Full-year FY 09/21 flash update
On November 12, 2021, MEDINET Co., Ltd. announced earnings results for Full-year FY09/21; see the results section for details.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes. “-” in place of figure denotes the rate of YoY change greater than 1000%.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes. “-” in place of figure denotes the rate of YoY change greater than 1000%.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes.
Full-year FY09/21 results (out November 12, 2021)
Initiatives in Full-year FY09/21
Under a legal framework* for regenerative medicine and cell therapy, MEDINET has been advancing measures for business growth by launching new businesses and focusing on improving its earnings structure since FY09/20.
The business environment surrounding MEDINET remains severe, because the prolonged COVID-19 pandemic is negatively impacting partner medical institutions and the outlook for a recovery in patient numbers remains uncertain.
Under these challenging conditions, the company focused on expanding the CMO business, having completed the technical transfer for contract manufacturing of investigational products for Janssen Pharmaceutical K.K. and concluding a contract manufacturing agreement with Janssen Pharmaceutical K.K. Under the terms of the agreement, in June 2021, the company began contract manufacturing of part of the manufacturing process of an investigational product used in Japan as part of a global joint phase III clinical trial performed by Janssen Pharmaceutical (CARTITUDE-4).
Sales and losses
Sales declined YoY due to lower sales at the Contract Cell Manufacturing Business, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19.
The operating loss widened. Gross profit fell to JPY180mn (-38.1% YoY) due to lower sales, and SG&A expenses rose to JPY1.3bn (+3.6% YoY).
Net loss was in line YoY. While the operating loss widened, the company recorded a JPY206mn gain on investments in investment partnerships (JPY79mn in FY09/20) as non-operating income, and an extraordinary gain of JPY24mn on reversal of stock warrants.
Contract Cell Manufacturing Business
As noted above, the company began contract manufacturing of part of the manufacturing process of an investigational product as part of a global joint phase III clinical trial performed by Janssen Pharmaceutical. However, the Contract Cell Manufacturing Business posted lower YoY sales, because the trend of fewer patients from overseas visiting partner medical institutions continued amid the spread of COVID-19. On the profit front, the operating loss widened as lower sales depressed gross profit.
Regenerative Medicinal Product Business
The company accelerated its development of regenerative medicinal products with a view to monetizing at an early stage, and kept an eye on development trends for such products in Japan and overseas, with a view to acquiring new pipeline products and expanding its lineup.
Full-year company forecasts
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes.
The company forecasts FY09/22 sales of JPY752mn (+10.1% YoY) and an operating loss of JPY1.8bn (in line with FY09/21).
In the Contract Cell Manufacturing Business, the company expects sales from the manufacture of specified cell products used in immuno-cell therapies for contracted medical institutions. It also aims to expand sales in the Specified Cell Products Manufacturing Business through contract manufacture of specified cell products used in regenerative medicine and cell therapy for pharmaceutical companies, universities, medical institutions, and research organizations. In the Value Chain Business, the company aims to grow sales from regenerative medicine and cell therapy consulting, cell processing facility operations management, dispatching cell processing engineers, and providing training systems. It also aims to grow the CDMO Business, which engages in contract development and manufacture of regenerative medicinal products to meet the needs of customers.
On the expense side, the company expects to launch joint research projects with universities, medical institutions, and research organizations, with a view to monetizing its Regenerative Medicinal Products Business at an early stage. It expects higher R&D spending as it expands its development pipeline and strengthens its development systems.
Future outlook, management strategy
Announced structural reforms in April 2018
MEDINET aimed to expand its Contract Cell Manufacturing and Regenerative Medicinal Product segments following the enactment of the Act on the Safety of Regenerative Medicine and the Act on Pharmaceuticals and Medical Devices (PMD Act) in November 2014. However, at the time of announcing 1H FY09/18 results, the business environment of the Contract Cell Manufacturing Business had changed as a result of the spread of immune checkpoint inhibitors in cancer therapy, requiring the company to take action to adapt to new conditions. In the Regenerative Medicinal Product Business, the company is making progress toward commercialization.
With this background, the company decided on structural reforms to improve earnings of its Contract Cell Manufacturing Business promptly. The company also plans to strengthen its management base by shifting its business structure toward the development, manufacture, and sales of proprietary products that harness autologous cell culture and engineering technologies as set out in its ACCEPT2021 strategy from one centered on the Contract Cell Manufacturing Business.
Structural reform measures
Contract Cell Manufacturing Business
The two cell processing centers (CPCs) in Shin-Yokohama and Osaka were integrated into a single facility in Tokyo, the Shinagawa Cell Processing Facility (Shinagawa CPF), in April 2019. The company aimed to improve the efficiency of the Contract Cell Manufacturing Business by covering services from cell processing for doctors to manufacture of regenerative medicinal products at the integrated facility. As a result, the segment turned into the black, posting JPY89mn in operating profit in FY09/19. However, in FY09/20, cell processing sales declined as the number of overseas patients attending the company’s partner medical institutions declined due to the COVID-19 pandemic. Sales fell YoY and the segment posted an operating loss.
The company concluded a license agreement with Medigen Biotechnology Corp. of Taiwan for gamma-delta T cell culture technology and formed a medical tourism alliance with Qingdao Haier Biotech Holding Co., Ltd., a member of the China-based Haier Group. It expects these agreements to contribute to earnings in the medium term.
Concluded gamma-delta T cell culture technology license agreement with Medigen Biotechnology Corp.
In October 2019, the company entered a licensing agreement with Medigen Biotechnology Corp. (MBC), a company listed on the Taipei Exchange, to out-license its gamma-delta T cell culture technology for cancer treatment.
In Taiwan, MBC focuses on the development of cell processing technologies for immuno-cell therapies for cancer, especially technology to process natural killer (NK) cells. MBC decided to in-license MEDINET’s gamma-delta T cell culture technology as part of its quest to develop immuno-cell therapies for cancer that use new regenerative medicine and cell therapy technologies. MBC will provide patients in Taiwan with immuno-cell therapies for cancer that use MEDINET’s gamma-delta T cell culture technology via medical institutions under the new legislation.
Under the agreement, MEDINET will receive royalty payments from MBC depending on the number of times the company’s gamma-delta T cell culture technology is used in cell processing.
Medical tourism alliance with Haier Group company Qingdao Haier Biotech Holding Co., Ltd.
The company had been holding discussions regarding medical tourism from China to Japan with the target of receiving advanced medical care, including regenerative medicine and cell therapy, or medical examinations (medical tourism business) with Haier Group company Qingdao Haier Biotech Holding Co., Ltd. (HBH), which formed a business alliance with the company in February 2019. In March 2019, these discussions resulted in the conclusion of a formal agreement concerning the medical tourism business.
Through the medical tourism business, the company will establish environments in which patients in China who wish to receive medical examinations or advanced medical care, including regenerative medicine and cell therapy, in Japan will be able to do so while feeling at ease. The company will accomplish this through the medical network it constructed through its various business activities and joint research in support of development in regenerative medicine, as well as the customer base and network of alliances with companies and medical institutions that the Haier Group including HBH, have established within China.
Regenerative Medicinal Product Business
In the Regenerative Medicinal Product Business, the company is mainly engaged in the following research projects (see Business section for details).
Development of autologous dendritic cell vaccine to prevent COVID-19 (joint research with National Cancer Center Japan and Keio University)
Practical application of regenerative medicinal products in the treatment of chronic heart failure (with Kyushu University)
R&D of a new cancer immunotherapy drug related to heat shock protein 105 (HSP105; with National Cancer Center Japan)
New culture technology for glycosylation-modified T cells
Practical application of BAR-T cells in the treatment of autoimmune disorders (with Kyoto Prefectural University of Medicine)
Business
Summary
Shifting from Immuno-Cell Therapy Total Support Service to the Contract Cell Manufacturing Business; sale and development of cell medicinal products
Prior to November 2015, MEDINET was a biotechnology company mainly offering the Immuno-Cell Therapy Total Support Service to medical and research institutions. The Act on the Safety of Regenerative Medicine and the Act on Pharmaceuticals and Medicals Devices (PMD Act) were enacted in November 2014. The company plans to shift from its former mainstay business—the Immuno-Cell Therapy Total Support Service—toward cell processing and developing cell medicinal products. Thus in FY09/14, the company changed reporting segments from the Cell Therapy Support Business to the Contract Cell Manufacturing Business and Regenerative Medicinal Product Business.
Contract Cell Manufacturing Business: Receives cell processing orders
In the Contract Cell Manufacturing Business, MEDINET's Specified Cell Products Manufacturing Business (formerly, Immuno-Cell Therapy Total Support Service) supplies regenerative medicinal products and investigational products as a CDMO (Contract Development and Manufacturing Organization). These products are used for clinical and experimental trials at companies, universities, and medical and research institutions. The company also provides related services, including the operation of cell processing centers (CPCs). As the construction of its cell processing facility in Tokyo’s Shinagawa district (Shinagawa CPF) was completed in May 2015, the company has been working to secure orders from companies, universities, and medical and research institutions for contract cell processing for clinical and experimental trials. The company also worked to establish relationships with companies, universities, and medical and research institutions by engaging in business and marketing activities such as the dispatch of cell processing engineers, education for maintaining product quality at CPCs, and consulting for establishing new CPCs.
In FY09/20, however, its Specified Cell Products Manufacturing Business (formerly, Immuno-Cell Therapy Total Support Service) produced the majority of segment sales. The Specified Cell Products Manufacturing Business is a comprehensive service that supplies medical institutions with processed cells used in cancer immuno-cell therapy.
Through August 2017, MEDINET provided the use of three CPCs (Shin-Yokohama, Osaka, and Fukuoka) to Medical Corporation Koshikai and ran its Immuno-Cell Therapy Total Support Service. From August 2017, the company worked to merge the CPCs and ended the Immuno-Cell Therapy Total Support Service agreements it had with medical institutions, replacing them with Specified Cell Products Manufacturing Business contracts. In April 2019, the Shin-Yokohama Cell Processing Center was integrated into the Shinagawa Cell Processing Facility (Shinagawa CPF). As of November 2020, the company manufactures cells for medical institutions’ immuno-cell therapies at the Shinagawa CPF under contract. It books resultant sales in the Specified Cell Products Manufacturing Business under the Contract Cell Manufacturing Business segment.
Regenerative Medicinal Product Business: Develops cell medicinal products
MEDINET researches and develops cell medicinal products in the Regenerative Medicinal Product Business. The company is conducting research into using regenerative medicinal products to treat chronic heart failure.
Business segments
The company’s business segments are the Contract Cell Manufacturing Business (99.9% of sales in FY09/20) and the Regenerative Medicinal Product Business (0.1%).
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes.
Contract Cell Manufacturing Business (99.9% of FY09/20 sales)
In this segment, MEDINET takes tissue/cell processing and culturing orders from medical and research institutions involved in regenerative medicine and cell therapy, and corporations developing regenerative medicinal products and investigational products. In addition, the company conducts related services such as educating and dispatching cell processing engineers, preparing documents, and operating facilities under contract.
In FY09/20, the Specified Cell Products Manufacturing Business (formerly, Immuno-Cell Therapy Total Support Service) was the main earnings driver. In October 2017, it ended the Immuno-Cell Therapy Total Support Service agreements it had with medical institutions and replaced them with cell processing (Specified Cell Products Manufacturing Business) contracts. From October 2017, it has conducted cell processing under contract and booked resultant sales in the Specified Cell Products Manufacturing Business under the Contract Cell Manufacturing Business segment.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: “YoY” figures indicate the rate of year-on-year changes.
Note: The Specified Cell Products Manufacturing Business was referred to as the Immuno-Cell Therapy Total Support Service before FY09/17.
Contract Cell Manufacturing Business (previously Immuno-Cell Therapy Total Support Service)
The company pioneered support services for immuno-cell therapy in Japan in 1999. As of FY09/20, it was the largest provider in the country.
Anticipated synergy between immuno-cell therapy and conventional treatments
In immuno-cell therapy, the patient’s immune cells (e.g., lymphocytes) are collected, cultured or processed, and then returned to the patient’s body. They suppress the growth of cancer cells by artificially magnifying the power of immune cells. According to the company, immuno-cell therapy’s potential has been growing due to synergistic effects when combined with three conventional treatments (surgery, radiotherapy, and chemotherapy). This could lead to immuno-cell therapy developing as a frontline therapy. Minimal adverse effects associated with immuno-cell therapy could help maintain patients’ quality of life (QOL) and quality-adjusted life year (QALY).
Interested patients locate a doctor/clinic providing the therapy and undergo a medical examination. The clinic sends a sample of the patient’s blood to MEDINET’s CPC, and cell engineers at the CPC culture and process the blood for about two weeks. After processing, cells are administered intravenously to the patient at medical institutions over a period of about 30 minutes. One course of treatment takes about three months and includes six infusions of immune cells.
Contract Cell Manufacturing Business (previously Immuno-Cell Therapy Total Support Service)
It is difficult for ordinary doctors and medical institutions to provide immuno-cell therapy because cultivating and processing immune cells requires technology and expertise, specialist technicians, equipment, and facilities. MEDINET thus provides a contract cell manufacturing service so that doctors and medical institutions can provide safe and effective immuno-cell therapy.
According to the Medical Practitioners Law, doctors and medical institutions that provide immuno-cell therapy are legally responsible for providing the therapy and must obtain informed consent from patients and accept liability for medical errors and accidents.
The company’s CPFs provide cell processing services under contract to doctors and medical institutions performing immuno-cell therapy. Immuno-cell processing requires engineering technology—a mix of medical and manufacturing skills—with a substantial know-how component.
As part of its Value Chain Business, MEDINET operates and manages CPCs for medical institutions that perform clinical research on medical technology for regenerative medicine and cell therapy. CPC operation requires strictly controlled, safe facilities as well as effective quality control systems. All facilities and systems need to be compliant with Good Manufacturing Practice (GMP)—a standard for pharmaceutical production and quality management—and other guidelines. Recently, many research institutions and medical institutions have established CPCs in line with research developments in the field of regenerative medicine and cell therapy. However, the majority of these CPCs have operated at limited capacity due to economic and personnel constraints, and institutions’ lack of experience in this new field. This appears to have hindered the spread of regenerative medicine and cell therapy. MEDINET hopes to resolve the situation by providing CPC operational management services.
As of end-September 2020, MEDINET was contracted to provide overall CPC operational management services at the Kyushu University Center for Advanced Medical Innovation (Fukuoka).
Contracted and allied medical institutions
Medical institutions that provide immuno-cell therapy using MEDINET’s support service are called “contracted medical institutions.” As of September 2020, there were ten such facilities:
These contracted medical institutions perform immuno-cell therapy using technology and support provided by MEDINET. They coordinate with other medical institutions to offer patients the same treatment. These other institutions are called “allied medical institutions.”
Relationship with Medical Corporation Koshikai, Seta Clinic Tokyo
Seta Clinic was established in March 1999 as a medical institution specializing in immuno-cell therapy. Currently, Seta Clinic Tokyo and various Allied Medical Institutions are progressing to build an environment to provide immuno-cell therapy to patients across Japan. According to Seta Clinic Tokyo, the cumulative number of patients had exceeded 22,000 by end-September 2019, and the company commented that Seta Clinic’s experience in the field of immuno-cell therapy and its accumulated clinical data are unrivaled worldwide.
Based on Specified Cell Products Manufacturing Business contracts, MEDINET supports Seta Clinic Tokyo by providing safe and efficient immuno-cell therapy. Seta Clinic Tokyo provides the therapy directly to patients and via Allied Medical Institutions.
Physicians working at the Seta Clinic Tokyo choose the most suitable therapy methods based on the characteristics of each patient’s cancer. Furthermore, they provide “tailor-made medical care,” as the company puts it, offering immuno-cell therapy in conjunction with other treatment methods selected based on the patient’s condition and stage of disease.
MEDINET provides technology and services related to natural killer (NK)-cell therapy, dendritic cell (DC) vaccine therapy, gamma-delta T cell therapy, and alpha-beta T cell therapy. It also employs genetic analysis to produce neoantigen-based dendritic cell vaccines best suited to individual patients.
Expansion of cell processing business
Before the enactment in November 2014 of the Act on the Safety of Regenerative Medicine, only medical institutions were permitted to engage in cell processing for immuno-cell therapy. The enactment of the law allows medical institutions to outsource cell processing and culturing to corporations (see The Act on the Safety of Regenerative Medicine and the PMD Act for details).
This law allows medical institutions to carry out immuno-cell therapy without establishing cell processing centers. MEDINET is now able to develop the Contract Cell Manufacturing Business with a focus on cell and tissue culturing and processing—in addition to the Immuno-Cell Therapy Total Support Service as the conventional core operation. It is able to manufacture specified cell products for customers. MEDINET also engages in the dispatch of cell processing engineers, education concerning product quality control at CPCs, and consulting for establishing new CPCs. Under the Act on Pharmaceuticals and Medical Devices, the company is contracted to develop and manufacture newly defined regenerative medicinal products and investigational products as a CDMO.
In FY09/20, the impact of these contract cell manufacturing operations was minimal and the core revenue driver continued to be the Specified Cell Products Manufacturing Business (formerly, Immuno-Cell Therapy Total Support Service), mainly contract cell processing for immuno-cell therapies.
Manufacture of specified cell products
As mentioned, the Act on the Safety of Regenerative Medicine allows medical and research institutions to outsource cell processing and culturing to corporations. MEDINET completed the construction of a cell culturing and processing facility in Shinagawa, Tokyo (Shinagawa Cell Processing Facility [CPF]) in May 2015 and obtained a license for manufacturing specified cell products at the new facility. In addition to orders for immune cells, Shinagawa CPF will take orders for tissue/cell processing and culturing from medical and research institutions involved in regenerative medicine and cell therapy, and corporations developing medicinal products for regenerative therapy.
In October 2017, MEDINET received regulatory approval to manufacture specified cell products at its Shin-Yokohama Cell Processing Center and Osaka Cell Processing Center. Together with the already licensed Shinagawa Cell Processing Facility, the company now has three centers that can conduct contracted cell manufacturing. The company integrated Shin-Yokohama Cell Processing Center and Osaka Cell Processing Center with Shinagawa CPF in April 2019.
Dispatch of cell processing engineers
MEDINET started the business of dispatching cell processing engineers from FY09/16. Cell processing engineers engaging in regenerative medicine and cell therapy are expected to possess not only cell processing skills and specialized knowledge of regenerative medicine and cell medicinal products, but are also required to have the ability needed for operating facilities and managing quality in accordance with laws, including the Act on the Safety of Regenerative Medicine and the Act on Pharmaceuticals and Medical Devices. As such, a tremendous amount of time and effort are needed to develop each cell processing engineer to satisfy these requirements. The creation and implementation of comprehensive and systematic training systems based on experience are also essential. Accordingly, the shortage of cell processing engineers is an issue in the commercialization of regenerative medicine and cell therapy.
Through distributing its Immuno-Cell Therapy Total Support Service to medical and research institutions, MEDINET has provided comprehensive services that have covered designing, installing, and managing cell-culturing and processing facilities, technologies to develop cell processing procedures, cell processing engineers, reliability assurance systems, and information management systems. The company now has a pool of cell processing engineers that can be utilized for national research institutions and other entities that have contracts with MEDINET.
Education for product quality control at CPCs
In February 2016, the company received an order from the National Center for Child Health and Development to provide training support for the management and operation of the center’s CPC. The aim is to educate those responsible for manufacturing and quality control and others involved in the manufacturing process at the center so that they will be able to properly manage and conduct investigational drug manufacturing related to regenerative medicinal products.
Manufacture of regenerative medicinal products and investigational products as a CDMO
Under the Act on Pharmaceuticals and Medical Devices, the company is contracted to develop and manufacture regenerative medicinal products and investigational products as a CDMO (Contract Development and Manufacturing Organization) for companies and others who want to develop and sell medical products using regenerative medicinal products and technologies as defined by the law. The Shinagawa CPF is also able to handle the manufacture of medical treatment products using regenerative medicinal products and technologies.
Agreement to attempt commercialization of an immune tolerance-inducing cell processing technology being jointly researched and developed by Gene Techno Science and Juntendo University
The company announced the conclusion of an agreement with Gene Techno Science Co., Ltd. (GTS) regarding contracted development and manufacturing associated with an immuno-cell processing technology. GTS and Juntendo University have jointly conducted research and development of a cell processing technology that induces immune tolerance. With the aim of accelerating the development of regenerative medicinal products to reduce organ transplant rejection, MEDINET and GTS have concluded an agreement, in which GTS is to outsource to MEDINET the development and manufacture toward commercialization of this product.
Regenerative Medicinal Product Business (0.1% of sales in FY09/20)
In the Regenerative Medicinal Product Business, the company conducts research and development to obtain approvals for the manufacture and sale of cell medicinal products.
The Act on Pharmaceuticals and Medical Devices (PMD Act) in November 2014 provides a new definition of regenerative medicinal products and stipulates that anyone wishing to manufacture and sell regenerative medicinal products has to obtain approval for each item from the Minister of Health, Labour and Welfare. Further, if the product is expected to be effective and its safety is confirmed it will be granted expedited approval for regenerative medicinal products with conditions and a limited term. After it goes on sale, upon examining efficacy and determining it meets additional safety criteria, the seller will be allowed to continue selling the product provided that it applies for and obtains approval again within the specified period (see The Act on the Safety of Regenerative Medicine and PMD Act for details).
The Ministry of Health, Labour and Welfare in November 2014 proposed a change in the Health Insurance Act to coincide with the enactment of the PMD Act. Under the new law, products for regenerative medicine would be partly subsidized by the Japanese National Health Insurance until they are officially approved for full coverage after the completion of clinical trials. Products that win expedited approval for regenerative medicinal products, with conditions and a limited term will also be covered by this insurance. Shared Research understands that the insurance coverage would lower medical costs for patients and remove the issue of combining insured and uninsured care, another barrier to the spread of immuno-cell therapy.
As of November 2020, examples of regenerative medicinal products approved in Japan are as follows.
MEDINET plans to use the expedited approval system for regenerative medicinal products with conditions and a limited term to obtain approval to manufacture and sell existing pipeline products. The company also aims to acquire pipeline products both in Japan and overseas. As of November 2020, MEDINET is engaged in research into using regenerative medicinal products to treat chronic heart failure and other products. In Japan, the company is exploring the feasibility of cell medicinal products through its own research and development, as well as joint development of immuno-cell therapy using iPS-cell processing with the University of Tokyo and other joint research projects so far conducted with university hospitals.
Product development status
Autologous cultured cartilage MDNT01
In-licensed autologous cultured cartilage NeoCart® from US-based Histogenics
In December 2017, MEDINET signed a license agreement with Histogenics Corporation (US) for the development and sale of autologous cultured cartilage NeoCart® (MEDINET’s development code: MDNT01) in Japan. MEDINET decided to in-license MDNT01, seeing the product has the potential to bring benefits to patients with knee cartilage defects in Japan.
Around 10,000 patients in Japan suffer knee cartilage defects annually; chondrocytes taken from patients to be implanted into damaged parts
The company estimates that in Japan there are annually at least ten thousand patients with knee cartilage defects, who could potentially benefit from MDNT01. If left untreated, cartilage defects may result in osteoarthritis and ultimately require total knee replacements. According to Histogenics’ survey, about 60% of patients receive only surgical or conservative treatments. Some 60% to 70% of patients who have not received surgical treatment are likely to suffer from osteoarthritis in the future. The company expects NeoCart® to become a new option for treatment as it consists of chondrocytes taken from the patients themselves and cultured in the shape of cartilage and can be implanted into damaged parts with less invasive treatment.
US phase III clinical trials did not demonstrate a statistically significant improvement, although a statistically significant improvement was observed for specific endpoints over a period of time, so the company is consulting with the FDA over submission of a Biologics License Application (BLA)
In September 2018, Histogenics announced phase III clinical trials of autologous chondrocyte cartilage implant NeoCart® for knee cartilage defects in the US failed to demonstrate a statistically significant improvement in primary endpoints (dual threshold responder analysis of pain and function one year after treatment) as compared to microfracture. That said, a statistically significant and clinically meaningful improvements versus microfracture was shown based on dual threshold responder analysis of pain and function six months after treatment. There were also statistically significant and clinically meaningful improvements observed on most pain and function parameters compared to microfracture after one and two years of treatment.
Since then, Histogenics has continued discussions with the US Food and Drug Administration (FDA) regarding topline data of the phase III trials and the Biologics License Application (BLA) process, and was informed by the FDA that additional clinical trials were required. In response, Histogenics announced in April 2019 that it had concluded a merger agreement with Ocugen, Inc., a clinical-stage biopharmaceutical company based in the US.
In May 2019, Histogenics and Medavate Corp. signed an asset transfer agreement for NeoCart®, which included the product’s licensing agreement in effect between MEDINET and Histogenics.
However, there had been no asset transfer from Histogenics (now Ocugen) to Medavate involving the autologous cultured cartilage NeoCart®, and Ocugen terminated the asset transfer agreement in May 2021. Ocugen seeks to recommence development of NeoCart® in the US, toward which end it has begun consultations with the FDA concerning additional trial protocols.
Application for approval in Japan possible with a comparative test enrolling some 30 patients
Histogenics had sought NDA consultation with Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) up to Q2 (April-June) 2017. During this process, it has obtained an opinion from PMDA that the data from phase III clinical trial in the US (249 cases) was applicable, and that it can apply for a manufacture and sales approval of NeoCart® in Japan by conducting a phase III comparative clinical trial for microfracture surgery (same treatment method used in the US clinical trial) involving just around thirty patients.
As noted above, MEDINET will progress talks with Ocugen to decide on the development policy for autologous cultured cartilage MDNT01. The company expects the phase III clinical trial for knee cartilage defects to take around two years.
Upfront payments and fees
In in-licensing NeoCart®, MEDINET is to pay Histogenics the upfront payment worth USD10mn (about JPY1.1bn), milestone payments totaling approximately JPY1.2bn at each stage of development and addition of indications, along with fees and royalties of up to JPY7.3bn subject to sales after the launch of the product in Japan.
R&D status
As of November 2020, the company was engaged in the following R&D projects:
Development of autologous dendritic cell vaccine to prevent COVID-19 (with National Cancer Center Japan and Keio University)
Research in practical application of regenerative medicinal products in the treatment of chronic heart failure (with Kyushu University)
A new cancer immunotherapy drug related to HSP105 (with National Cancer Center Japan)
New culture technology for glycosylation-modified T cells
Research in practical application of BAR-T cells in the treatment of autoimmune disorders (with Kyoto Prefectural University of Medicine)
Development of SARS-CoV-2 antigen-pulsed autologous dendritic cell vaccine against COVID-19 (joint research with the National Cancer Center Japan and Keio University)
On August 2020, MEDINET and the National Cancer Center Japan concluded a joint research agreement to develop a SARS-CoV-2 antigen-pulsed autologous dendritic cell vaccine against COVID-19. In September 2020, Keio University joined the effort.
COVID-19 vaccines being developed around the world are typically based on production of SARS-CoV-2 neutralizing antibodies that stimulate humoral immunity to prevent viral infection of cells. Rapid development of vaccines is needed to combat the COVID-19 outbreak, but recent research suggests these vaccines may not retain antibody titers against SARS-CoV-2 for an extended period of time. There is also concern over antibody-dependent enhancement if antibody titers do not rise sufficiently.
Unlike the aforementioned vaccines, the autologous dendritic cell vaccine pulses dendritic cells with SARS-CoV-2 antigen to induce cytotoxic lymphocytes (CTL) and have the potential to kill and remove infected cells through cell-mediated immunity. Furthermore, the autologous dendritic cell vaccine shows promise of having long-term prophylactic effect as some CTLs become memory T cells stored in the host that retain cytotoxic activity against the virus (i.e., SARS-CoV-2).
The autologous dendritic cell vaccine utilizes the company’s patented dendritic cell vaccine manufacturing technology, originally developed from its oncology research, that has already been used clinically and has a proven safety track record. Through this research, MEDINET looks to contribute to society by developing a dendritic cell vaccine platform that can facilitate rapid vaccine development, not limited to COVID-19.
The target population for the autologous dendritic cell vaccine would be people at high risk such as the elderly, people with underlying diseases or that are less likely to elicit humoral immunity, and frontline medical workers.
For this research project, the National Cancer Center Japan will acquire basic data for the autologous dendritic cell vaccine, Keio University will provide support for nonclinical studies and the start of the Phase 1 clinical trials, and MEDINET will create the manufacturing process, acquire basic data, and conduct nonclinical safety studies. By around mid-2021, the company aims to start Phase I clinical trials of autologous dendritic cell vaccine in collaboration with the National Cancer Center Hospital East and Keio University Hospital and advance development for commercialization as a regenerative medicinal product.
Joint research with Kyushu University in practical application of regenerative medicinal products in the treatment of chronic heart failure
Chronic heart failure is a condition in which the ability of the heart to pump blood is reduced by chronic cardiomyopathy. The heart is unable to supply a sufficient volume of blood to satisfy the oxygen demand of peripheral organs, resulting in symptoms that cause major disruptions to daily life such as exertional dyspnea, breathlessness, peripheral edema, and loss of appetite. Japan currently has an estimated one million heart failure patients, and their number is rising in the context of an aging population, increase in lifestyle-related diseases, and improved effectiveness of treatment at the acute stage of myocardial infarction. Despite advances in drug and non-drug therapies (such as surgical procedures) for heart failure, symptoms gradually worsen over time. There is a need to develop new products to treat the condition, given the heightened risk of sudden death from fatal arrhythmia and extremely poor vital prognosis.
In November 2019, the company concluded a joint research agreement with National University Corporation Kyushu University regarding the practical application of regenerative medicinal products for the treatment of chronic heart failure. The company and Professor Hiroyuki Tsutsui of the Department of Cardiovascular Medicine, Faculty of Medical Sciences, Kyushu University will commence joint research with the goal of practical application of a new regenerative medicinal product, α-GalCer/DC, to treat chronic heart failure. The company said that as of November 2020, a paper on the final results of investigator-initiated Phase I/IIa clinical trials of α-GalCer/DC in patients with chronic heart failure was being prepared.
Joint research with National Cancer Center of Japan (NCC) on cancer immunotherapy related to HSP105
In October 2019, the company concluded a joint research agreement with the National Cancer Center Japan (NCC) for the commercialization of a new cancer immunotherapy drug related to heat shock protein 105 (HSP105), a cancer antigen protein.
HSP105 is a cancer antigen identified by Tetsuya Nakatsura, chief of NCC’s Division of Cancer Immunotherapy, Exploratory Oncology Research & Clinical Trial Center and other researchers, by the SEREX method using the cancer cells and blood of pancreatic cancer patients. HSP105 is a cancer-specific antigen rarely or weakly expressed in normal tissue other than the testes, but shows overexpression in cells of most cancers with a few exceptions.
Considering HSP105 as an ideal target for cancer immunotherapy, Nakatsura and his team conducted an investigator-initiated phase I clinical trial, having identified HSP105-derived peptides that bind to HLA-A*24 and HLA-A*2 and administered these two peptides to patients with advanced esophageal cancer and colorectal cancer. MEDINET holds the patents to these two peptides.
Under the agreement with NCC, the company plans to commercialize a more effective cancer immunotherapy using the results of the research on HSP105 by Nakatsura and his team to date and the above phase I trial.
New culture technology for glycosylation-modified T cells
MEDINET established a joint research with National University Corporation Osaka University for a five-year period from 2014 to 2019 to develop next-generation immuno-cell therapy technology. The research was established as the Department of Immunology and Regenerative Medicine. As an outcome of the joint research, the company and Osaka University reported a new culture technology and functional analysis for glycosylation-modified T cells.
This technology induces T cells with enhanced antitumor activity using a glucose derivative called 2-deoxyglucose (2DG). These T cells exhibit enhanced cancer cytotoxicity compared to T cells cultured through conventional methods, characteristics similar to NK cells, and resistant to immune function deterioration caused by substances secreted by cancer cells. Accordingly, it shows promise for enhancing the efficacy of cancer immuno-cell therapy.
Through the research, the parties discovered 2DG enhances antitumor activity of T cells by modifying its glycosylation. This represents a new method of immunity induction, including addition of 2DG during in vitro T cell activation and proliferation. 2DG-enhanced T cells may have applications in chimeric antigen receptor T cell (CAR-T) therapy and other immune cell therapies targeting T cell-based cancers.
Joint research with Kyoto Prefectural University of Medicine with the goal of practical application of BAR-T cells to treat autoimmune disorders
In November 2019, the company concluded a joint research agreement and filed a joint patent application with Kyoto Prefectural University of Medicine with the goal of practical application of a removal method for specific B cells using immune cells with chimeric receptors (B-cell antibody receptors [BAR]) introduced by gene transfer to treat diseases caused by the production of autologous neutralizing antibodies.
Lysosomal storage disease and hemophilia are diseases caused by deficiency of catabolic enzymes and blood coagulation factors, respectively, due to genetic abnormalities. Treatment normally entails replacing the defective enzymes or coagulation factors, but long-term replacement can result in the production of neutralizing antibodies, making the treatment ineffective. The production of autoantibodies that act against the proteins such as enzymes, which play an important role in biological functions, may also trigger autoimmune diseases including pemphigus vulgaris.
Professor Satoshi Gojo, Department of Artificial Organ and Heart Transplant Regenerative Medicine, and Assistant Professor Atsushi Hoshino, Department of Cardiovascular Medicine and Department of Nephrology, Kyoto Prefectural University of Medicine developed a BAR-T cell, i.e., a T-cell into which new chimeric receptor (BAR) genes have been introduced, to test the hypothesis that conditions such as lysosomal storage disease and hemophilia could be treated by specifically removing B-cells that produce neutralizing antibodies. As a result of their research, Professor Gojo and Assistant Professor Hoshino confirmed that the effective removal of specific B-cells was feasible.
Based on the research on BAR-T cell conducted by Professor Gojo and Assistant Professor Hoshino, the company will engage in the joint research with Kyoto Prefectural University of Medicine with the goal of practical application of BAR-T cells as a treatment for conditions caused by the production of neutralizing antibodies in replacement therapy for lysosomal storage disease and autoimmune diseases in which the autoantibodies recognize a single antigen.
Earnings structure
In FY09/20, MEDINET’s main revenue source was contract cell processing for immuno-cell therapies (formerly, Immuno-Cell Therapy Total Support Service), which services medical institutions. The revenue structure of the service is as follows.
Revenues from contract cell processing for immuno-cell therapies are mainly royalties paid by contracted medical institutions, which offer immuno-cell therapy. In DC vaccine therapy, patients pay about JPY1.51mn–2.22mn for one course of treatment (given over six to twelve sessions; see below) directly to a contracted medical institution, which performs the therapy. In NK-cell, gamma-delta T cell, and alpha-beta T cell therapies, patients pay about JPY270,000–380,000 for one session (see below).
Based on frequency and types of cells processed, MEDINET receives a specified share of treatment fees paid to medical institutions by patients that have undergone immuno-cell therapy. The number of cell processing units determines sales volume. As the number of new patients receiving treatment grows, so does total volume.
Cost analysis
Gross profit
Shared Research estimates that the company’s gross profit margin (GPM) is influenced by the utilization ratio of its cell processing sites.
The company discloses the breakdown of the cost of sales on a parent-only basis in its Annual Securities Report. In FY09/11–FY09/18, the ratios of both consolidated-to-parent sales and consolidated-to-parent gross profit were 1.0x. Accordingly, Shared Research recognizes that there is no large difference between the consolidated and parent cost-of-sales breakdowns. The company’s results have been non-consolidated since FY09/19.
After peaking at 71.2% in FY09/09, parent-only GPM has been on a downtrend due to falls in sales and increases in labor costs and other expenses. The main components of the cost of sales in FY09/20 were other costs (26.9% of sales on a parent-only basis), followed by labor costs (21.3%) and material costs (14.6%). The other costs included rent.
Note: Figures may differ from company materials due to differences in rounding methods.
SG&A expenses
The main component of SG&A expenses is R&D and personnel expenses.
MEDINET strategically spends about JPY200–700mn a year on R&D (including upfront payment of JPY1.1bn paid by Histogenics in FY09/18 for the license agreement for the development and sale of autologous cultured cartilage NeoCart®). At other companies, personnel are frequently the largest portion of R&D expenses, and is a fixed cost. MEDINET, however, performs many of its research activities in cooperation with university hospitals, so personnel accounts for only about 30% of R&D expenses.
Note: Figures may differ from company materials due to differences in rounding methods.
Profitability snapshot, financial ratios
Note: Figures may differ from company materials due to differences in rounding methods.
Strengths and weaknesses
Strengths
Early mover advantage: One of MEDINET’s strengths is the cell processing technology the company developed as a pioneer in the field of immuno-cell therapy. The company has been involved in immuno-cell processing for nearly 20 years. According to MEDINET, technological expertise, not facilities or equipment, makes the difference in cell processing quality. The company has developed its cell processing technology by handling about 187,000 cases.
Close cooperation with the Seta Clinic: The company has a strong relationship with Seta Clinic Tokyo and has provided its Immuno-Cell Therapy Total Support Service or contract cell processing for immuno-cell therapies since its establishment in Tokyo in 1999.
Contract cell manufacturing for immuno-cell therapy as revenue driver: The company has provided the Immuno-Cell Therapy Total Support Service (contract cell manufacturing for immuno-cell therapy after enactment of Act on the Safety of Regenerative Medicine) and reported revenues from the service since before the November 2014 enactment of the Act on the Safety of Regenerative Medicine. MEDINET aims to grow sales by expanding the range of its cell processing business over the medium and long term. Shared Research recognizes that the company will not be starting from scratch as the solid revenue base of the contract cell processing for immuno-cell therapies means it has the advantage of being able to cover fixed costs.
Weaknesses
Dependent on the Seta Clinic: Sales to the Seta Clinic Tokyo accounted for 77.3% of FY09/20 sales (compared to 69.4% of FY09/19 sales). Seta Clinic Tokyo specializes in immuno-cell therapy using MEDINET’s contract cell processing for immuno-cell therapies and has a close and stable relationship with the company. If the relationship worsens, or if Seta Clinic Tokyo incurs a fall in patients or has to close its clinics due to an unexpected accident or any other issues affecting the group, there could be a direct impact on MEDINET’s performances.
Possibility of fall in demand for the immuno-cell therapy due to substitute technologies: The biotechnology industry is quickly changing and expanding. Especially in cancer treatment, more and more new technologies are being studied and developed. If highly efficient medicinal products or technologies not used along with the immuno-cell therapy or remedies that may replace the therapy are developed, there may be no more need for the therapy.
Relatively high costs for patients: The Japanese National Healthcare Insurance does not cover immuno-cell therapy, so patients bear 100% of the treatment costs, approximately JPY1.5mn–2.1mn for one treatment course, which could be a large financial burden.
Main facilities
Group companies
Two consolidated subsidiaries (Institute of Medical Service Management, Inc. and MEDcell Co., Ltd.) were absorbed in October 2018 and incorporated into the unconsolidated account from FY09/19.
Capital and business alliances
MEDINET forms capital and technical alliances with biotechnology ventures in Japan and overseas. Key examples include:
MaxCyte Inc. (US): Scope of technological license offered by MaxCyte Inc.
PRISM Pharma Co., Ltd.: An alliance in the field of protein-protein Interaction and peptidomimetic technology.
TC BioPharm Ltd.: TC BioPharm Ltd. was engaged in clinical trials to evaluate safety and efficacy of treatment using autologous gamma delta T cells (ImmuniCell®) in malignant melanoma, lung cancer, and kidney cancer patients. In November 2018, the company decided to end clinical trials of autologous gamma delta T cell therapy; it plans to develop allogeneic gamma delta cells instead.
MEDINET has invested in Lymphotech Inc., a company in a similar line of business, and in MASA Life Science Ventures, LP, a venture capital fund focused on biotechnology and life science.
Market and value chain
Market overview
The cancer immuno-cell therapy market: JPY300bn in 2030; JPY570bn in 2050
Regenerative medicine and cell medicine are areas of potential growth. Cell medicine (sometimes included in a broader definition of regenerative medicine) is a state-of-the-art technology that provides treatment using patients’ own (or other people’s) cells. The field of cell medicine can be broadly divided into two areas: regenerative medicine that aims to re-grow body parts such as cultured skin or cartilage, and cell transplant medicine that treats cancer or congenital diseases. In FY09/20, the company’s main revenue driver was the Specified Cell Products Manufacturing Business (mainly contract cell processing for immuno-cell therapies). Cancer immunotherapy, which is covered by the total service, is deemed to be part of cell therapy.
Cancer is number one cause of death for Japanese people
Since 1981, cancer has been the number one cause of death for Japanese people. According to the 2019 Vital Statistics of Japan by the Ministry of Health, Labour and Welfare (MHLW), there were 390,000 deaths attributable to cancer (compared to 387,000 in 2018), which accounted for 28.2% of all deaths in Japan (28.4% in 2018).
According to Cancer Registry and Statistics (2016–2017, nationwide) by the Center for Cancer Control and Information Services (National Cancer Center), there were approximately 977,000 new cancer patients in Japan in 2017, compared to approximately 995,000 in 2016. According to MHLW’s Patient Survey 2017, there were a total of 1.78mn cancer patients in Japan (versus 1.63mn in 2014 survey).
Number of patients who received immuno-cell therapy is limited
The number of patients who received immuno-cell therapy supported by MEDINET has been increasing every year, with approximately 187,000 units of processed cells as of end-FY09/20. However, the total number of new patients per year has been about 20,000—a very small proportion of the above mentioned new cancer cases annually in Japan. (New cases are defined as the number of newly diagnosed cancer cases among the selected population over a certain period.) If immuno-cell therapy is less physically burdensome for patients and has demonstrated some effectiveness, why isn’t it used more?
As shown below, Shared Research thinks obstacles to the wide use of immuno-cell therapy include the costs to patients, awareness on the part of physicians and medical institutions, and evidence of the treatment’s clinical effectiveness.
Lack of understanding and awareness on the part of physicians and medical institutions
In order to increase demand for immuno-cell therapy, physicians and medical institutions that effectively control the treatment decision process for their patients need to consider immuno-cell therapy as a viable cancer treatment option. Rapid advances in the fields of immunology, molecular biology, and cellular technology during recent years meant that average clinical doctors find it hard to keep up with the newest trends and techniques. This means that physicians and medical institutions do not have sufficient awareness and understanding of immuno-cell therapy.
Still, it is true that medical technologies are advancing and discussions regarding new medical procedures are progressing, pushing Japan’s cancer therapy strategy toward a turning point. For example, even in traditional methods of cancer treatment, such as surgery, chemotherapy and radiotherapy, less invasive methods with less physical burden on patients are spreading (e.g., endoscopy, molecular-targeted drugs, particle radiotherapy). Furthermore, since individual treatments have their limits, the medical industry has recognized the need for team medical care (i.e., doctors in different fields serve a patient) and multimodality therapy. Accordingly, university hospitals and other medical institutions are increasingly shifting away from the traditional structure of vertically separated departments and moving toward a new structure more oriented to patients’ needs.
Evidence concerning clinical efficacy of the immuno-cell therapy (effects of treatment)
Given the problems discussed above, the company feels that it has to work on increasing awareness and understanding among physicians and medical institutions. This in turn necessitates the practice of evidence-based medicine (EBM), collection and formulation of clinical evidence, and communication of such evidence to the medical community via announcements and other means.
The company works on developing new immuno-cell therapy technologies as well as improving existing ones. It also pursues joint clinical research with leading medical institutions, primarily university hospitals, in order to evaluate the obtained evidence and develop new treatment protocols. However, one problem facing immuno-cell therapy is that there are no established methods to scientifically evaluate its validity using generally accepted indicators. At the same time, existing evaluation methods used for chemotherapy and radiotherapy, such as RECIST (Response Evaluation Criteria In Solid Tumors), do not show sufficient clinical results when applied to immuno-cell therapy. It is therefore vital to build quality evidence to widen acceptance of immuno-cell therapy, including establishing evaluation methods and criteria.
Cost of therapy
As of November 2020, immuno-cell therapy was not covered by medical insurance. Consequently, patients receiving the therapy bear the full cost themselves (see Business Model for details of treatment costs). Additionally, since laws prohibit combining insured and uninsured care, it is difficult for patients receiving other treatments covered by insurance to receive immuno-cell therapy treatment. Medical institutions must make a clear distinction between immuno-cell therapy and insured medical care, even when offering them together.
Per the Advanced Medical Evaluation System, the MHLW permits combining advanced therapeutic methods not covered by the national insurance with insured therapies on an exceptional basis. If immuno-cell therapy methods offered by MEDINET are admitted as such advanced therapies in the future, this may allow the therapy to be combined with methods covered by insurance. The result: an increase in the number of patients receiving immuno-cell therapy.
Introduction of therapy by patient request
Under the new system of introducing advanced therapies requested by patients, when a patient hopes to be treated with an advanced therapeutic method, the doctor will confirm the safety and efficacy and will submit an application regarding the new technologies and other requirements to a core hospital for clinical research or the government, which will judge whether or not to approve a combination of insured and uninsured treatments. The revised Health Insurance Act outlines the legal framework for the new system, which was introduced in April 2016.
Government actions to boost regenerative medicine/cell therapy
Growing hopes for regenerative medicine and cell therapy
Immuno-cell therapy—a biomedical technology for systemic treatment essentially without side effects and for treatments combining traditional therapeutic methods in any given phase—is increasingly expected to become a leading-edge cancer treatment option for patients. In particular, there have been many reports indicating that the use of immuno-cell therapy in the initial phase of treatment to prevent relapse improves patients’ survival rates and recurrence-free survival rates.
Expectations are also increasing for regenerative and cell medicine to become effective cancer treatments, following several Nobel Prizes in Physiology or Medicine in recent years. In 2011, Ralph M. Steinman, a scientist at Rockefeller University in the United States, received the prize for his “discovery of the dendritic cell and its role in adaptive immunity.” In 2012, Shinya Yamanaka, a Kyoto University professor who developed induced pluripotent stem cell (iPS cells), received the prize for his “discovery that mature cells can be reprogrammed to become pluripotent.”
The Act on the Safety of Regenerative Medicine and the Act on Pharmaceuticals and the Medicals Devices (PMD Act)
The Act on the Safety of Regenerative Medicine and the Act on Pharmaceuticals and the Medicals Devices (PMD Act) were enacted in November 2014. The enactment of these laws may have a significant impact on the company’s earnings in the medium term.
Act on the Safety of Regenerative Medicine allows outsourcing of cell processing/culturing
The Act on the Safety of Regenerative Medicine allows medical institutions to outsource cell processing work to companies that have been approved by the Ministry of Health, Labour and Welfare.
For the outsourcing of specified cell products (processed cells for other purposes than regenerative medicine), each processing and culturing facility is to receive MHLW approval or companies, registered for producing particular processed cells, shall undertake a duty to manufacture them. Standards relating to the quality management and safety policies of facilities are to be established separately from the law.
Outsourcing is only licensed to companies that have cleared the quality management and safety policy standards at processing facilities under the Act on the Safety of Regenerative Medicine. Shared Research recognizes that the competitive environment will turn favorably for MEDINET, which has accumulated cell processing technologies since the dawn of immuno-cell medicinal treatment. MEDINET, which used to establish cell processing centers at client medical institutions, will no longer have to do so under the new system. The company became able to reduce costs as a result.
The PMD Act’s expedited approval system for regenerative medicinal products with conditions and a limited term
The PMD Act contains two key points:
Under the PMD Act, regenerative medicine products are newly defined, and those who plan to produce and sell regenerative medicine products have to receive approval from the Ministry of Health, Labour and Welfare (MHLW) for each product. Under the new system, even if clinical data are limited, if safety can be confirmed and efficacy can be estimated, it will be granted expedited approval for regenerative medicinal products, with conditions and a limited term. The system will allow efficacy to be validated at the post-marketing stage.
According to the Ministry of Health, Labour and Welfare, (MHLW), under the expedited approval system for regenerative medicinal products with conditions and a limited term, the period necessary to gain approval is expected be shortened by two to three years (compared with the former approval system). Shared Research believes that this development will allow MEDINET to obtain approval to manufacture products for regenerative treatment and further expand its operations.
Suppliers
Culture medium (culture fluid) for cell culture and cell processing is one of the most important procured items. MEDINET mainly purchases culture media produced at Cell Science & Technology Institute, Inc. (a wholly owned subsidiary of Nipro Corporation (TSE1: 8086)) via Nipro.
Barriers to entry
Contract cell manufacturing for immuno-cell therapy requires CPFs and cell engineers. Setting up the facilities is not a major obstacle. However, there are opportunities for differentiation in training technical personnel and accumulating cell culturing expertise. According to the company, its experience accumulated after processing around 187,000 units of cultured cells gives it an overwhelming competitive advantage.
Under the PMD Act, companies seeking to win orders for cell processing work must either be approved by the Ministry of Health, Labour and Welfare or submit documents notifying the ministry of their plan to begin such operations. These companies must comply with safety standards concerning product quality and safety.
Competition
According to the company, the market for immuno-cell therapy is still in its infancy; it is not yet large enough for companies to fight over market share. Others in the same line of business are following the business model developed by President Kimura and Dr. Egawa. The company thinks that healthy competition is desirable because it gives patients more options.
tella, Inc. (JASDAQ: 2191)
Founded by Dr. Yazaki in 2004. The company focuses on its “IMAX Cancer Treatment (maximum immunotherapy for cancer),” which aims to kill cancer cells efficiently by combining chemotherapy and radiotherapy with a type of immunotherapy called “Dendritic Cell (DC) Vaccine Therapy.”
GC Lymphotech Inc.
Founded in April 1999. MEDINET holds a stake. The company provides services for clinics that specialize in cancer treatment using activated autologous lymphocytes.
Lymphocyte-bank Co., Ltd.
Founded in 2001 and focusing on amplified natural killer (ANK) autologous lymphocyte immunotherapy. Provides ANK therapy via medical institutions.
J.B. Therapeutic Inc.
Founded in 2001 by Dr. Tanigawa, a former surgeon at the Center of Gastroenteropathy of Tokyo Women’s Medical University. Medical institutions performing therapy supported by the company include Tokyo Women’s Medical University and Bio-Thera Clinic.
MEDINET has been cooperating with the above four competing companies and working on the establishment of the standard for immuno-cell therapy in order to promote the treatment’s acceptance.
MEDINET’s competitors in the area of cell processing include the following companies:
Takara Bio Inc. (TSE1: 4974)
The company began as the biotechnology division of Takara Shuzo, which is now Takara Holdings Inc. (TSE1: 2531).
Takara Bio began full operations of the Center for Gene and Cell Processing in October 2014. The facility takes on outsourced tasks related to the manufacturing of gene transfer vectors and the culturing and processing of cells, as well as the production of biopharmaceutical products under the so-called good manufacturing practice. The facility will allow the company to expand its contract development and manufacturing operations.
Japan Tissue Engineering Co., Ltd. (TSE JASDAQ Growth: 7774)
The company, established in 1999, uses human tissues and cells taken directly from the patient to develop products for regenerative treatment and sells them to medical institutions. The company’s products included autologous cultured epidermis (for severe burns), autologous cultured cartilage, and autologous corneal epithelial cell sheet as of November 2020. The company is owned 50.1% by FUJIFILM Holdings Corporation (TSE1: 4901).
Substitutes
The three main conventional cancer therapy methods are surgery, radiotherapy, and chemotherapy. These therapies can be administered in combination, and according to the company, it is also sometimes possible to improve therapeutic results by combining these methods with immuno-cell therapy.
Historical financial statements
Previous earnings results (for reference purposes)
Cumulative Q3 FY09/21 results (out August 11, 2021)
Initiatives in cumulative Q3 FY09/21
Under a legal framework* for regenerative medicine and cell therapy, MEDINET has been advancing measures for business growth by launching new businesses and focusing on improving its earnings structure since FY09/20.
The business environment for MEDINET remains severe, because the prolonged COVID-19 pandemic is negatively impacting partner medical institutions and the outlook for a recovery in patient numbers remains uncertain.
Under these challenging conditions, the company focused on expanding the CMO business, having completed the technical transfer for contract manufacturing of investigational products for Janssen Pharmaceutical K.K. and concluding a contract manufacturing agreement with Janssen Pharmaceutical K.K. Under the terms of the agreement, in June 2021, the company began contract manufacturing of part of the manufacturing process of an investigational product used in Japan as part of a global joint phase III clinical trial performed by Janssen Pharmaceutical (CARTITUDE-4).
Sales and losses
Sales declined YoY due to lower sales at the Contract Cell Manufacturing Business, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19.
Gross profit fell to JPY140mn (-43.9% YoY) due to lower sales, and the operating loss grew YoY because SG&A expenses rose to JPY932mn (+4.5% YoY).
The company recorded a JPY209mn gain on investments in investment partnerships (no record in cumulative Q3 FY09/20) for total non-operating income of JPY221mn (versus JPY25mn in cumulative Q3 FY09/20). Extraordinary gains came to JPY33mn (no record a year earlier), including a JPY24mn gain on reversal of stock warrants.
Contract Cell Manufacturing Business
As noted above, in June 2021, the company began contract manufacturing of part of the manufacturing process of an investigational product used in Japan as part of a global joint phase III clinical trial performed by Janssen Pharmaceutical. However, the Contract Cell Manufacturing Business posted lower YoY sales in cumulative Q3, because the trend of fewer patients from overseas visiting partner medical institutions continued amid the spread of COVID-19. On the profit front, the company posted a segment loss as lower sales depressed gross profit.
Regenerative Medicinal Product Business
1H FY09/21 results (out February 5, 2021)
Initiatives in full-year FY09/21
Under a legal framework* for regenerative medicine and cell therapy, MEDINET has been advancing measures for business growth by launching new businesses and focusing on improving its earnings structure. Major business outcomes were as follows.
In December 2017, MEDINET signed a license agreement with Histogenics Corporation (now Ocugen) for the development and sale in Japan of the autologous cultured cartilage NeoCart® (MEDINET’s development code: MDNT01). In May 2019, Histogenics and Medavate Corp. signed an asset transfer agreement for NeoCart®, which included the product’s licensing agreement between MEDINET and Histogenics. However, there had been no asset transfer from Ocugen to Medavate involving the autologous cultured cartilage NeoCart®, and Ocugen terminated the asset transfer agreement in May 2021. Ocugen seeks to recommence development of NeoCart® in the US, toward which end it has begun consultations with the FDA concerning additional trial protocols. MEDINET plans to move ahead with discussions with Ocugen, with a view to deciding development plans for MDNT01 in Japan.
In partnership with the National Cancer Center Japan and Keio University, MEDINET has been researching a SARS-CoV-2 antigen-pulsed autologous dendritic cell vaccine against COVID-19. It had planned to commence Phase I clinical trials of the autologous dendritic cell vaccine by around mid-2021, but in discussions with Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) it was determined that nonclinical testing also would be necessary. Accordingly, MEDINET now plans to commence Phase I clinical trials in 2022 at the earliest.
In April 2021, the company concluded a new joint research agreement with National University Corporation Kyushu University regarding practical application of the regenerative medicinal product α-GalCer/DC in the treatment of chronic heart failure. MEDINET aims to promote the practical application of α-GalCer/DC as a new product for treating chronic heart failure, based on its ability to suppress chronic inflammation through the activation of natural killer T cells, a subset of immune cells. Investigator-initiated Phase I/IIa clinical trials were completed, and the company is now preparing for the launch of investigator-initiated Phase IIb clinical studies.
In December 2020, the company announced that it had entered a joint research agreement with Medical Corporation Koshikai regarding the effectiveness of immuno-cell therapy in preemptive medicine. In the research, it will administer immuno-cell therapy to persons at risk of cancers or infectious diseases due to a decline in immune functions, and study changes in immune parameters before and after the treatment with the goal of applying immuno-cell therapy in preemptive medicine.
Sales and losses
Sales declined YoY due to lower sales at the Contract Cell Manufacturing Business, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19. In addition, MEDINET pushed back the booking of sales on some projects for which it was contracted to develop and manufacture regenerative medicinal products and investigational products as a CDMO. The company began being affected by a drop in the number of overseas patients visiting medical institutions in Q2 FY09/20, and the effects were even more notable from Q3 FY09/20. By quarter, sales were JPY131mn in Q3 FY09/20 (April–June 2020; -48.2% YoY), JPY145mn in Q4 FY09/20 (July–September 2020; -51.1% YoY), JPY140mn in Q1 FY09/21 (October–December 2020; -52.6% YoY), and JPY135mn in Q2 FY09/21 (January–March 2021; -36.0% YoY).
Gross profit fell to JPY50mn (-78.4% YoY) due to lower sales, and the operating loss grew YoY despite SG&A expenses falling to JPY595mn (-1.2% YoY).
The company recorded a JPY6mn gain on investments in investment partnerships as non-operating income. Extraordinary gains came to JPY30mn, including a JPY24mn gain on reversal of stock warrants.
Contract Cell Manufacturing Business
The Contract Cell Manufacturing Business posted lower YoY sales in 1H FY09/21, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19. In addition, the company pushed back the booking of sales on some projects for which it was contracted to develop and manufacture products as a CDMO, from Q2 to Q3. On the profit front, the company posted a segment loss as lower sales depressed gross profit.
Specified Cell Products Manufacturing Business
Sales in the Specified Cell Products Manufacturing Business were JPY239mn (-45.9% YoY), reflecting a drop in the number of patients—mostly foreign visitors to Japan—at medical institutions with which MEDINET has signed an agreement for contracted manufacturing of specified cell products. In Japan as well, the number of patients decreased owing to movement restrictions under the state of emergency.
Quarterly sales began being affected by a drop in the number of overseas patients visiting medical institutions in Q2 FY09/20, and the effects were even more notable from Q3 FY09/20. By quarter, sales were JPY123mn in Q3 FY09/20 (-43.8% YoY), JPY126mn in Q4 FY09/20 (-50.4% YoY), JPY121mn in Q1 FY09/21 (-54.0% YoY), and JPY118mn in Q2 FY09/21 (-34.1% YoY).
According to the Japan National Tourist Organization (JNTO), the number of overseas visitors to Japan totaled 7,000 in April–June 2020 (-99.9% YoY), 26,000 in July–September 2020 (-99.7% YoY), 143,000 in October–December 2020 (-98.1% YoY), and 66,000 in January–March 2021 (-99.2% YoY).
Regenerative Medicinal Product Business
In 1H FY09/21, there were delays in some of the company’s R&D activities.
Financial position and fundraising
Total assets stood at JPY5.7bn (+JPY499mn versus end-FY09/20) and cash and deposits were JPY4.1bn (+JPY434mn). Investment securities totaled JPY581mn (+JPY153mn).
Total net assets were JPY5.3bn (+JPY461mn versus end-FY09/20). The net loss in 1H FY09/21 led to a JPY510mn drop in retained earnings versus end-FY09/20, but capital stock and capital surplus both increased by JPY425mn due to the exercise of stock acquisition rights. In addition, in January 2021 the company reduced capital stock by JPY4.3bn and capital surplus by JPY3.0bn to cover the deficit in retained earnings brought forward. This resulted in a JPY7.4bn increase in retained earnings, but no change to total shareholders’ equity.
In August 2020, the company announced the issue of the 17th series of share acquisition rights (with a clause to revise the exercise price). The number of dilutive shares was 19mn, funds to be raised was JPY1.9bn, and the exercise period was September 2020–September 2022. During October 2020–March 2021, 15,805,000 shares were issued upon the exercise of the 17th series of stock acquisition rights. The total exercise price was JPY1.0bn.
Q1 FY09/21 results (out February 5, 2021)
Initiatives in full-year FY09/21
Under a legal framework* for regenerative medicine and cell therapy, MEDINET has been advancing measures for business growth by launching new businesses and focusing on improving its earnings structure. Major business outcomes were as follows.
In December 2020, the company announced that it had entered a joint research agreement with Medical Corporation Koshikai regarding the effectiveness of immuno-cell therapy in preemptive medicine. In the research, it will administer immuno-cell therapy to persons at risk of cancers or infectious diseases due to a decline in immune functions, and study changes in immune parameters before and after the treatment with the goal of applying immuno-cell therapy in preemptive medicine.
Sales and losses
Sales declined YoY due to lower sales at the Contract Cell Manufacturing Business, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19. The company has been affected by a drop in the number of overseas patients visiting medical institutions since Q2 FY09/20. By quarter, sales were JPY211mn in Q2 FY09/20 (January–March 2020; -16.7% YoY), JPY131mn in Q3 FY09/20 (April–June 2020; -48.2% YoY), JPY146mn in Q4 FY09/20 (July–September 2020; -52.1% YoY), and JPY140mn in Q1 FY09/21 (October–December 2020; -52.7% YoY).
Gross profit fell to JPY22mn (-84.7% YoY) due to lower sales, and the operating loss grew YoY as SG&A expenses climbed to JPY328mn (+4.2% YoY).
Non-operating losses came to JPY31mn. The company recorded a JPY33mn loss on investments in investment partnerships as operating expenses. Extraordinary gains came to JPY30mn. The company recorded items including a JPY24mn gain on the reversal of share subscription rights.
Contract Cell Manufacturing Business
The Contract Cell Manufacturing Business posted lower YoY sales in Q1, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19. On the profit front, the company posted a segment loss as lower sales depressed gross profit.
Sales in the Specified Cell Products Manufacturing Business were JPY121mn (-54.0% YoY), reflecting a drop in the number of patients—mostly foreign visitors to Japan—at medical institutions with which MEDINET has signed an agreement for contracted manufacturing of specified cell products.
Quarterly sales have trended down as the number of overseas patients visiting medical institutions has declined since Q2 FY09/20 due to the COVID-19 pandemic. By quarter, sales were JPY179mn in Q2 FY09/20 (-19.0% YoY), JPY123mn in Q3 FY09/20 (-43.8% YoY), JPY126mn in Q4 FY09/20 (-50.4% YoY), and JPY140mn in Q1 FY09/21 (-52.6% YoY).
According to the Japan National Tourist Organization (JNTO), the number of overseas visitors to Japan totaled 3.9mn in January–March 2020 (-51.1% YoY), 7,000 in April–June 2020 (-99.9% YoY), 26,000 in July–September 2020 (-99.7% YoY), and 143,000 in October–December 2020 (-98.1% YoY).
Regenerative Medicinal Product Business
Losses in the Regenerative Medicinal Product Business narrowed in Q1 as R&D expenses shrank as a result of delays in some R&D activities.
Financial position and fundraising
Total assets stood at JPY5.9bn (+JPY642mn versus end-FY09/19) and cash and deposits were JPY4.1bn (+JPY418mn). Investment securities totaled JPY711mn (+JPY283mn).
Total net assets were JPY5.4bn (+JPY573mn versus end-FY09/19). The net loss in Q1 FY09/21 led to a JPY309mn drop in retained earnings versus end-FY09/20, but capital stock and capital surplus both increased by JPY294mn due to the exercise of stock acquisition rights. In addition, the valuation difference on available-for-sale securities increased JPY329mn.
In August 2020, the company announced the issue of the 17th series of share acquisition rights (with a clause to revise the exercise price). The number of dilutive shares was 19mn, funds to be raised was JPY1.9bn, and the exercise period was September 2020–September 2022. In October–December 2020, 9,255,000 shares were issued upon the exercise of the 17th series of stock acquisition rights. The total exercise price was JPY577mn.
Full-year FY09/20 results (out November 13, 2020)
Initiatives in full-year FY09/20
Under a legal framework* for regenerative medicine and cell therapy, MEDINET has been advancing measures for business growth by launching new businesses and focusing on improving its earnings structure. Major business outcomes were as follows.
In August 2020, MEDINET and the National Cancer Center Japan concluded a joint research agreement to develop a SARS-CoV-2 antigen-pulsed autologous dendritic cell vaccine against COVID-19. In September 2020, Keio University joined the effort. The Phase I clinical trials for the autologous dendritic cell vaccine are expected to begin by around mid-2021. The National Cancer Center Japan will acquire basic research data, Keio University will provide support for nonclinical studies and the start of the Phase I clinical trials, and MEDINET will create the manufacturing process, acquire basic data, and conduct nonclinical safety studies.
MEDINET started selling rapid COVID-19 antibody test kits—kits that deliver results within roughly 15 minutes—to Japanese medical institutions from September 2020. The products are imported from Medigen Biotechnology Corporation (Medigen; listed on the Taipei Stock Exchange).
In October 2019, the company entered a licensing agreement with Medigen to out-license its gamma-delta T cell culture technology for cancer treatment, and in March 2020, the company completed transfer of the technology the two companies had been jointly developing. Once approved by Taiwanese authorities, Medigen will provide patients in Taiwan with cancer immuno-cell therapies that use MEDINET’s gamma-delta T cell culture technology via affiliated medical institutions. MEDINET will receive royalty payments from Medigen.
In October 2019, the company concluded a joint research agreement with the National Cancer Center Japan regarding practical application of a new cancer immunotherapy related to heat shock protein 105 (HSP105), a cancer antigen protein.
In November 2019, the company concluded a joint research agreement with Kyoto Prefectural University of Medicine with the goal of practical application of a specific B cell removal method using immune cells (BAR-T cells) with chimeric receptors (B-cell antibody receptors [BAR]) introduced by gene transfer to treat diseases caused by the production of autologous neutralizing antibodies. The two parties also filed a joint patent application for this technology.
In November 2019, the company entered a joint research agreement with Kyushu University with the goal of practical application of regenerative medicinal products in the treatment of chronic heart failure. The company said that as of November 2020, a paper on the final results of investigator-initiated Phase I/IIa clinical trials of α-GalCer/DC in patients with chronic heart failure was being prepared.
In January 2020, MEDINET obtained a license for the manufacture of regenerative medicinal products at the Shinagawa Cell Processing Facility (Shinagawa CPF), according to “The Act on Pharmaceuticals and Medical Devices.” With this, the Shinagawa CPF is now approved to manufacture regenerative medicine products, and through further initiatives in this respect the company will reinforce its manufacturing systems toward commercialization of regenerative medicine and cell therapy, aiming to bring regenerative medicine products to market.
Regarding the development of autologous chondrocyte cartilage MDNT01, the transfer of assets based on the asset transfer agreement (signed in FY09/19) between Histogenics Corp. and Medavate Corp. (Histogenics merged with Ocugen and the company name was changed to Ocugen, so the agreement is with Ocugen) related to autologous chondrocyte cartilage implant NeoCart® has been completed, so Medavate has taken over from Histogenics the license agreement for NeoCart® concluded between the company and Histogenics. After the completion of asset transfer from Histogenics to Medavate, the company plans to engage in talks with Medavate regarding the development of autologous chondrocyte cartilage MDNT01.
Sales and profits
Sales declined YoY due to lower sales at the Contract Cell Manufacturing Business, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19. In Q1, sales increased YoY as patient numbers, including those from overseas, grew, but from Q2 onward, sales were down YoY as the number of inbound patients declined. Sales were JPY296mn in Q1 (+18.8% YoY), JPY211mn in Q2 (-16.7% YoY), JPY131mn in Q3 (-48.2% YoY), and JPY146mn in Q4 (-52.1% YoY).
Gross profit fell to JPY291mn (-27.2% YoY) due to lower sales, but operating loss contracted YoY as SG&A expenses fell to JPY1.2bn (-13.6% YoY). SG&A expenses declined as a result of strengthening and thorough implementation of business structural reforms carried out in FY09/19, as well as R&D expense savings due to temporary suspension or stalling of R&D activities amid the spread of COVID-19. From Q1 through Q3, sales declined, but operating losses narrowed on lower SG&A expenses. The operating loss widened in Q4 on falling sales and rising SG&A expenses.
Non-operating income included a JPY79mn gain on investments in investment partnerships and a JPY20mn provision of allowance for doubtful accounts while non-operating expenses included JPY12mn in costs related to the issue of shares to raise funds and JPY8mn for the issue of corporate bonds. The company booked JPY232mn in extraordinary gains and JPY25mn in extraordinary losses in 09/19 but recorded neither this term.
Contract Cell Manufacturing Business
The Contract Cell Manufacturing Business posted lower YoY sales in FY09/20, because fewer patients from overseas visited partner medical institutions amid the spread of COVID-19. On the profit front, the company posted a segment loss as lower sales depressed gross profit.
In the Specified Cell Products Manufacturing Business, sales fell 23.9% YoY to JPY691mn. The YoY decrease mainly reflected a drop in contract cell manufacturing sales driven by a decline in patients—mostly foreign visitors to Japan—at medical institutions with which MEDINET has signed an agreement for contracted manufacturing of specified cell products.
In Q1, sales were up 22.9% YoY to JPY263mn supported by a higher number of patients, including foreign visitors to Japan. From Q2, however, the number of visits to medical institutions by patients from overseas fell due to the pandemic. Consequently, sales declined 19.0% YoY to JPY179mn in Q2, 43.8% YoY to JPY123mn in Q3, and 50.4% YoY to JPY126mn in Q4.
According to the Japan National Tourist Organization (JNTO), the number of overseas visitors to Japan declined to 3.9mn (-51.1% YoY) in January–March 2020, 7,000 (-99.9% YoY) in April–May 2020, and 26,000 (-99.7% YoY) in July–September 2020.
The business posted a segment loss on lower sales and a provision for doubtful accounts, despite revised transaction terms of contracts with contracted medical institutions and business structural reforms implemented in FY09/19. On a quarterly basis, the segment turned profitable from Q2 FY09/19 (January–March 2019) and reported a segment profit of JPY68mn in Q1 FY09/20 (versus a loss of JPY9mn in Q1 FY09/19) on higher sales. Segment sales declined in Q2, but segment profit was up 36.2% YoY to JPY11mn. In Q3, the segment posted a segment loss of JPY51mn (versus profit of JPY17mn in Q3 FY09/19) attributable to a sharp decline in segment sales. In Q4, it posted a segment loss of JPY61mn (versus profit of JPY73mn in Q4 FY09/19) on lower sales and a JPY33mn provision for doubtful accounts (receivables).
Regenerative Medicinal Product Business
The Regenerative Medicinal Product Business narrowed losses as R&D expenses fell due to the temporary suspension and slowing progress of R&D activities amid the spread of COVID-19.
Financial position and fundraising
Total assets stood at JPY5.2bn (+JPY2.2bn versus end-FY09/19) and cash and deposits were JPY3.6bn (+JPY2.2bn). Investment securities totaled JPY427mn (+JPY234mn).
Total net assets were JPY4.8bn (+JPY2.2bn versus end-FY09/19). The net loss in FY09/20 led to a JPY842mn drop in retained earnings versus end-FY09/19, but capital stock increased by JPY1.4bn and capital surplus by JPY1.4bn due to the exercise of stock acquisition rights. In addition, valuation difference on available-for-sale securities increased JPY232mn.
In June 2019, the company issued the 14th series of share acquisition rights (17mn dilutive shares) and 15th series of share acquisition rights (7mn dilutive shares) via third-party allocation. The 14th and 15th series of share acquisition rights were completely exercised in April–May 2020, with 17mn shares issued from the 14th series for a total exercise price of JPY873mn and 7mn shares issued from the 15th series for a total exercise price of JPY398mn.
In June 2020, the company announced the issue of the 16th series of share acquisition rights (with a clause to revise the exercise price). The number of dilutive shares was 16.4mn, funds to be raised was JPY1.9bn, and the exercise period was July 2020–July 2022. The 16th series of share acquisition rights was completely exercised in July¬–August 2020, with 16.4mn shares issued for a total exercise price of JPY1.5bn.
In August 2020, the company announced the issue of the 17th series of share acquisition rights (with a clause to revise the exercise price). The number of dilutive shares was 19mn, funds to be raised was JPY1.9bn, and the exercise period was September 2020–September 2022. As of September 2020, 2.1mn shares had been issued under the 17th series of share acquisition rights, raising JPY208mn including the issue price.
Income statement
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Consolidated results from FY09/09 and nonconsolidated results from FY09/19.
Note: “YoY” figures indicate the rate of year-on-year changes.
Sales
Sales of contract cell processing for immuno-cell therapies (formerly, Immuno-Cell Therapy Total Support Service), which accounted for a majority of the company’s overall sales in FY09/20, are an undisclosed percentage of the amount that patients pay to the clinic performing immuno-cell therapy. As such, the number of new patients and cell processing units directly drives sales. Advertising directly to patients and increases in the number of clinics performing the immuno-cell therapy would naturally impact the number of new patients.
GPM
The company’s gross profit margin exceeded 65% in FY09/09 and FY09/10, due to higher CPC utilization resulting from an increase in the number of patients.
In FY09/11, gross profit margin decreased to 62.8% due to a YoY decline in patient numbers following the Tohoku earthquake, and a resulting drop in the CPC utilization rate.
Since FY09/12, the margin had been on a downtrend due to the fall in sales and rise in labor costs and other expenses, but it exceeded 45% in FY09/16 and FY09/17.
GPM fell to 33.1% in FY09/18 owing to a decline in the number of cell processing units and changes to transaction terms. GPM rose to 37.8% in FY09/19 after changes in transaction terms.
SG&A expenses
The largest component in SG&A expenses after labor (see the Business model section for details) is R&D. (a JPY1.1bn upfront payment from Histogenics was included in FY09/18 for the license agreement for the development and sale of autologous cultured cartilage NeoCart®).
Extraordinary profits and losses
As extraordinary profit in FY09/13, MEDINET reported JPY618mn in gain on the sale of investment securities.
In FY09/14, the company reported extraordinary gain on the sale of investment securities worth JPY440mn and extraordinary loss worth JPY673mn, which included a JPY580mn allowance for doubtful accounts.
In FY09/17, it lowered the book value of some of its fixed assets to the estimated recoverable amount and booked an extraordinary loss of JPY880mn as an impairment loss.
In FY09/18, the company reported extraordinary gains of JPY378mn in gain on the sale of investment securities, and extraordinary losses of JPY551mn on provision for doubtful accounts regarding a loan made to US-based Argos Therapeutics, Inc. and JPY96mn as structural reform expenses.
In FY09/19, the company reported extraordinary gains of JPY144mn in reversal of provision for doubtful accounts regarding a loan made to Argos, JPY62mn on cancellation of shares due to the absorption-type merger of subsidiaries (Institute of Medical Service Management, Inc. and MEDcell Co., Ltd.), and JPY8mn from the sale of investment securities.
Note: Figures may differ from company materials due to differences in rounding methods.
Balance sheet
Note: Figures may differ from company materials due to differences in rounding methods.
Assets
The company has large levels of cash and deposits. As of end-September 2020, it had cash and deposits totaling JPY3.6bn, or 69.4%, of the company’s total assets.
Main components of fixed assets are tangible assets (mainly Shinagawa CPF), totaling JPY715mn.
Liabilities
The company has a high equity ratio of 90.7% (FY09/20) and no interest-bearing debt.
Net assets
Shareholders’ equity increased due to series of new stock issuance from FY09/03 through FY09/20. With the exception of FY09/07, FY09/09, and FY09/10, the company has posted net losses from FY09/04 through FY09/20.
Cash flow statement