Executive Summary

Developing regenerative cell medicines for central nervous system disorders

SanBio was founded as a biotechnology company that develops regenerative cell medicines (nerve regeneration cells) that restore nerve function lost due to diseases or injuries. It is developing regenerative cell medicine SB623 for commercialization mainly in Japan and the US. SanBio group’s independent phase 2 trial (conducted with 61 patients) evaluating SB623 in Japan and the US for the treatment of chronic motor deficit associated with traumatic brain injury (TBI) demonstrated a statistically significant improvement in impaired motor function, the primary endpoint (announced November 2018).

The SanBio group aims to apply for manufacturing and marketing approval of SB623 in Japan as a regenerative medicine for treating chronic motor deficit stemming from TBI. It entered a business partnership with the Hitachi Chemical group for the manufacture of SB623 in March 2018 with a view to establishing a supply chain (manufacture, distribution, and sales) once SB623 is launched, On April 8, 2019, the Ministry of Health, Labour and Welfare (MHLW) awarded SB623 Sakigake Designation as a regenerative cell medicine for chronic motor deficit resulting from TBI. This enables priority regulatory review by the Pharmaceuticals and Medical Devices Agency (PMDA). The agency is giving the company face-to-face advice and holding prior consultations. In June 2020, the MHLW granted SB623 orphan regenerative medicine designation for its efficacy in ameliorating chronic effects from TBI. SanBio looks to leverage these in applying for approval in Japan. In September 2019, the company announced that in the US, the Food and Drug Administration (FDA) had granted SB623 regenerative medicine advanced therapy (RMAT) designation. SanBio is now in active discussions with the PMDA with a view to applying to the MHLW for domestic approval of SB623 as a regenerative medical product. With the launch in Japan of SB623, the company aims to transform itself into a fully integrated pharmaceutical company with a complete value chain supporting development, manufacturing, distribution, and marketing functions, and to become a global leader by 2025.

In 2009, SanBio out-licensed exclusive rights to develop and market SB623 for treating chronic motor deficit from ischemic stroke in Japan to Teijin Limited (TSE1: 3401). Rights have reverted to the company after it terminated the agreement on February 14, 2018. In North America, a phase 2b study (163 patients) the group conducted with Sumitomo Dainippon Pharma (TSE1: 4506; held 5.4% of the company shares as of end-July 2019) failed to demonstrate a statistically significant improvement in the primary endpoint. In December 2019, SanBio suspended joint development with Sumitomo Dainippon Pharma and canceled the joint development and license agreement. The company intends to continue developing SB623 as a treatment for chronic motor deficit due to ischemic stroke, and plans to commence consultations with the PMDA with an eye to starting clinical trials in FY01/22 or later.

Many companies are involved in the development and marketing of regenerative medicine, including those involved in drug discovery and development, those specializing in production, and those selling related equipment and services. SanBio develops new drugs (cell medicines) that use allogeneic transplantation (see figure below). In terms of clinical development, SanBio is the most advanced company using regenerative cell medicines to treat central nervous system disorders. One of the company’s strengths is its expertise in large-scale production of cells derived from bone marrow donors by processing and culturing them. SanBio also has expertise in reliable delivery of regenerative cell medicines to patients. Regenerative cell medicine SB623 demonstrated good safety profile without observed tumorigenicity or uncontrolled growth in model animals in preclinical studies. Especially noteworthy was that SB623’s biological effects in animal studies did not require any immunosuppressants.

Product pipeline

SanBio’s lead regenerative cell medicine SB623, is currently being developed for treatment of patients with chronic motor dysfunctions caused by ischemic stroke or traumatic brain injury (TBI). When administered directly into the brain, SB623 can promote regeneration of damaged nerve cells that cause chronic dysfunction. Two development programs (clinical trials) are underway, one targeting chronic motor deficit from ischemic stroke and another chronic motor deficit from TBI. SanBio also plans to further expand development of SB623 (research, non-clinical studies) for other indications such as chronic cerebral hemorrhage, age-related macular degeneration, retinitis pigmentosa, Parkinson’s disease, spinal cord injury, and Alzheimer’s disease. 

In 2010, SanBio out-licensed joint development and marketing rights of SB623 for chronic motor deficit from ischemic stroke in the US and Canada to Sumitomo Dainippon Pharma Co., Ltd. SanBio completed the US-based phase 1/2a clinical trial of SB623 targeting 18 patients with chronic motor deficit from ischemic stroke under a US Food and Drug Administration (FDA) approved study protocol, and confirmed data on safety and efficacy suggesting recovery from motor disabilities in 2014. 

For the US-based phase 2b clinical trial of SB623 for treating chronic motor deficit from ischemic stroke jointly conducted with Sumitomo Dainippon Pharma, the company completed enrollment of 163 patients in December 2017 (enrollment initiated in March 2016). The 163 patients were randomized into three groups: those treated with 2.5mn SB623 cells, 5mn SB623 cells, and the sham surgical control group. At six months after the treatment, no statistically significant difference was observed in the percentage of patients with a 10-point or greater improvement in the Fugl-Meyer Motor Scale (FMMS) score (the primary endpoint) between the treatment and control groups, so the primary endpoint was not achieved, although safety was confirmed. In December 2019, SanBio suspended joint development with Sumitomo Dainippon Pharma and canceled the joint development and license agreement. However, on September 14, 2020, the company announced that following additional analysis of the STR-02 study, a statistically significant difference was found. Currently, the SanBio group is preparing for the next late-phase clinical trials for the ischemic stroke and cerebral hemorrhage programs of SB623.

Regarding the SB623 development program targeting chronic motor deficit resulting from TBI, the company has received FDA’s approval to skip a phase 1 clinical trial and initiated patient enrollment for a phase 2 clinical trial in the US in July 2016. In Japan, a Clinical Trial Notification (CTN) was approved by the Pharmaceutical and Medical Devices Agency (PMDA) in April 2016 to conduct a phase 2 global clinical trial of SB623 for the same indication in Japan and the US, and the Japanese portion of the trial enrolled the first patient in October 2016. Patient enrollment for this trial was completed in April 2018 with a final count of 61 patients versus the initial target of 52. The company was scheduled to announce the trial results by end-FY01/19 (February 2018–January 2019). On November 1, 2018, it announced favorable results that met the primary endpoints of the study, showing a statistically significant improvement in motor function of patients treated with SB623 versus the control group. 

Regarding the development program for TBI in Japan, SB623 regenerative cell therapy received Sakigake Designation from the MHLW in April 2019. In June 2020, the MHLW granted SB623 orphan regenerative medicine designation for its efficacy in ameliorating chronic effects from TBI. These designations have enabled SB623 to receive prioritized consultations and approval review by the PMDA. The company is preparing to apply to the MHLW for manufacture and marketing approval. This is in line with the company’s aim of launching SB623 in the Japanese market before it does so anywhere else. 

Regarding the development program for TBI overseas, the European Medicines Agency (EMA) designated SB623 an advanced therapy medicinal product (ATMP) in April 2019. In the US, SB623 received regenerative medicine advanced therapy (RMAT) designation by the Food and Drug Administration (FDA) in September 2019. As RMAT is an FDA program aimed at promoting commercialization of regenerative medicines, SanBio is gearing its business strategy toward early approval of SB623 in the US. In Japan, the company will prioritize development of SB623 for chronic motor deficit due to TBI, before commencing domestic clinical studies in the ischemic stroke and cerebral hemorrhage programs. 

Strengths and weaknesses

Shared Research views SanBio’s key strengths as its founders’ ability to attract team members with strong track records in regenerative medicine, its work in a field where immune rejection is rare, and its rights to neural regeneration cells and the technology (such as allogeneic transplant and large-scale production technology) required to deliver the drug to market. Weaknesses include: trying to develop and market SB623 on its own is the company’s first such attempt, heavy reliance on the success of SB623, and no track record of its products reaching the market.

Key financial data

Recent updates

Business partnership for development and commercialization of regenerative esophageal implant using MSC2

On November 16, 2021, SanBio Company Limited announced that it entered a business partnership agreement for the development and commercialization of regenerative esophageal implant using MSC2.

The company announced that on November 15, 2021, it signed a business partnership agreement with the US-based D&P Bioinnovations, Inc. for the development and commercialization of regenerative esophageal implant for the regeneration of esophageal tissues in humans.

Under the partnership agreement, SanBio will grant D&P a non-exclusive, non-transferable license to use MSC2 for the development and commercialization of the latter’s regenerative esophageal implant. In return, the company will receive rights to commercialize D&P’s regenerative esophageal implant in Japan, as well as first negotiation rights to commercialize the implant in other parts of Asia. Further, the company will receive tiered royalties (up to 2.5%) for D&P’s sales of the implant outside Japan. In case D&P out-licenses its regenerative esophageal implant to a third party, the company will receive a certain proportion (up to 20%) of the profits D&P earns from out-licensing the implant.

In terms of major expenses, SanBio will cover expenses for the development of manufacturing processes for MSC2 while D&P will shoulder expenses for the development of the regenerative esophageal implant in all countries except Japan.

SanBio says it is confident that this collaboration with D&P, which includes the supply of MSC2 to D&P, will lead to development of a regenerative esophageal implant that will treat and regenerate a damaged esophagus as a result of cancer and other diseases, or trauma. The company also says that the impact of this development on its earnings performance for FY01/22 is minimal, but that the partnership will contribute to enhancing its performance in the longer term.

Trends and outlook

Quarterly trends and results

1H FY01/22 results

1H FY01/22 (February–July 2021) results

Operating revenue: JPY0 (JPY0 operating revenue in 1H FY01/21)

Operating loss: JPY3.1bn (operating loss of JPY2.6bn in 1H FY01/21)

Recurring loss: JPY2.1bn (recurring loss of JPY3.2bn in 1H FY01/21)

Net loss attributable to owners of the parent: JPY2.1bn (net loss of JPY3.2bn in 1H FY01/21)

R&D expenses: JPY2.3bn (+25.2% YoY)

The company generated no operating revenue. Meanwhile, operating expenses were up 18.7% YoY to JPY3.1bn due to R&D expenses increasing 25.2% YoY to JPY2.3bn and SG&A expenses rising 3.8% YoY to JPY802mn. 

Non-operating income came to JPY933mn (JPY8mn in 1H FY01/21). In addition to recording JPY803mn in foreign exchange gains on loans receivable in foreign currency due to forex market fluctuations, the company also recorded JPY126mn in gains from the forgiveness of debts. Non-operating expenses totaled JPY27mn (JPY643mn in 1H FY02/21) after the company recorded JPY24mn in interest expenses and JPY3mn in financing costs. Due to the company generating positive non-operating income, the recurring loss shrank JPY1.1bn to JPY2.1bn.

Against the company's forecasts for 1H FY01/22 consolidated results, announced March 17, 2021, the operating loss, recurring loss and net loss were better-than-forecast by a respective JPY440mn, JPY1.4bn and JPY1.4bn. The operating loss was smaller because budgeted R&D expenses and manufacturing-related expenses were carried forward to 2H, and the recurring loss and net loss were smaller because of the booking of foreign exchange gains as a result of the yen depreciating.

Business conditions

R&D expenses increased JPY452mn YoY to JPY2.3bn (+25.2% YoY) owing primarily to manufacturing expenses in preparation for applying for regulatory approval of SB623 targeting chronic motor deficit from traumatic brain injury (TBI).

In February 2021, the company established Singaporean subsidiary SanBio Asia Pte. to expand its sales channel in Asia.

Full-year company forecast

FY01/22 (February 2021–January 2022) company forecast

The company does not expect to generate operating revenue in FY01/22. It forecasts operating loss of JPY5.8bn (versus JPY5.8bn operating loss in FY01/21), recurring loss of JPY5.9bn (JPY6.5bn recurring loss), and net loss attributable to owners of the parent of JPY5.9bn (JPY3.4bn net loss). SanBio assumes a rate of JPY110.00/USD, and R&D budgets of JPY3.8bn (a YoY decrease of 6.2%). The company made no change to its FY01/22 forecast at the time of 1H results announcement.

The company is preparing to apply for regulatory approval in Japan for SB623 targeting chronic motor deficit resulting from TBI with the aim to maximize the value of SB623 by concentrating its management resources. At the same time, it plans to prioritize preparations for the development of SB623 for cerebral infarction and cerebral hemorrhage indications in Japan. The company has said it will disclose specifics on the design of clinical trials and the content of development for both programs as soon as these have been finalized.

Pipeline update

In April 2019, the Ministry of Health, Labour and Welfare (MHLW) awarded SB623 Sakigake Designation as a regenerative medicine. In June 2020, the MHLW granted SB623 orphan regenerative medicine* designation for its efficacy in ameliorating chronic effects from TBI.

If a regenerative medicine product receives the orphan designation, the product developer can generally expect the following benefits: 1) Product developers can receive subsidies for or report as tax credits part of the development expenses incurred from the day of orphan designation to the filing of manufacturing and marketing approval; 2) Product developers can receive guidance and consultation as well as priority review from the Ministry of Health, Labour and Welfare, the Pharmaceuticals and Medical Devices Agency (PMDA), and the National Institute of Biomedical Innovation, Health and Nutrition; 3) The re-examination period for products may be extended up to 10 years.

SanBio initially planned to file for manufacturing and marketing approval of SB623 as a regenerative cell medicine during FY01/21 (February 2020–January 2021), but announced on December 15, 2020 that there was a high likelihood this could be delayed. There is a risk of the filing being delayed based on the various stages in the filing process such as discussions with the regulatory authorities and work involved in submitting the various required materials for the filing.

As it prepares to file for approval, SanBio is also making preparations to build a sales structure for after SB623 is approved in Japan. Led by the Medical Affairs Division, the company is setting up a structure to support medical institutions.

According to the company, it needs to resolve the following three issues before filing for domestic manufacturing and marketing approval. First, transfer technology to the new contract manufacturing organization (CMO), which appears to be mostly completed. Second, establish the management system required for commercial production; steady progress in line with plans has been made on this front. Third, calibrate standards tests to meet requirements. SanBio has also made steady progress here and is on track with plans.

The US Food and Drug Administration (FDA) granted SB623 a Regenerative Medicine Advanced Therapy (RMAT) designation. RMAT is an FDA program aimed at promoting commercialization of regenerative medicine, so the SanBio group looks to step up its business strategy to facilitate rapid approval in the US. Moving forward, the company plans to liaise with the FDA as it develops a clinical trial design.

In Japan, the company will prioritize development of SB623 for chronic motor deficit due to TBI, before commencing domestic clinical studies in the ischemic stroke and cerebral hemorrhage programs.

As for the ischemic stroke program of SB623, SanBio conducted additional analysis of the STR-02 study and reassessed the endpoints for the US-Japan global Phase 2 TBI trial from the perspective of minimal clinically important difference (MCID)^*. In September 2020, the company evaluated the efficacy of SB623 at six months in 77 patients with infarct areas smaller than a specified size (47% of all patients enrolled in the trial) based on composite FMMS^** endpoints^***. An improvement was observed in 49% of the 51 patients treated with SB623 versus 19% of the 26 patients in the control sham group, confirming a 30pp difference. This was a statistically significant difference (p-value of 0.02). SanBio does not believe the clinical significance of the composite endpoint is inferior to the originally established primary endpoint.

In response to this outcome, the SanBio group has resumed preparations for domestic clinical trials of the next SB623 ischemic stroke and cerebral hemorrhage programs and looks to have discussions with the Pharmaceuticals and Medical Devices Agency (PMDA). As clinical trials to date for chronic motor dysfunction caused by ischemic stroke or traumatic brain injury have already confirmed safety, the development policy is aimed at beginning these clinical trials from Phase 2b. The company is considering when to initiate global clinical trials in Europe, China, and the US. SanBio has various options including in-house development or formation of an alliance.

With a view to further expanding possible indications for SB623, SanBio concluded a business agreement with Ocumension (Hong Kong) Limited in March 2020. The two companies will jointly develop SB623 and MSC2 cell therapy in the Greater China area (Mainland China, Hong Kong, Macao, and Taiwan) for ophthalmic indications such as retinitis pigmentosa and dry age-related macular degeneration.

The COVID-19 pandemic has had no impact on the company’s operations to date.

Outlook

Business strategy

SanBio develops regenerative cell medicines to address diseases with high unmet medical needs that cannot be addressed by existing medical treatments. The company focuses primarily on the field of central nervous system disorders.

Management resources focused on key product: SB623

SanBio’s lead regenerative cell medicine is SB623. Its other regenerative cell medicines, SB618 and SB308, are backup products. For now, the company plans to concentrate its resources on developing SB623. Clinical trials in two SB623 development programs, targeting chronic motor deficit from ischemic stroke and from traumatic brain injury (TBI), are underway. The company also decided to pursue development of SB623 for the additional indication of chronic motor deficit due to cerebral hemorrhage in January 2019.

According to Heart Disease and Stroke Statistics 2020, published by the American Heart Association, stroke patients comprise 2.5% of the US population (roughly 7mn people), 87% of whom (about 6.9mn people) have had ischemic stroke, 10% (about 700,000) cerebral hemorrhage, and 3% (about 200,000) subarachnoid hemorrhage. Patient numbers are growing by roughly 800,000 yearly. Globally, there are about 104.2mn stroke patients: roughly 82.4mn with ischemic stroke, 17.9mn with cerebral hemorrhage, and 9.3mn with subarachnoid hemorrhage.

In Japan, 76.4% of stroke patients who fell ill in 2019 suffered from ischemic stroke, 18.9% cerebral hemorrhage, and about 4.7% subarachnoid hemorrhage (2020 Stroke Databank, Japan).

Based on population demographics, SanBio forecasts that in 2023 the number of patients in the US who suffer stroke may rise to 9.1mn (+33% from 2014), and that 1.1mn (+33% from 2014) may experience a cerebrovascular attack for the first time every year.

SB623 development program targeting chronic motor deficit from traumatic brain injury (TBI)

US market trends for traumatic brain injury treatments

Data published by the Analysis Group, Inc. in March 2017 indicates that the average medical cost per traumatic brain injury patient two years after the injury (i.e., beyond the acute phase) remains high at USD27,000, which is greater than the figure for the control group. The company is stressing the importance of developing an effective treatment for patients suffering chronic effects of brain injury to help those struggling with complications and reduce their financial burden as well as reducing healthcare costs overall.

SB623 development program targeting chronic motor deficit from TBI

The SB623 development program targeting chronic motor deficit from TBI started from phase 2 as the FDA of the US and the PMDA of Japan gave approval to skip a phase 1 trial, based on the results of the phase 1/2a clinical trial conducted in the US targeting chronic motor deficit from ischemic stroke. 

The company announced in November 2018 that the global (US and Japan) phase 2 trial achieved its primary endpoint of a statistically significant improvement in motor function over the control group.

MHLW designated SB623 for the Sakigake Designation System as a regenerative medicine for chronic motor deficit from TBI on April 8, 2019. This designation has led to preferential treatment by PMDA for approval-related consultations and review, which SanBio is leveraging to apply for approval in Japan. 

In June 2020, the MHLW granted SB623 orphan regenerative medicine* designation for its efficacy in ameliorating chronic effects from TBI.

If a regenerative medicine product receives the orphan designation, the product developer can generally expect the following benefits: 1) Product developers can receive subsidies for or report as tax credits part of the development expenses incurred from the day of orphan designation to the filing of manufacturing and marketing approval; 2) Product developers can receive guidance and consultation as well as priority review from the Ministry of Health, Labour and Welfare, the Pharmaceuticals and Medical Devices Agency (PMDA), and the National Institute of Biomedical Innovation, Health and Nutrition; 3) The re-examination period for products may be extended up to 10 years.

SanBio initially planned to file for manufacturing and marketing approval of SB623 as a regenerative cell medicine in Japan in FY01/21 (February 2020–January 2021), but announced on December 15, 2020 that there was a high likelihood this could be delayed.

Regarding the TBI development program overseas, the European Medicines Agency designated SB623 an advanced therapy medicinal product in April 2019.

In September 2019, the FDA granted SB623 RMAT designation in the US. RMAT is a key FDA program to promote regenerative medicines. The company is gearing its business strategy toward early approval of SB623 in the US.

In September, 2020, the company decided to prioritize development in Japan for the ischemic stroke and cerebral hemorrhage programs of SB623, postponing the phase 3 clinical trial that is part of the global TBI program scheduled for FY01/21 to FY01/22 (February 2021–January 2022) or later.

Progress of clinical trials

The independent global (Japan and the US) phase 2 clinical trial evaluating SB623 as a treatment for chronic motor deficit from TBI (initial target of enrolling 52 patients, double-blind trial) began enrolling patients from July 2016 in the US and from October 2016 in Japan; enrollment was completed with 61 patients in April 2018.

In November 2018, SanBio announced that the global (Japan and the US) phase 2 trial achieved the primary endpoint of demonstrating a statistically significant improvement in motor function by the SB623 treated group over the control group.

Efficient information provision activities are essential

Research conducted by SanBio and others indicates that 51.7% of patients suffering from chronic-phase (maintenance) TBI are treated solely at home. Therefore, it is essential that SanBio conduct efficient information dissemination activities that consider this potential market when SB623 is commercialized.

SB623 development program to treat chronic motor deficit from ischemic stroke

In December 2009, SanBio out-licensed exclusive rights to develop and market SB623 for chronic motor deficit from ischemic stroke in Japan to Teijin Limited (TSE1: 3401). The company terminated the agreement in February, 2018. In 2010, SanBio out-licensed joint development and marketing rights in the US and Canada to Sumitomo Dainippon Pharma (TSE1: 4506; held a 5.4% stake in SanBio as of end-July 2019). In December 2019, SanBio suspended joint development with Sumitomo Dainippon Pharma and canceled the joint development and license agreement. Rights for the program have reverted to the company after terminating these agreements.

SanBio performed additional analysis of the STR-02 study. In September 2020, the company evaluated efficacy of SB623 six months after administration to 77 patients with infarct areas below a certain size (47% of all patients enrolled in the trial) using multiple Fugl-Meyer motor scale (FMMS) endpoints. An improvement was observed in 49% of the 51 patients who received SB623 versus 19% of the 26 patients in the control group that received sham surgery, showing statistically significant difference (p-value of 0.02) between the two groups. Based on these results, the SanBio group began preparations to commence late-phase clinical trials for the ischemic stroke and cerebral hemorrhage programs of SB623.

Progress of clinical studies in US

The group conducted a US-based phase 1/2a clinical study with 18 patients suffering from chronic motor deficit resulting from ischemic stroke under an FDA approved study protocol. The study demonstrated safety and efficacy of SB623 in restoring motor functions (2014).

However, the US-based phase 2b study conducted with Sumitomo Dainippon Pharma (163 patients were enrolled from March 2016 to December 2017) failed to show a statistically significant improvement in the primary endpoint*. No safety problems were observed (announced on January 29, 2019).

As for the ischemic stroke program of SB623, SanBio conducted additional analysis of the STR-02 study and reassessed the endpoints for the US-Japan global Phase 2 TBI trial from the perspective of minimal clinically important difference (MCID)^*. In September 2020, the company evaluated the efficacy of SB623 at six months in 77 patients with infarct areas smaller than a specified size (47% of all patients enrolled in the trial) based on composite FMMS^** endpoints^***. An improvement was observed in 49% of the 51 patients treated with SB623 versus 19% of the 26 patients in the control sham group, confirming a 30pp difference. This was a statistically significant difference (p-value of 0.02). SanBio does not believe the clinical significance of the composite endpoint is inferior to the originally established primary endpoint.

In response to this outcome, the SanBio group resumed preparations for domestic clinical trials of the next SB623 ischemic stroke and cerebral hemorrhage programs.

SB623 development program targeting chronic motor deficit due to cerebral hemorrhage

SanBio has reassessed the possible indications for SB623 in response to the positive findings from the global phase 2 trial evaluating the drug for treating chronic motor deficit from TBI conducted in Japan and the US (see above). In January 2019, the company decided to expand the development program for SB623 to include chronic motor deficit from cerebral hemorrhage* as an additional indication, which has a pathophysiology similar to that of TBI. The company is looking to develop this program in Japan and the US. The company plans to start this program from a phase 2 or phase 3 trial, but no details, including development schedule, had been determined as of March 16, 2020.

SB623 development program targeting retinal disease

On March 31, 2020, the company entered a business tie-up with Ocumension of Hong Kong. The agreement aims at R&D and commercialization of cell therapies in the field of ophthalmology. The partners plan to jointly develop SB623 for retinitis pigmentosa and dry age-related macular degeneration and MSC2 cell therapy for optic neuritis.

SB623 could potentially be used for retinal diseases such as age-related macular degeneration, retinitis pigmentosa, and glaucoma due to its strong neuroprotective action. The SanBio group is investigating the indication of age-related macular degeneration first. In this disease, eyesight deteriorates when abnormalities form in the macula (area in the center of the retina that plays an important role in vision) as the number of retinal cells gradually declines during the aging process. An effective treatment would be welcomed due to the large number of patients.

In January 2014, SanBio held an investigational new drug (IND) application meeting with the FDA based on the results of animal trials for retinal disease. Currently the company is conducting non-clinical studies required for regulatory approval for clinical studies targeting dry age-related macular degeneration.

Ocumension will fund the first USD6mn for nonclinical studies and manufacturing development, with any further expenses equally shared by both companies. 

SanBio will grant Ocumension exclusive rights to develop and commercialize SB623 and MSC2 for ophthalmic indications in Greater China (Mainland China, Hong Kong, Macao, and Taiwan). Ocumension in return will bear all costs of clinical trials and commercialization activities in the region.

Further, SanBio may receive up to USD71mn in milestone payments from Ocumension depending on progress in the business alliance. Ocumension will pay the company tiered royalties of up to 15% of net annual sales in Greater China.

Note: SanBio retains all rights to ophthalmic indications outside Greater China.

Formerly, SanBio focused on maximizing out-licensing value

SanBio’s strategy involved developing cell production technology and conducting preclinical development and early-stage clinical trials through the proof of concept (POC) phase, where safety and efficacy in humans are first tested. Then the company would out-license development and marketing rights to larger, multinational pharmaceutical companies.

In order to fund the early clinical development of SB623, SanBio out-licensed its regenerative cell medicine SB623 for ischemic stroke before it received regulatory approval to begin clinical trials. In Japan, it out-licensed development and marketing rights for ischemic stroke to Teijin (terminated as of February 14, 2018). In the US and Canada, it out-licensed development and marketing rights for ischemic stroke to joint development partner Sumitomo Dainippon Pharma (Note: The company has terminated the agreements with Teijin and Sumitomo Dainippon Pharma). On March 31, 2020, SanBio entered a business tie-up with Ocumension of Hong Kong. The partnership aims at R&D and commercialization of regenerative medicine products in ophthalmology. The partners plan to jointly develop SB623 cell therapy for retinitis pigmentosa and dry age-related macular degeneration and MSC2 cell therapy for optic neuritis.

SanBio out-licensed these rights prior to the POC phase due to the need to raise funds during the early development of the product. It intends to make decisions on a case-by-case basis, depending on its partner’s intentions and fundraising needs.

Thanks to obtaining POC of SB623 and the funds acquired through listing its shares, SanBio has raised the necessary funds for development in the near term. Its strategy was to spearhead clinical trials using contract research organizations (CROs), and after increasing product value, out-license them either regionally or globally, depending on which strategy creates the greatest value for shareholders.

SanBio will transform into a pharmaceutical company (independently develop and market products in Japan)

Japan

SanBio terminated a licensing agreement with Teijin Limited (TSE1: 3401; held a 1.9% stake in SanBio as of end-July 2019), to whom it had out-licensed exclusive rights to develop and market the regenerative medicine SB623 for treating stroke in Japan (agreement concluded on December 22, 2009, terminated on February 14, 2018), and as a result, the rights were returned to the company. Concurrently, the company has decided to proceed with the program targeting stroke as well as a program targeting chronic motor deficit from TBI in Japan with the aim of maximizing revenue after marketing SB623.

As mentioned above, by leveraging Japan’s conditional and time-limited marketing approval system for regenerative medicines, SanBio intends to deliver SB623 for the indication of chronic motor deficit from TBI in Japan earlier than in any other market in the world. On April 8, 2019, MHLW awarded regenerative medicine SB623 with the Sakigake Designation^* as a treatment for chronic motor deficit from TBI. This designation has led to priority handling of consultation and approval review by PMDA. Currently the company is receiving face-to-face advice from and holding prior consultations with the agency.

In June 2020, the MHLW granted SB623 orphan regenerative medicine* designation for its efficacy in ameliorating chronic effects from TBI.

If a regenerative medicine product receives the orphan designation, the product developer can generally expect the following benefits: 1) Product developers can receive subsidies for or report as tax credits part of the development expenses incurred from the day of orphan designation to the filing of manufacturing and marketing approval; 2) Product developers can receive guidance and consultation as well as priority review from the Ministry of Health, Labour and Welfare, the Pharmaceuticals and Medical Devices Agency (PMDA), and the National Institute of Biomedical Innovation, Health and Nutrition; 3) The re-examination period for products may be extended up to 10 years.

SanBio plans to file for manufacturing and marketing approval of SB623 as a regenerative medicine in Japan in FY01/21 (February 2020–January 2021), and is in ongoing discussions with the PMDA to this end.

The company thinks it is on track to resolve outstanding issues by the end of FY01/21 in three areas: transferring technology to the new Contract Manufacturing Organization (CMO); the establishment of the management system needed for commercial production; and calibrating standards tests to meet requirements.

With an eye toward establishing a supply chain (structure for manufacture, distribution, and sales) after launching SB623, SanBio formed a business partnership with Hitachi Chemical group regarding manufacture of SB623.

Also in March 2018, the company issued the 13th share acquisition rights with provisions to revise the exercise price (through third-party allotment; estimated net proceeds of JPY15.3bn; the exercise period of share acquisition rights by April 9, 2021). Intended use of the proceeds include JPY8.0bn for establishing structure for manufacture, distribution, and sales after marketing SB623, JPY4.0bn for SB623 development program targeting chronic motor deficit from ischemic stroke in Japan and R&D for expanding target regions to market SB623 in the future, and JPY3.3bn for R&D to expand indications of SB623 and to introduce new drug substances. In May 2019, the company issued shares in an international offering. The proceeds of JPY7.3bn anticipates sales of SB623 in Japan, the US, and Europe. The company plans to use the funds to boost mass production capacity and ensure stable supply of SB623. It plans to ensure inventory of SB623 by enlisting multiple contract manufacturers. It intends to use the inventory to treat chronic motor deficit from TBI in Japan in the first instance.

Overseas

SanBio will decide whether it will independently market SB623 overseas or form a partnership on a case-by-case basis. There are pros and cons to either approach; going it alone would lead to higher profit but entering a partnership would likely expedite commercialization. SanBio plans to choose the most effective method for each region.

Leveraging Japan’s expedited approval system for regenerative medicine

In Japan, regenerative medicine products were newly categorized under the Pharmaceuticals, Medical Devices and Other Therapeutic Products Act (formerly called the Pharmaceutical Affairs Act) on November 25, 2014. Under the previous law, collecting and evaluating data to confirm efficacy of products using human cells required substantial time and resources. The new law requires fewer patients for clinical trials, so efficacy can be established more quickly, and adverse effects can be evaluated in a shorter period. This substantially reduces the cost and time required for approval of these medicines in Japan.

Because regenerative medicine products are derived from living cells and tissues of humans or animals, their properties are different from conventional drugs and medical devices. Under the new legislation in Japan, even if a product using living cells does not have uniform quality, if efficacy can be predicted and safety confirmed, the product can receive expedited regulatory approval under certain conditions and time limits.

In September 2015, the Japanese Ministry of Health, Labor, and Welfare approved the manufacture and sale of allogeneic bone marrow-derived mesenchymal stem cells developed by JCR Pharma (application submitted in September 2014) and skeletal myoblast sheets developed by Terumo (application submitted in October 2014). Terumo’s skeletal myoblast sheets received regulatory approval due to their expected efficacy and based on Terumo’s clinical data on only seven patients.

SanBio plans to bring its products to the market as soon as possible by leveraging Japan’s expedited approval system. The company announced that the global phase 2 clinical trial of SB623 as a treatment for chronic motor deficit from TBI conducted in Japan and the US achieved its primary endpoint as the treatment group demonstrated a statistically significant improvement in motor function over the control group (November 2018). On April 8, 2019, the MHLW granted regenerative medicine SB623 Sakigake Designation as a treatment for chronic motor deficit from TBI. This facilitates priority consultation and review by the PMDA. Currently the company is receiving face-to-face advice from the agency and holding prior consultations with it.

SanBio plans to complete comprehensive evaluation consultations under the Sakigake arrangements and file for approval of SB623 as a regenerative medicine in FY01/21.

Sakigake Designation System

The Sakigake Designation System was unveiled in June 2014 as part of the “Strategy of SAKIGAKE” by an MHLW project team to lead the world in the practical application of innovative medical products. It is a scheme for rapid authorization of innovative pharmaceutical products initially developed in Japan for which prominent effectiveness can be expected based on preclinical and early stages of clinical trials. The objective is to shorten the review period to six months by utilizing the preferential consultation framework and priority review*.

Requirements for Sakigake Designation

A pharmaceutical drug must meet the following four conditions to obtain Sakigake Designation:

• Be an innovative treatment: In principle, the pharmaceutical drug must have a different mechanism of action from currently available drugs (if not a new mechanism of action, it must be the first time the target indication is being sought and/or must have an innovative drug delivery system that dramatically improves efficacy)
• Must target a serious disease: The drug must target one of the following diseases
• A serious life-threatening disease
• A disease with persisting symptoms without cure (that adversely affect the quality of life, including social functioning)
• Be highly effective in treating target disease: Either no treatment is currently approved or the drug is expected to be dramatically more effective than currently available drugs (including dramatic improvement in safety)
  
• Must have the intent to develop and file the drug in Japan before any other global markets: The drug should to be developed in Japan from the early stage of clinical research with a plan to submit approval application in Japan first (simultaneous filings in other countries are acceptable). In order to confirm that the development is steadily progressing in Japan, it is desirable that the drug meets either or both of the following conditions:
• First-in-Human (FIH) study conducted in Japan
• Proof of Concept (POC) study conducted in Japan

Benefits of Sakigake Designation

Benefits for pharmaceutical drugs reviewed under the Sakigake Designation System are as follows:

• Preferential consultations: Sakigake-designated products are treated as priority consultation items by PMDA (time from material submission to trial consultations is shortened)
• Enhanced pre-evaluation: Sakigake-designated products qualify for preliminary comprehensive evaluation consultation by PMDA
  
• Priority review: Sakigake-designated products are provided a priority review as they are deemed to have high medical needs in accordance with Article 14, paragraph 7 of The Law on Securing Quality, Efficacy and Safety of Products including Pharmaceuticals and Medical Devices
  
• Assignment of a concierge: A review partner assigned by PMDA will provide progress management consultation regarding development of the Sakigake-designated product and coordinate approval application filers with relevant review departments
  
• Reexamination period: The reexamination period for evaluating diseases, disabilities, or deaths suspected to be due to adverse effects of the drug as well as suspected infections and other uses for drugs other than those recognized as treatments for rare diseases is typically six years after approval, but this can be extended (for up to 10 years) for Sakigake-designated products.
  

Financial strategy

Issued 13th share acquisition rights with provisions to revise the exercise price via third-party allotment

In March 2018, SanBio issued the 13th share acquisition rights with provisions to revise the exercise price (through third-party allotment; estimated net proceeds: JPY15.3bn).

Intended use of proceeds includes JPY8.0bn for establishing structure for manufacture, distribution, and sales after marketing SB623 (planed period of spending: April 2018–January 2022), JPY4.0bn for the SB623 development program targeting chronic motor deficit from ischemic stroke in Japan and R&D for expanding target regions to market SB623 in the future (April 2018–January 2022), and JPY3.3bn for R&D to expand indications of SB623 and to introduce new drug substances (April 2018–January 2022).

SanBio raised JPY11.1bn in January 2019 through the issuance of share acquisition rights.

Background of fund raising

Since its establishment in 2001 as a biotechnology company which discovers new drugs, SanBio has focused on developing its propriety regenerative medicine product SB623 for the treatment of central nervous system disorders of stroke and chronic motor deficit from TBI. The company thinks the key for a biotechnology venture company which discovers new drugs to be successful in commercialization is ensuring the safety and efficacy of its products and an approach to development with an eye toward commercialization.

Regarding ensuring the safety and efficacy of its products, the company completed a phase 1/2a clinical trial targeting 18 patients with chronic motor deficit from ischemic stroke in the US in 2014, and the results showed data on safety and efficacy of SB623 indicating recovery from motor disabilities. In its effort to develop products with an eye toward commercialization; a) it is focusing on developing products for neurological disorders of stroke and chronic motor deficit from TBI that have a large number of patients, b) it expects profitability after delivering products to the market by using allogeneic transplantation, c) it has secured technology for large-scale production, and d) it has avoided using cells with ethically questionable origins such as those derived from aborted fetus.

Given development progress of SB623, SanBio needs to promptly prepare to implement structure for manufacture, distribution, and sales after delivering SB623 to the market. As a part of these initiatives, as mentioned above, the company has formed a business partnership with Hitachi Chemical group for manufacture of the regenerative medicine SB623. In addition, following termination of a licensing agreement with Teijin, rights for the SB623 program targeting chronic motor deficit from ischemic stroke has been returned to the company. The company is advancing development of the program on its own with the aim of delivering SB623 to the Japanese market before anywhere else in the world and maximizing revenue after doing so.

Long-term commitment lines of credit agreements

In FY01/19, SanBio secured borrowings for investment in future growth by concluding long-term commitment lines of credit agreements with Sumitomo Mitsui Banking Corporation (JPY1.0bn) and MUFG Bank, Ltd. (JPY2.0bn) in November 2018 and with Mizuho Bank, Ltd. (JPY2.0bn) in December 2018.

Share issue via international offering

On May 14, 2019, the company raised JPY7.1bn through an international offering of 2mn shares. The funding anticipates SB623 sales in Japan, the US, and Europe. The first priority for the funds is to boost mass production capacity for SB623 and second is to ensure stable supply and inventory of SB623 by signing up multiple contract manufacturers. The company plans for inventory to be allocated to treat chronic motor deficit from TBI in Japan in the first instance.

Other products in the pipeline

SB623: expanding indications

For its regenerative cell medicine SB623, SanBio plans to expand the indications beyond chronic effects of stroke and traumatic brain injury, deciding in January 2019 to pursue the additional indication of chronic motor deficit from cerebral hemorrhage. In March 2020, the company launched a business partnership with Hong Kong based Ocumension and joint development program for retinal diseases. 

Other indications under plan include Parkinson’s disease, spinal cord injury, and Alzheimer’s disease. Most of these are central nervous system disorders without effective treatments. According to the company, in the US there were 2.1mn age-related macular degeneration patients, 1.5mn Parkinson’s disease patients, and 5.1mn Alzheimer’s disease patients, indicating a large potential market.

Joint research

SanBio sees considerable potential for SB623 as a treatment for dementia based on data gathered in the process of developing it as a regenerative medicine product to treat chronic motor deficit from TBI and ischemic stroke. Thus the company and its founding scientist Professor Hideyuki Okano of Keio University School of Medicine have started joint research on SB623 as a treatment for dementia (including Alzheimer‘s disease). The study will evaluate the potential of SB623 using animal models for dementia. The company says it aims to gather data and begin a clinical trial as soon as possible.

The company is also engaged in a joint research project on ALGERNON (altered generation of neurons), a compound that promotes neurogenesis, led by Professor Masatoshi Hagiwara of Kyoto University. The company is responsible for efficacy evaluation in stroke model animals, while Kyoto University oversees the whole project and conducts a pharmacological study of the compound in the treatment of stroke.

Regenerative cell medicines SB618 and SB308

SB618: Similar to SB623, SB618 is a regenerative cell medicine to restore damaged nerve functions. Its effects have been demonstrated for peripheral nerve damage and spinal cord injury in animal models. SanBio is developing this drug as a treatment for peripheral nerve damage, spinal cord injury, and multiple sclerosis. In monkey model studies for peripheral nerve damage, transplanting SB618 together with collagen tubes after resection of peripheral nerves prompted regeneration of peripheral nerves and the restoration of nerve function.

SB308: SB308 is derived from bone marrow stem cells. SB308 was in the drug discovery research phase as of January 2016. The company plans to develop it as a treatment for muscular dystrophy. According to the company, SB308 regenerative cell medicine has been shown to be a potential treatment for muscular dystrophy in mouse model experiments.

Acquires patents for mesenchymal stem cell derived cell therapies MSC1 and MSC2

In addition to central nervous system disorders, SanBio is expanding the development pipeline for SB623 to include inflammatory diseases and cancer

In September 2018, SanBio obtained a patent portfolio for MSC1 and MSC2, which are cell therapy drugs derived from mesenchymal stem cells^*1. The patents concern technology to strengthen anti-inflammatory and pro-inflammatory functions while maintaining the safety and tolerability features of mesenchymal stem cells by stimulating specific Toll-like receptors (TLR)^*2 found in the mesenchymal stem cell membranes. Cells with an enhanced anti-inflammatory function (MSC2) and those with an enhanced pro-inflammatory function (MSC1) have greater migration to the injury site and higher homogeneity than normal mesenchymal stem cells. The company expects these two compounds to demonstrate superior safety and efficacy.

SB623 is effective against a broad range of central nervous system disorders, whereas the MSC1/MSC2 patents concern cells with potential to treat inflammatory disorders and cancers. The technology covered by the patents enhances anti-inflammatory properties of mesenchymal stem cells by stimulating TLR. It is a unique technology in that it can also produce cells with pro-inflammatory properties by applying a different stimulus to the same location. For this reason, the company believes the technology holds great potential and that MSC1/MSC2 will create substantial synergies with SB623. Although one of the greatest challenges in the commercialization of regenerative medicines has been to establish volume production technology, MSC1/MSC2 offer the advantage of sharing much of the manufacturing process with SB623, because they are mesenchymal stem cells. The company says that it can start up volume production of MSC1/MSC2 quickly to accelerate treatment.

On March 31, 2020, the company entered a business tie-up with Ocumension of Hong Kong. The agreement aims at R&D and commercialization of cell therapies in ophthalmology. In addition to SB623, the partners plan to jointly develop MSC2 cell therapy for optic neuritis.

Business

Overview

Transformation from biotechnology to pharmaceutical company

SanBio is a biotechnology company that develops regenerative cell medicines to restore nerve functions lost due to disease and injury.

SanBio plans to independently apply for approval of the regenerative medicine SB623 as a treatment for chronic motor deficit from TBI in Japan during FY01/21 (February 2020–January 2021) by leveraging Japan’s conditional and time-limited approval system for regenerative medicines. The company also aims to put into place a post-marketing supply chain for SB623 with an eye on transforming from a biotechnology company into a pharmaceutical company by 2020.

However, a phase 2b trial (163 patients) the company conducted with Sumitomo Dainippon Pharma (TSE1: 4506; held 5.4% of the company shares as of end-July 2019) failed to demonstrate a statistically significant improvement in the primary endpoint. No safety problems were observed (announced January 29, 2019).

On December 13, 2019, the SanBio group and Sumitomo Dainippon Pharma Co., Ltd. (TSE1: 4506) announced that they had agreed to suspend joint development in North America (US and Canada) of SB623 targeting chronic motor deficit from ischemic stroke and to cancel the 2014 joint development and license agreement.

On March 31, 2020, the company entered a business tie-up with Ocumension of Hong Kong. The agreement aims at R&D and commercialization of cell therapies in the field of ophthalmology. The partners plan to jointly develop SB623 for retinitis pigmentosa and dry age-related macular degeneration and MSC2 cell therapy for optic neuritis.

SanBio aims to become a global leader (commercialization of regenerative medicine SB623 in global markets and a company capable of supplying products worldwide) by 2025.

Business model

The company’s business model has been to develop regenerative cell medicines through early phases of clinical studies and then to out-license products to pharmaceutical companies.

• SanBio’s regenerative medicines are produced in-house and require extensive expertise.
• Therefore, even after the company licenses out rights to develop and market its regenerative medicine to other companies, it produces and supplies the product to partner companies.
  
• Upon commercialization, SanBio receives royalty income on sales and is also paid for supplying the product to the partner company (this is in contrast to the typical arrangement by drug discovery-oriented biotechnology companies that only receive royalty payments on sales).
  
• SanBio has concluded out-licensing agreements with Teijin Limited, Sumitomo Dainippon Pharma Co., Ltd., and Ocumension of Hong Kong
  

However, SanBio terminated a licensing agreement with Teijin, to whom the company had out-licensed exclusive rights to develop and market the regenerative medicine product SB623 for treating stroke in Japan (agreement concluded on December 22, 2009, terminated on February 14, 2018), and the rights were returned to the company.

Concurrently, the company has decided to proceed the program as well as a program targeting chronic motor deficit from traumatic brain injury (TBI) on its own in Japan, with the aim of maximizing revenue after delivering the product to the market. SanBio is conducting joint research with CareNet, Inc. and four other companies on appropriate use and diffusion, and stable distribution of regenerative medicines. With an eye toward establishing a supply chain (structure for manufacture, distribution, and sales) after launching SB623, the company entered into a business partnership agreement with Hitachi Chemical group regarding manufacture of SB623 in March 2018.

In March 2018, SanBio issued the 13th share acquisition rights with provisions to revise the exercise price (through third-party allotment; estimated net proceeds: JPY15.3bn).

The company aims to transform itself into a fully integrated pharmaceutical company with a complete value chain supporting development, manufacturing, distribution, and marketing functions in place. It plans to independently manufacture and market SB623 in Japan while overseas it looks to market independently or partner with another company to grow into a global leader (commercialize regenerative medicine SB623 in global markets and become a company that can supply products worldwide).

Building an in-house manufacturing and marketing structure

Manufacturing: SanBio has established volume production technology for SB623 and maintains its vision of providing the product to a large number of patients, just like protein formulations and antibody drugs. The company has signed a contract manufacturing agreement with Hitachi Chemical Co., Ltd. (TSE1: 4217) regarding the manufacture of SB623 for late-phase clinical trials and commercial sales.

Distribution and sales: It is essential to deliver SB623 to patients who need it and for doctors to use it in an appropriate way. To this end, the company has formed multiple capital and business alliances (see Recent updates section for details).

SanBio formed a business and capital alliance with CareNet, Inc. (TSE Mothers: 2150) and Medical Incubator Japan K.K. to ensure appropriate use of SB623 by doctors and accelerate market penetration of the product. CareNet has a network of 140,000 doctor members around the country, as well as many years’ experience in producing healthcare education and training programs. Medical Incubator Japan invests in pharmaceutical startups and provides business support to pharmaceutical companies through a consortium. SanBio plans to maximize their strengths to ensure appropriate use and spread of SB623

The company also formed a business and capital alliance with Vital KSK Holdings, Inc. and ASTEM Inc. to facilitate distribution of SB623. The three companies are to discuss and research distribution methods and prepare a system that ensures smooth distribution and market penetration of the product. The three companies seek to establish a structure that will swiftly ensure appropriate use of SB623 and accelerate its spread following marketing.