Executive Summary

Business overview

SanBio was founded as a biotechnology company that develops regenerative cell medicines (nerve regeneration cells) that restore nerve functions lost due to diseases or injuries. The company is developing its pipeline, including its mainstay regenerative cell medicine SB623, mainly in Japan and the US. SB623 has eight development programs, targeting chronic motor deficit associated with traumatic brain injury (TBI), ischemic stroke, and cerebral hemorrhage, as well as other conditions. Of these, the TBI program is the most advanced, and in March 2022, SanBio completed the application process for manufacturing and marketing approval of SB623 (its first regenerative medicinal product) in Japan as a treatment for chronic effects of TBI.

In April 2019, SB623 received Sakigake designation from the Japanese Ministry of Health, Labour and Welfare (MHLW) as a treatment for chronic effects of TBI. This enabled priority regulatory review by the Pharmaceuticals and Medical Devices Agency (PMDA) as well as face-to-face advice and prior consultations. Also, in June 2020, SB623 received orphan regenerative medicine designation from MHLW for its efficacy in ameliorating chronic effects from TBI. The company also announced in September 2019 that SB623 received regenerative medicine advanced therapy (RMAT) designation from the US Food and Drug Administration (FDA). 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 in the business by 2025.

In March 2018, SanBio entered a business partnership with the Hitachi Chemical Co., Ltd. (now Showa Denko Materials Co., Ltd., an unlisted subsidiary of Showa Denko K.K. [TSE Prime: 4004]) for the manufacture of SB623 with a view to establishing a supply chain (manufacture, distribution, and sales) once SB623 is launched. Further, in August 2019, the company entered into a business alliance with Suzuken Co., Ltd. (TSE Prime: 9987) for the distribution of SB623. The two companies have built R-SAT^® (an acronym for Regenerative Medicine, Safety, Accuracy, and Traceability), a regenerative medicine distribution management system.   

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 (TSE Prime: 3401; held 1.9% of the company's shares as of end-January 2022). Rights 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 Pharma Co., Ltd. (formerly Sumitomo Dainippon Pharma; TSE Prime: 4506; held 5.4% of the company shares as of end-January 2021) failed to demonstrate a statistically significant improvement in the primary endpoint. In December 2019, SanBio suspended joint development with Sumitomo Pharma and canceled the joint development and license agreement. The company intends to continue development of the SB623 ischemic stroke program independently.

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

In FY01/22, the company generated no operating revenue. It posted operating loss of JPY6.6bn (loss of JPY5.8bn in FY01/21), recurring loss of JPY4.6bn (loss of JPY6.5bn) and net loss attributable to owners of the parent of JPY4.7bn (loss of JPY3.4bn) Operating expenses were up 14.1% YoY to JPY6.6bn, comprising R&D expenses of JPY5.0bn (+21.7% YoY) and SG&A expenses of JPY1.7bn (-3.7% YoY). R&D expenses increased due to mounting manufacturing-related expenses associated with applying for manufacturing and marketing approval of the SB623 TBI program in Japan. The exchange rate was JPY110.73/USD (JPY106.34/USD in FY01/21).

The company filed for approval of SB623 for its chronic traumatic brain injury (TBI) program on March 7, 2022, but does not forecast any revenue from these activities in FY01/23 since approval has not been given and the drug price has not yet been determined. It forecasts an operating loss of JPY5.9bn (versus JPY6.6bn operating loss in FY01/22), recurring loss of JPY6.0bn (JPY4.6bn recurring loss), and net loss attributable to owners of the parent of JPY6.0bn (JPY4.7bn net loss). SanBio assumes an exchange rate of JPY115.00/USD. The company is building a manufacturing, logistics and sales system to promote SB623 in Japan, and plans operating expenses of JPY5.9bn (-11.5% YoY; including approval-related expenses), of which JPY4.1bn (-17.5% YoY) relate to R&D. 

The company stated that this forecast will only remain in place until the SB623 TBI program is approved. It will revise its forecast on a post-approval basis once approval is expected to be given. Following this, the company intends to prioritize the development of the SB623 ischemic stroke program and the cerebral hemorrhage program 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.

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. SanBio also plans to further expand development of SB623 (research, non-clinical studies) for other indications such as chronic effects of cerebral hemorrhage, age-related macular degeneration, retinitis pigmentosa, Parkinson’s disease, spinal cord injury, and Alzheimer’s disease. Of these, the TBI program is the most advanced, and the company completed the application process for marketing approval in March 2022. Other than SB623, SanBio has four pipeline products: SB618 (regenerative cell medicine to restore damaged nerve functions), SB308 (treatment for muscular dystrophy), MSC1 (cancer treatment), and MSC2 (treatment for inflammatory diseases such as optic neuritis).

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 Pharma. SanBio completed the US-based phase 1/2a clinical trial with 18 chronic stroke patients 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.

Continuing with the SB623 ischemic stroke program (jointly with Sumitomo Pharma) in the US, the company completed enrollment of 163 patients in the phase 2b study 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 Pharma and canceled the joint development and license agreement. However, on September 14, 2020, the company announced that additional analysis of the phase 2b clinical trial (conducted independently) demonstrated a statistically significant results.

In the SB623 chronic TBI program, 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 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). 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. 

In April 2019, SB623 in the chronic TBI program received Sakigake (fast-track) designation from the Ministry of Health, Labour and Welfare (MHLW). 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. On January 31, 2022, the company received confirmation from the PMDA and filed for manufacturing and marketing approval of regenerative medicine SB623 with the MHLW on March 7, 2022.

In April 2022, the company announced that after a final one-year analysis, a phase 2 clinical trial of SB623 in patients with chronic TBI met its primary endpoint, showing a trend toward improvement in motor function and daily activities. The results were presented in a plenary session at the annual meeting of the American Academy of Neurology (AAN) in April of that year. With the data reaffirming SB623's potential to regenerate the brain after injury, the company plans to prioritize domestic clinical trials for its ischemic stroke and cerebral hemorrhage programs. 

Overseas, the chronic TBI program of SB623 received advanced therapy medicinal product (ATMP) designation from the European Medicines Agency (EMA) in April 2019. It was also granted regenerative medicine advanced therapy (RMAT) designation in the US by 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.

With a view to further expanding possible indications for SB623, SanBio concluded a business alliance agreement with Ocumension Therapeutics, Limited (Hong Kong: 1477) 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. As well, the company concluded a business alliance agreement with US regenerative medicine company D&P Bioinnovations, Inc. (unlisted) in November 2021 to develop and commercialize an esophageal implant using MSC2 cells to regenerate human esophageal tissue.

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

Patent acquisition for R-SAT, a distribution management and administration schedule support system for regenerative medicine products developed jointly with Suzuken

SanBio Co., Ltd. made an announcement concerning the patent acquisition for R-SAT^Ⓡ, a distribution management and administration schedule support system for regenerative medicine products developed jointly with Suzuken Co., Ltd.

In March 2022, SanBio filed for marketing approval with the Ministry of Health, Labour and Welfare for its regenerative medicine product SB623 as a treatment for chronic motor deficit from traumatic brain injury (TBI). SanBio and Suzuken have an agreement governing the commercial distribution of SB623 after launch, and plan to make use of R-SAT^Ⓡ, a distribution management and administration schedule support system for regenerative medicine products that they jointly developed. The patent in question is summarized in "Management system and method for regenerative medicine products (Patent No.7061762)," and the patent acquisition is dated April 21, 2022.

R-SAT^Ⓡ, is an acronym for Regenerative Medicine, Safety, Accuracy, and Traceability. The system is used for the central management of information from registration of patients who receive regenerative medicine products to transportation, delivery, administration, and post-dose follow-up. Information managed on the system can be shared via the cloud between all relevant parties, including pharmaceutical companies, manufacturers, logistics companies, and medical institutions.

SB623 demonstrated sustained improvement in motor impairment up to 48 weeks and associated improvement in function and activities of daily living in patients suffering from chronic effects of TBI

SanBio Co., Ltd. announced that SB623 demonstrated sustained improvement in motor impairment up to 48 weeks and associated improvement in function and activities of daily living in patients suffering from chronic effects of traumatic brain injury (TBI).

SanBio announced that SB623 met the primary endpoint and demonstrated a trend toward maintaining improvement in function and activities of daily living in the final, one-year analysis of the Phase 2 STEMTRA* trial evaluating SB623 in patients with chronic motor deficits resulting from TBI. These results will be presented in a plenary session at the American Academy of Neurology (AAN) Annual Meeting taking place on April 5, 2022, in Seattle, Washington, in the US.

SB623 is an investigational, regenerative cell medicine comprised of bone-marrow-derived, mesenchymal stem cells that are implanted intracranially around the area of the injury. In this clinical study involving a total of 61 patients, 46 were treated with SB623 and 15 underwent sham surgery as a control group. Patients treated with SB623 saw significant improvements in motor function at 24 weeks compared to sham surgery, as measured by the change from baseline in the Fugl-Meyer Motor Scale (FMMS), the study’s primary endpoint. These improvements in motor impairment were maintained up to 48 weeks in the treatment group. SB623 cell implantation was associated with an improvement of function and activities of daily living at 48 weeks, as measured by scales including the Action Research Arm Test (ARAT) and gait velocity. SB623 was well tolerated, consistent with previous studies, and no new safety signals were identified, with no patients withdrawing due to adverse events. 

In the view that the STEMTRA trial data reaffirm the potential for SB623 to regenerate the brain after injury, in March 2022 SanBio completed an approval filing with Japan’s Ministry of Health, Labour and Welfare (MHLW) for SB623 as a treatment for chronic motor deficit from TBI under the Sakigake Designation System. In addition to receiving the Sakigake designation, SB623 was granted orphan regenerative medicine designation by the MHLW and regenerative medicine advanced therapy (RMAT) designation by the U.S. Food and Drug Administration (FDA). Currently, SanBio is preparing to initiate a Phase 3 trial for SB623 in the US, where there are many TBI patients.

Completion of approval filing for the domestic SB623 chronic traumatic brain injury (TBI) program

SanBio Co., Ltd. announced that it had completed a manufacture and marketing approval filing for its domestic SB623 chronic traumatic brain injury (TBI) program.

The company announced that it had completed a manufacture and marketing approval filing in Japan for its SB623 chronic TBI program. The SB623 development program in Japan targeting chronic effects of traumatic brain injury was awarded Sakigake (expedited review) designation from the Ministry of Health, Labour, and Welfare (MHLW) in April 2019, and in June 2020 the MHLW also granted SB623 orphan regenerative medicine designation. Under the Sakigake Designation System, the goal is to keep the period from approval filing to approval to about six months. SanBio had been receiving face-to-face advice from and holding prior consultations with the Pharmaceuticals and Medical Devices Agency (PMDA) in the lead-up to filing an approval application for SB623, and following confirmation on January 31, 2022, of the PMDA's receipt of the application documents, the company commenced preparations for an approval filing.

The company is currently assessing the potential impact of this matter on the earnings performance outlook for FY01/23.

Trends and outlook

Quarterly trends and results

Full-year FY01/22 results

Full-year FY01/22 (February 2021–January 2022) results

• Operating revenue: None (none in FY01/21)
  
• Operating loss: JPY6.6bn (operating loss of JPY5.8bn in FY01/21)
• Recurring loss: JPY4.6bn (recurring loss of JPY6.6bn in FY01/21)
• Net loss: JPY4.7bn (net loss of JPY3.4bn in FY01/21)
• R&D costs: JPY5.0bn (+21.7% YoY)

The company generated no operating revenue. Meanwhile, operating expenses were up 14.1% YoY to JPY6.6bn, comprising R&D expenses of JPY5.0bn (+21.7% YoY; initial forecast: JPY3.8bn) and SG&A expenses of JPY1.7bn (-3.7% YoY). Operating expenses exceeded the initial forecast by JPY1.1bn, because R&D expenses increased due to mounting manufacturing-related expenses associated with applying for manufacturing and marketing approval of the SB623 TBI program in Japan.

The recurring loss narrowed because of a positive contribution from non-operating income. Non-operating income came to JPY2.1bn (JPY9mn in Q3 FY01/21). In addition to JPY2.0bn in foreign exchange gains on foreign currency denominated loans to a consolidated subsidiary arising from exchange rate fluctuations, the company recorded JPY128mn in gains on forgiveness of debts*. Non-operating expenses totaled JPY55mn (JPY738mn in Q3 FY01/21) after the company recorded JPY45mn in interest expenses on bank loans and JPY10mn in financing costs (fees related to loan agreements with three banks). As a result of these, the recurring loss shrank JPY2.0bn YoY to JPY4.6bn.

Business conditions

In Japan, the company held consultations with the PMDA to shorten the time required for review after marketing approval application has been filed under the framework of Sakigake (expedited review) Designation System. On January 31, 2022, the company received confirmation of its application from the PMDA. R&D expenses increased to JPY5.0bn (+JPY884mn, or 21.7% YoY; initial forecast: JPY3.8bn) owing primarily to manufacturing expenses associated with applying for regulatory approval of SB623 targeting chronic motor deficit from traumatic brain injury (TBI).

On November 15, 2021, the company concluded a business alliance agreement with US regenerative medicine company D&P Bioinnovations, Inc. to develop and commercialize a regenerative esophageal implant using MSC2 cells to regenerate human esophageal tissue. Based on this agreement, the company will loan MSC2 cells to D&P with a non-exclusivity clause and transfer prohibited. In return, the company will receive the right to commercialize the regenerative esophageal implant in Japan in the future and priority negotiation rights for commercialization in the Asian region. If D&P sells the esophageal implant outside Japan, the company will receive royalties (up to 2.5%) from D&P. If D&P succeeds in out-licensing the esophageal implant, the company will receive a profit distribution (up to 20%) on licensing revenue. The company will pay the cost of developing the manufacturing process of MSC2 cells, while D&P will pay the cost of developing the esophageal implant in all regions outside Japan.

FY01/23 company forecast

FY01/23 (February 2022–January 2023) company forecast

• Operating revenue: None (none in FY01/22)
• Operating loss: JPY5.9bn (loss of JPY6.6bn in FY01/22)
• Recurring loss: JPY6.0bn (loss of JPY4.6bn)
• Net loss attributable to owners of the parent: JPY6.0bn (loss of JPY4.7bn)
• Operating expenses: JPY5.9bn (-11.5% YoY), of which R&D expenses: JPY4.1bn (-17.5% YoY)
• Exchange rate: JPY115.00/USD (JPY110.73/USD in FY01/22)
  

The company filed for approval of SB623 for its chronic traumatic brain injury (TBI) program on March 7, 2022, but does not forecast any revenue from these activities in FY01/23 since approval has not been given and the drug price has not yet been determined. It forecasts an operating loss of JPY5.9bn (versus JPY6.6bn operating loss in FY01/22), recurring loss of JPY6.0bn (JPY4.6bn recurring loss), and net loss attributable to owners of the parent of JPY6.0bn (JPY4.7bn net loss). SanBio assumes an exchange rate of JPY115.00/USD. The company is building a manufacturing, logistics and sales system to promote SB623 in Japan, and plans operating expenses of JPY5.9bn (-11.5% YoY; including approval-related expenses), of which JPY4.1bn (-17.5% YoY) relate to R&D. 

The company stated that this forecast will only remain in place until the SB623 chronic TBI program is approved. It will revise its forecast on a post-approval basis once approval is expected to be given. Following this, the company intends to prioritize the development of the SB623 ischemic stroke program and the cerebral hemorrhage program 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.

In February 2022, the company announced the issuance of its 32nd series of share acquisition rights with provisions to revise the exercise price via third-party allotment. It has decided to raise funds (approximate net proceeds: JPY8.3bn) to establish a framework for promoting the product in Japan once SB623 is approved and to invest in building up a manufacturing system and inventory to meet the demand for the product.

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

Management strategy and medium- to long-term 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. It has four other regenerative medicine products in its pipeline, including SB618 and SB308. For now, the company plans to concentrate its resources on developing SB623. In addition to two ongoing SB623 development programs, targeting chronic motor deficit from ischemic stroke and from traumatic brain injury (TBI), the company also decided to pursue development of SB623 for the additional indication of chronic motor deficit due to cerebral hemorrhage in January 2019.

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 its ischemic stroke programs, SanBio has so far out-licensed SB623 prior to the start of clinical trials. In Japan, it out-licensed development and marketing rights for the ischemic stroke program to Teijin (terminated as of February 14, 2018). In the US and Canada, it out-licensed development and marketing rights for the same indication to joint development partner Sumitomo Pharma (Note: The company has terminated the agreements with Teijin and Sumitomo Pharma). On March 31, 2020, SanBio entered a business tie-up with Ocumension of Hong Kong, aiming 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. In November 2021,  the company concluded a business alliance agreement with US regenerative medicine company D&P in November 2021 to develop and commercialize an esophageal implant using MSC2 cells to regenerate human esophageal tissue.

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.

Transformation into a pharmaceutical company (independently develop and market products in Japan)

Japan

SanBio terminated a licensing agreement with Teijin to whom it had out-licensed exclusive rights to develop and market SB623 for the cerebral stroke program in Japan (agreement concluded on December 22, 2009, terminated on February 14, 2018), and the rights were returned to the company. As a result, the company has decided to proceed with this program as well as the chronic TBI program in Japan independently, with the aim of maximizing revenue after the launch.

As mentioned above, by leveraging Japan’s conditional and time-limited marketing approval system for regenerative medicines, SanBio intends to deliver SB623 in the chronic TBI program in Japan earlier than in any other market in the world. On April 8, 2019, MHLW awarded 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.

On March 7, 2022, the company filed a manufacturing and marketing approval application in Japan for its SB623 chronic TBI program. In April 2019, the MHLW awarded a Sakigake designation to SB623 as a regenerative medicine targeting chronic TBI.  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.

The company resolved outstanding issues in three areas through face-to-face advice and prior consultation with PMDA: transferring technology to the new contract manufacturing organization; the establishment of the management system needed for commercial production; and calibrating standards tests to meet requirements. It received the approval of application in January 2022, and completed the application for marketing approval in March 2022.

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 (PMD 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. Under the revised PMD Act, the cost and time required for drug approval in Japan has been significantly reduced (although the evaluation period for adverse effects and other criteria related to efficacy and safety cannot necessarily be shortened in the case of conditional and time-limited approval).

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 (TSE PRM: 4552; application submitted in September 2014) and skeletal myoblast sheets developed by Terumo (TSE PRM: 4543; 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 announced that the global phase 2 clinical trial for the SB623 chronic TBI program 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.

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 was established as a pilot scheme in 2015 and legislated in 2020 as the revised PMD Act. It is a scheme for rapid authorization of innovative new drugs, medical devices, regenerative medicines, extracorporeal diagnostic agents, and other 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 significantly 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 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; the exercise period of share acquisition rights by April 9, 2021). 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 FY01/19 through the issuance of share acquisition rights.

Committed credit line agreements

SanBio has secured borrowings for investment in future growth by concluding committed credit line agreements with Sumitomo Mitsui Banking Corporation (unlisted subsidiary of the Sumitomo Mitsui Financial Group [TSE Prime: 8306]), MUFG Bank, Ltd. (unlisted subsidiary of Mitsubishi UFJ Financial Group, Inc. [TSE Prime: 8306]) and with Mizuho Bank, Ltd. (unlisted subsidiary of Mizuho Financial Group [TSE Prime: 8411]). As of end-January 2021, the total amount of committed credit line agreements was JPY7.6bn and the balance of loans executed was JPY4.8bn. In December 2021, the company also concluded a committed credit line agreement with Resona Bank, Limited (unlisted subsidiary of Resona Holdings, Inc. [TSE Prime: 8308]). The amount procured is JPY1.0bn with a repayment date in June 2023. The company plans to use the funds to establish a manufacturing, distribution, and sales structure after SB623 is approved and goes on the market.

Share issue via international offering

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.

Issued 32nd share acquisition rights with provisions to revise the exercise price via third-party allotment

In February 2022, the company announced the issuance of its 32nd series of share acquisition rights with provisions to revise the exercise price via third-party allotment. It has decided to raise funds (approximate net proceeds: JPY8.3bn) to establish a framework for promoting the product in Japan once SB623 is approved and to invest in building up a manufacturing system and inventory to meet the demand for the product.

Background of fund raising

Given that it applied for marketing approval of SB623 in March 2022, SanBio needs to promptly prepare to implement structure for manufacture, distribution, and sales after delivering SB623 to the market. As part of these initiatives, the company entered into a business alliance with Showa Denko Materials for the manufacture of SB623. In addition, the company formed a business alliance with Suzuken in August 2019 for the distribution of SB623, and jointly established R-SAT^® (an acronym for Regenerative Medicine, Safety, Accuracy, and Traceability), a regenerative medicine distribution management system.  

Expansion of R&D pipeline

Expanding indications of SB623

For its regenerative cell medicine SB623, SanBio plans to expand the indications beyond chronic effects of ischemic stroke and traumatic brain injury, deciding in January 2019 to pursue the additional indication of chronic motor deficit from cerebral hemorrhage.

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 in the chronic TBI and ischemic stroke programs. 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.

Acquired 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. 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.

In March 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. The company also concluded a business alliance agreement with US regenerative medicine company D&P in November 2021 to develop and commercialize a regenerative esophageal implant using MSC2 cells to regenerate human esophageal tissue.

Business

Overview

Transformation from biotechnology to pharmaceutical company

SanBio was founded as a biotechnology company that develops regenerative cell medicines (nerve regeneration cells) that restore nerve functions lost due to diseases or injuries. The company is developing its pipeline, including its mainstay regenerative cell medicine SB623, mainly in Japan and the US. SB623 has eight development programs, targeting chronic motor deficit associated with traumatic brain injury (TBI), ischemic stroke, and cerebral hemorrhage, as well as other conditions. Of these, the chronic TBI program is the most advanced, and in March 2022, SanBio completed the application process for manufacturing and marketing approval of SB623 (its first regenerative medicinal product) in Japan as a treatment for chronic TBI.

The company aims to use the launch of SB623 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) around 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, Sumitomo Pharma, Ocumension (Hong Kong), and D&P Bioinnovations.
  

In February 2018, SanBio terminated a licensing agreement with Teijin to whom it had out-licensed exclusive rights to develop and market SB623 for the cerebral stroke program in Japan (agreement concluded on December 22, 2009), 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. (TSE Growth: 2150) 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 Showa Denko Materials regarding manufacture of SB623 in March 2018. It also formed a business alliance with Suzuken in August 2019 and jointly established  R-SAT^® (Regenerative Medicine, Safety, Accuracy, and Traceability), a regenerative medicine distribution management system.  

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 Showa Denko Materials 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 and Medical Incubator Japan K.K. (unlisted) 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 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. (TSE Prime: 3151) and ASTEM Inc. (unlisted) 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.