3-D Matrix 7777
スリー･ディー･マトリックス
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Kojimachi HF Building 7th floor3- 2- 4 Kojimachi Chiyoda-ku Tokyo, Japan 102-0083
Summary
Medical technology company. Exclusively licensed from MIT, core technology is based on unique characteristics of self-assembling peptides.
Biotechnology
Key dates
2012-04-25
Coverage initiation
Executive summary
Summary
3-D Matrix (3DM) is a medical technology company that develops, manufacturers, and markets a self-assembling peptide technology originally created at the Massachusetts Institute of Technology (MIT). Self-assembling peptides are composed of three types of amino acids, and upon coming into contact with neutral pH environments, the peptide molecules “self-assemble” to create a gel formed of nanofibers. These peptides are also unique in that they do not include organic compounds, yielding advantages in safety and homogeneity. Utilizing these properties, 3DM is working to commercialize self-assembling peptide products in various fields, such as surgery, regenerative medicine, and DDS. The medical products in development by the company are categorized as “medical devices” rather than “pharmaceuticals.” Consequently, the duration from application to approval is shorter and costs are lower compared to drug development.
The company’s key pipelines are an absorbable local hemostat (TDM-621), an anti-adhesion material (TDM-651), and a mucous membrane protuberance material (TDM-644). Among these, Shared Research believes absorbable local hemostat (TDM-621), which is applied through a syringe to bleeding areas caused by surgical and GI endoscopic procedures, is of particular importance. Upon coming into contact with bodily fluids such as blood, TDM-621 self-assembles to create a gel formed of nanofibers to stop bleeding. According to the company, its advantages versus current blood coagulants include low infection risk, no requirement for informed consent, and a superior field of view. According to the company, the market for blood coagulants is USD3.0bn globally. 3DM is aiming for a market share of between 30% and 50% in each region by leveraging the advantages of TDM-621 to promote replacement from current methods.
In January 2014, 3DM received approval to use the CE marking for TDM-621 in Europe. With this, in Europe, Asia, Oceania, Latin America, and Canada, where products with the CE marking may be sold and granted regulatory approval without the need for clinical studies, the company plans to expand sales of TDM-621. To that end, in June 2019, 3DM appointed FUJIFILM as its exclusive distributor in Europe for the promotion and sale of TDM-621 in gastrointestinal (GI) endoscopic surgery indications.
In July 2020, 3DM obtained marketing approval in Japan for TDM-621, an absorbable local hemostat for hemorrhage per diapedesis occurring during endoscopic submucosal dissections. In May 2021, the company obtained marketing approval for PuraLift, a submucosal injection material for use in endoscopic procedures. The company plans to apply for National Health Insurance coverage for these products and begin selling them once coverage has been obtained.
In the US, in April 2019 anti-adhesion material PuraSinus was approved by the Food and Drug Administration (FDA) for otorhinolaryngologic use. In June 2021, the 510(k) premarket notification for the company’s hemostat in the gastrointestinal endoscopic field was cleared.
Trends and outlook
In FY04/21, the company reported full-year consolidated operating revenue of JPY1.0bn (+52.3% YoY), an operating loss of JPY2.6bn (versus loss of JPY2.5bn in FY04/20), a recurring loss of JPY1.9bn (versus loss of JPY3.0bn in FY04/20), and a net loss attributable to owners of the parent of JPY2.0bn (versus loss of JPY3.1bn in FY04/20).
For FY04/22, the company projects full-year consolidated operating revenue of JPY2.4bn (+132.2% YoY), an operating loss of JPY1.7bn (versus loss of JPY2.6bn in FY04/21), a recurring loss of JPY1.8bn (versus loss of JPY1.9bn in FY04/21), and a net loss attributable to owners of the parent of JPY1.9bn (versus loss of JPY2.0bn in FY04/21).The operating loss is projected to narrow owing to rising sales and declining product costs.
Under its new medium-term business plan, the company has set in FY04/24 targets for consolidated operating revenue of JPY9.8bn, operating profit of JPY2.9bn, recurring profit of JPY2.9bn, and net income attributable to owners of the parent of JPY2.8bn. As growth drivers, the new plan is counting on the expansion of product sales in Europe and Australia, and the startup of product sales in the US and Japan. On the profit front, a new sterilization process will be adopted from FY04/22, which is expected to reduce manufacturing costs. The company expects to post operating profit in FY04/23 supported by rising sales and higher profit margins.
Strengths and weaknesses
Shared Research believes that the three strengths of 3DM are its promise of the core self-assembling peptide technology, differentiated business model and large potential market. Its three weaknesses include its commercial success being dependent on outside partners, dependence on third party core patents with relatively short lives, and potential human resources bottlenecks. (See Strengths, weaknesses for details.)
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Recent updates
Applied for approval of new manufacturing process for hemostat in Europe
On January 13, 2022, 3-D Matrix Ltd. announced that it had applied for approval of a new manufacturing process for its hemostats in Europe.
European subsidiary 3-D Matrix Europe SAS applied for approval of a new manufacturing process jointly developed with Pharmpur GmbH, the company's contract manufacturer in Europe, to the region's independent third-party certification body in accordance with the Medical Device Regulation. In seeking this approval, the company aims to obtain CE marking for products manufactured using the new process.
In December 2021, the company entered into a global contract manufacturing agreement with Pharmpur and began manufacturing hemostats for the US market. The application was filed so that the company could manufacture its hemostat products using the new process jointly developed with Pharmpur and begin selling them in markets that recognize or require CE marking, including Europe, Australia, and Middle East, in addition to the US.
If approval is granted, the company will be able to manufacture products for sale in countries and regions that require or recognize CE marking at its European production base, in addition to its existing production bases in Japan.
Treatment completed in the Phase I study of next-generation hemostat (TDM-623)
On December 27, 2021, 3-D Matrix Ltd. announced the completion of treatment (application of the study medical device) in the Phase I study of next-generation hemostat TDM-623.
The company was notified by its European subsidiary 3-D Matrix Europe SAS that treatment (application of the study medical device) in the Phase I study of next-generation hemostat TDM-623 had been completed.
In Europe, clinical studies of TDM-623 are designed to investigate the use of the medical device in neurosurgery. The Phase I study was conducted at a medical facility in Belgium, and upon evaluating the safety of the device, additional study sites—medical facilities in France and UK—will be added to evaluate the efficacy.
Clinical studies of next-generation hemostat TDM-623 comprise two phases: Phase I and Phase II. The Phase I study was conducted at a single site in 10 patients with the aim of confirming safety. Once safety data has been verified, a Phase II study will commence. The Phase II study is scheduled to begin in March 2022, and as of the time of this release, no adverse events related to the use of TDM-623 had been reported. The Phase II study will be conducted at six sites in 80 patients to verify the efficacy of the medical device; it is scheduled to be completed in November 2022.
Conclusion of manufacture and service agreement with new contract manufacturer, and handling of neutralizing antibody detection kits
On December 16, 2021, 3-D Matrix Inc. announced that it had concluded a manufacturing and service agreement with a new contract manufacturer.
On December 16, 2021, the company concluded a manufacturing and service agreement with PharmPur GmbH, a new contract manufacturer of its products.
Under the agreement, PharmaPur will undertake the manufacturing, packaging, and delivery of the company's products for markets in Europe (and other countries where the CE Mark is recognized), UK, US, Canada, and Japan. Although no costs arise on conclusion of the agreement, the company plans to book manufacturing costs for products manufactured by PharmaPur associated with sales going forward. PharmaPur has started manufacturing 3-D Matrix products for the US market, with the first batch due for delivery in the US in early March 2022. Thereafter, PharmaPur is scheduled to manufacture products for the markets in Europe, Australia, and Japan.
On the same day, the company announced that it had started handling neutralizing antibody detection kits for COVID-19.
The company will begin handling neutralizing antibody detection kits for COVID-19 jointly developed with Prometheus Bio Inc. in addition to Prometheus Bio's antibody test kits that it already handles.
NHI converage of PuraStat®
On November 30, 2021, 3-D Matrix, Ltd. announced that its absorbable local hemostat PuraStat® was included in the NHI reimbursement price list.
In July 2020, the company obtained manufacturing and marketing approval from the Ministry of Health, Labour and Welfare for its absorbable local hemostat PuraStat®. On November 30, 2021, the Ministry informed the company that the product would be covered by National Health Insurance (NHI) from December 1, 2021.
With NHI coverage, medical institutions can claim a special treatment medical device fee for PuraStat® at the NHI reimbursement price in addition to technical and drug fees.
3-D Matrix has started selling PuraStat® to around 25 distributors that excel in sales in the digestive endoscopy field. PuraStat® is in clinical use at more than 100 medical institutions and is expected to be fully adopted by around 50 facilities in December 2021.
Approval of partial change to absorbable local hemostat "PuraStat®" (addition of a sterilization method) and launch of its sales
On November 15, 2021, 3-D Matrix Ltd. announced approval of a partial change to absorbable local hemostat "PuraStat®" (the addition of a sterilization method in the approved indications).
On April 1, 2021, the company submitted a partial change application to the Ministry of Health, Labour and Welfare to add a sterilization method in the approved manufacturing and marketing indications of absorbable local hemostat "PuraStat®" (sales of which have been launched in Japan). The partial change was approved on November 10, 2021.
On the same day, the company announced the launch of absorbable local hemostat "PuraStat."
The company obtained manufacture and marketing approval for its absorbable local hemostat “PuraStat” in Japan from the Ministry of Health, Labour and Welfare in July 2020, and launched sales to distributors in Japan ahead of inclusion in the NHI reimbursement price list (which has been approved to occur in December 2021).
The company commenced sales to some 25 sales agents with strong marketing capabilities in the area of gastrointestinal endoscopy, such that they will be able to quickly launch full-scale sales of the product to medical institutions throughout Japan after the scheduled inclusion in the NHI reimbursement price list in December 2021.
Submission of 510 (k) for approval of wound-healing material for radiation proctitis
On November 9, 2021, 3-D Matrix Ltd. announced the submission of a premarket notification 510 (k) for its wound-healing material for radiation proctitis.
The company's US subsidiary 3-D Matrix, Inc. submitted a premarket notification 510(k) to the US Food and Drug Administration (FDA) for its wound-healing material for radiation proctitis. For a wound-healing material for oral mucositis, for which it submitted a 510(k) as a preliminary step in developing the wound-healing material for radiation proctitis, the subsidiary obtained approval to market the material from FDA in October 2021.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: FY estimates are latest figures.
Note: Figures may differ from company materials due to differences in rounding methods.
1H FY04/22 results
Driving the YoY growth in operating revenue were sales of JPY640mn from absorbable local hemostat TDM-621 (JPY353mn from Europe, JPY249mn from Australia, and JPY21mn from other regions), and sales of JPY17mn from research reagents (including those used in COVID-19 antibody test cassettes).
Expenses were within the range of expectations, with the company booking losses in all profit categories from the operating line down.
Cost of sales increased 22.5% YoY to JPY418mn while the cost of sales ratio (cost of sales divided by product sales) declined 6.9pp YoY to 65.3%. The company will shift to using the new manufacturing process in 2H and projects this will cut manufacturing costs by more than half compared to their previous levels.
R&D expenses fell 2.6% YoY to JPY360mn. Quarterly R&D expenses have trended around JPY200mn since FY04/19.
SG&A expenses amounted to JPY1.2bn (+31.6% YoY), as miscellaneous expenses rose, and personnel expenses increased due to growth in the company's employee counts in Japan and the US.
In Q1, the company generated JPY341mn through sales of its TDM-621 absorbable local hemostat (+62.6% YoY) and in Q2 posted JPY299mn (+13.8% YoY) in sales generated through this material. By major market, sales in Europe during Q1 were JPY190mn (+95.4% YoY), while sales in Australia were JPY127mn (+30.9% YoY) in Q1. In Q2, sales in Europe were JPY163mn (+41.4% YoY), while sales in Australia were JPY122mn (+15.5% YoY). Sales in Europe incurred impact from inventory adjustments at major distributors, and sales in Australia were affected by the COVID-19 pandemic. The rate of sales growth fell temporarily in Q2 due to external factors, but sales continued to grow as, according to the company, demand for absorbable local hemostat TDM-621 remained strong in both markets.
Cost of sales in Q1 amounted to JPY251mn in Q1 (+49.7% YoY), while the cost-to-sales ratio came to 73.6% (-6.3pp YoY). In Q2, cost of sales stood at JPY167mn (-3.7% YoY), and the cost-to-sales ratio was 55.9% (-10.1pp YoY). During Q1, the company began manufacturing and shipping products manufactured at lower costs using the new sterilization methods. In Q2, this reduction in manufacturing costs was reflected in the company's cost of sales, and the cost-to-sales ratio declined both YoY and QoQ. During 2H, the company anticipates that changes in its manufacturing methods will lower its manufacturing costs by more than 50%.
Progress of 1H results versus full-year projections
Sales in 1H achieved 26.9% of their corresponding projection in the company's full-year forecast, and the company recognized operating loss of JPY1.4bn (versus a full-year projection for a loss of JPY1.7bn). The company projects that earnings contributions in 2H will be more significant than in 1H in part because it anticipates full-scale product sales in Japan and the US starting in 2H and in part because it believes that product sales will gradually increase in Europe and Australia. According to the company, 1H results were below expectations indicated by its full-year forecast due to the impact of the COVID-19 pandemic incurred in Q2. However, customer acquisition and other activities have been progressing well when measured against the company's forecast, and the company believes it will be able to achieve recovery in 2H.
R&D status and sales of absorbable local hemostat by region are detailed below.
R&D status
Major progress in R&D was as follows.
In December 2021, the company entered into an agreement with a new contract manufacturer, PharmPur GmbH. Under this agreement, PharmPur will manufacture, package, and deliver the company's products for the European, US, and Japanese markets.
In November 2021, the Ministry of Health, Labour and Welfare (MHLW) notified the company that its absorbable local hemostat PuraStat® was included in NHI coverage, with NHI reimbursement starting on December 1, 2021.
In November 2021, the company obtained approval for the addition of new sterilization methods for absorbable local hemostat PuraStat® in Japan.
In November 2021, US subsidiary 3-D Matrix, Inc. filed a premarket notification 510(k) with the FDA for wound healing material for radiation proctitis.
In October 2021, US subsidiary 3-D Matrix, Inc. obtained approval for its premarket notification 510(k) for wound healing material for oral mucositis.
In August 2021, the company signed a memorandum of understanding with PURMX Therapeutics Co., Ltd. regarding a patent transfer and licenses, and in relation to this, agreed to acquire a portion of PURMX’s shares (more details below).
In June 2021, the US FDA cleared the company’s 510(k) premarket notification for hemostat PuraStat-GI (provisional name) as a Class II medical device for use in gastrointestinal endoscopic procedures.
In May 2021, 3DM obtained marketing approval in Japan for PuraLift (TDM-644), a submucosal injection material for use in endoscopic procedures. The company plans to apply for NHI coverage and launch the product once it has been added to the NHI reimbursement price list.
In May 2021, an independent third-party verification body approved the new sterilization method in the manufacturing process of CE-marked PuraStat, which is being marketed by European subsidiary 3-D Matrix Europe SAS. Adoption of this new manufacturing process is expected to cut manufacturing costs by more than half.
Financing status is as follows.
In November 2020, the company issued its 27th and 28th series of stock acquisition rights, and during 1H FY04/22, it raised JPY620mn through exercise of the 27th series stock acquisition rights.
In August 2021, the company issued its fourth series of unsecured convertible bonds with stock acquisition rights and its 30th series of stock acquisition rights (with exercise price adjustment clauses) via third-party allotment. Through the issue of these unsecured convertible bonds and stock acquisition rights and their subsequent exercise, the company had raised JPY2.3bn as of October 31, 2021.
Surgery
Absorbable local hemostat
In Japan, 3-D Matrix completed the clinical trial evaluating hemostatic effects on hemorrhage per diapedesis in gastrointestinal endoscopic surgery in July 2019. It submitted an application for manufacturing and marketing approval to the Pharmaceuticals and Medical Devices Agency (PMDA) in October 2019, and obtained PMDA approval in July 2020 and NHI reimbursement approval in October 2021 (coverage starting from December 1). With NHI coverage, medical institutions can claim a special treatment medical device fee for PuraStat® at the NHI reimbursement price. As a result, hospitals can use PuraStat® without a cost burden, and the company expects sales to accelerate in the future.
The company in January 2014 received the CE marking in Europe for TDM-621, which is on sale throughout Europe. The company plans to continue expanding indications in multiple disease areas, including central nervous system disorders, as well as expand its functions including wound healing.
In January 2021, the company submitted an application for use in the US of its absorbable local hemostat in gastrointestinal endoscopy to the FDA using the 510(k) process. Approval was granted in June 2021. The company said it would continue to take a development approach aimed at achieving high-value-added wound-healing and anti-adhesion effects.
Mucous membrane protuberance material
Using a different sequence than hemostatic material, this material self-assembles into a gel structure, allowing excellent protuberance maintenance. As it is not a biologically derived substance, it has a high level of safety and carries no risk of viral contamination. According to the company, the material could be widely used in endoscopic surgery to remove polyps and tumors.
3DM submitted its application for marketing approval in December 2020, and obtained approval from the PMDA in May 2021. The company is currently preparing for the inclusion of the product in the National Health Insurance (NHI) reimbursement price list, and plans to create a system that will allow for the cross-selling of the product with its hemostat starting in FY04/23.
Hemostatic agent to prevent post-operative bleeding
In Europe, prevention of post-operative bleeding under endoscopic surgeries was approved as an additional indication in December 2017.
Prevention of post-operative bleeding was also approved as an additional indication in Australia in September 2019. The company sees a need for the prevention of post-operative bleeding (bleeding that occurs after surgery), because it requires further surgery, which adds to patients’ physical stress as well as the hospital’s workload. Bleeding occurs during gastrointestinal endoscopic surgery in 5% of cases, whereas the risk of post-operative bleeding (in high-risk patients and procedures) is around 30%. The company believes that the additional indication more than doubles the scope of the agent’s potential market in the endoscopic surgery field.
Next-generation hemostat
The next-generation hemostat under development uses a new peptide sequence patented by the company that is different from that used in the absorbable local hemostat. The next-generation hemostat is being developed based on the self-assembling peptide technology for which 3D-Matrix was granted a license from MIT. It plans to advance R&D with a view to make the next-generation hemostat its mainstay product as it is superior to absorbable local hemostat in hemostatic effect and can be manufactured at lower cost. In Europe, the company has already established commercial scale manufacturing methods in accordance with Good Manufacturing Practice (GMP), a manufacturing and quality control standard. The clinical trial plan was approved in May 2021, and the trial began with the first participant enrolled in July 2021. In Japan, the company is proceeding with development, while investigating whether it will be possible to apply for approval as an improved medical device (without clinical trials) with TDM-621 (approved in July 2020) as its predecessor.
Anti-adhesion material
In April 2019, 3D-Matrix received approval from the Food and Drug Administration (FDA) for PuraSinus, an anti-adhesion and hemostatic agent, for use in the otorhinolaryngology field in the US. Being the only product with simultaneous hemostatic, anti-adhesion, and wound-healing effects, the company believes the device can deliver high clinical value in otolaryngology procedures such as turbinectomy and nasal septoplasty. The American Rhinologic Society (ARS) has begun purchasing the product, and other major hospitals in the US, to which many Key Opinion Leaders (KOLs) belong, are reviewing whether to purchase the product.
Regenerative medicine
Alveolar bone regenerator
In clinical trials in the US, the company completed treatment and observations of 15 patients, collecting favorable results and data in terms of bone formation. The company enrolled 12 more patients to continue the clinical trial in FY04/18, because there was scope for improvement in the study protocols. The company is in discussions with the FDA concerning the next step after completing clinical trials.
Wound-healing material
The product was approved by FDA in February 2015, allowing for the start of sales in the US. The company expects increased therapeutic effects in combination with other pharmaceuticals (such as antibiotics and anticancer drugs) and is progressing research in the fields of skin burn treatments and skin cancer treatments. Further, to move into the giant market of cosmetic surgery, the company submitted an application for approval of the additional indications to the FDA in November 2019; it obtained approval in May 2020. Cosmetic surgery requires a different marketing approach to the general medical market. In the first instance, the company said it planned to obtain clinical data necessary to make inroads into the market, while developing plans for sales strategy and sales channels suited to the market’s needs and structure.
Radiation proctitis healing material
Radiation proctitis is a side effect of radiation therapy used to treat prostate and uterine cancers, and frequently causes inflammation of the rectum. Approximately 20% of radiation proctitis patients suffer from complications including chronic bloody discharge, frequent bowel movements, and severe abdominal pain, so an effective treatment is needed.
In January 2021, the company submitted an application to the FDA for approval to market its oral mucosal wound healing material using the 510(k) process. This was approved by the FDA in October 2021. Based on this, the company also submitted an application to the FDA in November 2021 for approval to market its wound healing material for radiation proctitis. The company sees approval for the oral mucosal wound healing material as a precursor to developing a wound healing material for radiation proctitis.
In a European clinical trial, the company's absorbable local hemostat was shown to be effective in the treatment of radiation proctitis. The company aims to develop the product with a view to early commercialization to address unmet needs in this area. Accordingly, preparations for clinical trials led by European academic associations are currently underway.
Drug-delivery system (DDS)
3-D Matrix is collaborating with the National Cancer Center on treatment for “triple negative” breast cancer with nucleic acid medicine that targets the RPN2 gene. The company provided siRNA nucleic acid medicine that uses the self-assembling peptide A6K as a drug-delivery system (DDS). The company has a joint patent with the National Cancer Center regarding treatment and diagnostic method for cancer stem cells, and is working toward advancing joint R&D in this area and related fields.
3-D Matrix is also advancing a joint development project with Hiroshima University, for which it provides its surfactant peptide A6K for use in an innovative anti-tumor nucleic acid drug for malignant pleural mesothelioma. With PURMX Therapeutics, established by Professor Hidetoshi Tahara of Hiroshima University, taking the lead in product development, the company is focused on preparations for clinical trials. 3DM has acquired a 10% stake in PURMX and intends to continue to engage in joint development of new products with PURMX moving forward. This is the company's second project in which it provides DDS for nucleic acid drugs, following the project centered on RPN2-targeted nucleic acid drugs for the treatment of triple-negative breast cancer.
As nucleic acid therapeutics become increasingly common, the company thinks its self-assembling peptide A6K may be widely used as an option for delivering these drugs. According to the company, A6K may be capable of being ingested by multiple types of cancer stem cells, and the combination of A6K with oligonucleotide therapeutics that act on cancer stem cells may be able to reset resistance to anticancer drugs and inhibit metastasis.
Antibody testing
3-D Matrix and Prometheus Bio Inc., which has a track record of selling COVID-19 antibody test kits in Europe and North America, are jointly developing novel coronavirus antibody test kits for the Japanese market. Prometheus Bio’s antibody test kit Coronavirus IgG/IgM Antibody (COVID-19) Test Cassette is an in-vitro diagnostic immunoassay that detects 2019-n-CoV antibodies in whole blood, serum, or plasma. It can detect antivirus antibodies that suggest acquired immunity to COVID-19. This is being jointly developed in Japan.
The company also participated in joint development of a DNA vaccine against the novel coronavirus using plasmid DNA manufacturing technology announced in March 2020 by AnGes Inc. and Osaka University. AnGes and 3-D Matrix will collaborate in gathering clinical trial data in Japan to consider potential for use of antibody test kits to check the existence of antibodies in trial participants before they receive the vaccine in clinical trials.
Other R&D, etc.
Changes to manufacturing methods to sharply reduce production costs
On other fronts, the company is pushing ahead with major modifications on the factory floor, changing its sterilization methods and scaling up systems with the aim of lowering production costs across its product lineup. To this end, the company submitted an application for the approval of these changes to BSI, a third-party certification body in Europe, in October 2020 and obtained approval from the BSI in May 2021. In November 2021, the company obtained approval for the addition of the new sterilization methods in Japan.
According to the company, changes in sterilization methods will enable a 50% reduction in manufacturing costs. The company began manufacturing using the new sterilization methods in Q1 and has already begun shipping the resulting products to markets in Europe, the Middle East, and Australia. The company indicates that these changes in its manufacturing process have reduced its product cost ratio and eliminated bottlenecks that would potentially hinder the company's ability to restore profitability by FY04/23.
Concluded an agreement with Germany-based new contract manufacturer PharmPur GmbH
In December 2021, the company entered into an agreement with a new contract manufacturer, Germany-based PharmPur GmbH. Under this agreement, the company will outsource the manufacture, packaging, and delivery of its products for European, US, and Japanese markets to PharmPur. Deliveries to the US market are scheduled to begin in March 2022. The company anticipates that growth in the volume of products produced by PharmPur will result in lower manufacturing costs starting in FY04/23.
Possible effectiveness of absorbable local hemostat PuraStat for the treatment of inflammatory bowel disease (IBD)
Inflammatory bowel disease (IBD) is a refractory and idiopathic inflammation of the gastrointestinal tract. Once a patient contracts IBD, he or she will experience repeated relapses followed by remissions and will require lifelong treatment. Two types of IBD have been identified: ulcerative colitis and Crohn's disease. Anti-inflammatory agents can suppress the symptoms of IBD, but existing anti-inflammatory agents alone are not enough to reduce rates of relapse. Experts have emphasized the need for mucosal healing, but as of December 2021, no potent mucosal healing products were on the market.
IBD market size: More than 3mn patients are suffering from IBD worldwide, and the market for anti-inflammatory agents and other remedies generates sales of approximately JPY2.5tn (based on company data as of 2018). Patients diagnosed with IBD require lifelong treatment, so the market will continue to grow without a decline in the number of patients.
Promising results of animal testing for IBD: Kurume University conducted an experiment in which absorbable local hemostat PuraStat was applied topically to mice models of colonic injury. The application of PuraStat was shown to reduce the length and surface area of ulcers and promote healing of intestinal injuries in mice models. These results suggested that PuraStat could be a possible treatment for IBD.
Future initiatives: After acquiring data from animal testing, 3DM plans to conduct clinical trials regarding the efficacy of PuraStat as a treatment for IBD with Gunma University in Japan starting in 2022. In Europe, 3DM plans to commence clinical trials of PuraStat for Crohn's disease in 2022. The company also plans to conduct clinical trials to investigate PuraStat’s effectiveness in treating IBD following animal testing. The company is considering to add PuraStat as a treatment for IBD to its pipeline once these clinical studies confirm the product's efficacy in humans.
Regional sales status
Breakdown of sales of absorbable local hemostat and anti-adhesion material and hemostat by region
Europe
For Europe, the company reported 1H product sales of JPY353mn (+66.1% YoY). The number of surgical procedures performed in Europe was on a recovery track as COVID-19 vaccinations made progress and restrictions on social activities were largely lifted.
In Q1, sales were JPY190mn (+95.4% YoY), while sales in Q2 amounted to JPY163mn (+41.4% YoY). Sales in Q2 fell short of the company's projections due to temporary impact from inventory adjustments associated with a major distributor's move to a new warehouse and frontline disruptions caused by a change in president at another distributor. However, Q2 sales were still up YoY, and with current demand remaining strong, the company expects sales to come back in line with its forecast in Q3 (November 2021–January 2022).
Australia
For Australia, 3DM reported 1H product sales of JPY249mn (+22.9% YoY). Sales in Q1 amounted to JPY127mn (+30.9% YoY), while sales in Q2 amounted to JPY122mn (+15.5% YoY). The number of COVID-19 cases has increased since the beginning of the fiscal year, with the resulting restrictions on movement across state and territorial lines leading to a heightened impact on economic activity. Within this environment, visits to hospitals and doctors were also restricted and the company's sales and marketing activities were affected. However, as of December 2021, economic activity was progressively resuming with the proportion of residents having received the second vaccination exceeding 80% in major cities. The company will resume its sales and marketing activities in Q3 to make up for the impact of restrictions up until end-1H.
US
In April 2019, 3DM obtained FDA approval to sell anti-adhesion material and hemostat PuraSinus for use in the otorhinolaryngology field. The company launched sales through a direct sales system in Q1 FY04/22. The company has acquired new accounts as expected and has also been able to secure several new leads to potential new customers. Several top hospitals in the US either began using PuraSinus on a trial basis or adopted it for use in otorhinolaryngological procedures. Product utilization rates were high at the medical facilities and by physicians that have started purchasing the company's products, with the company acknowledging the high competitiveness of its products.
Although the company made progress in its acquisition of accounts, non-essential otorhinolaryngological procedures were postponed in response to the COVID-19 pandemic. Consequently, procedures conducted at hospitals that were initially targeted by the company declined in number. Therefore, in Q3, the company will begin targeting clinics that are less susceptible to the impact from the pandemic with the goal of raising sales per account on a short-term basis. Once the pandemic-related impact has diminished, the company will aim to achieve recovery in sales as hospitals that previously postponed their procedures begin to conduct them.
In June 2021, the company obtained approval from the FDA regarding the application of its hemostatic material in the field of gastrointestinal endoscopy. Currently, the company is conducting preparations targeting a product launch in FY04/22. As mentioned above, the company plans to deliver products manufactured at its Germany-based contract manufacturer PharmPur from March 2022.
Japan
In Japan, the Ministry of Health, Labour and Welfare (MHLW) notified the company that PuraStat®, its absorbable local hemostat, was included in NHI coverage in November 2021, with NHI reimbursement starting in December 2021. The company is receiving a greater number of inquiries for the product that it has expected, and began selling the product to domestic distributors in November 2011. The Japan Gastroenterological Endoscopy Society (JGES) published guidelines for the proper use of PuraStat® in September 2021. This, together with inclusion on the reimbursement list, should support future sales growth.
According to the company, Japan's insurance system prevents hospitals from incurring financial burdens stemming from the use of medical devices, and hospitals tend to proactively adopt and use quality medical devices. The company has received many inquiries from hospitals regarding PuraStat. However, due to a lack of sales staff, the company can only conduct sales activities targeting only a limited number of hospitals. The company plans to address these circumstances by increasing the size of its sales force.
For COVID-19 antibody test cassettes, the company launched sales of antibody test cassettes for research purposes to universities and other research organizations in April 2020. With the start of sales to private businesses in July 2020, the company booked 1H sales of JPY17mn.
Other
As announced by the company in December 2020, its agreements with Fuso Pharmaceutical Industries (covering exclusive sales for absorbable local hemostat using RADA16 self-assembling peptide technology in Japan and contract manufacturing) were terminated in response to the notification of intent to terminate the agreement previously received from Fuso Pharmaceutical in July 2020. As part of the termination agreement, it was agreed that Fuso Pharmaceutical Industries would continue to produce the needed amounts of absorbable local hemostat products until 3DM was able to enlist the services of a new contract manufacturer.
Company forecast for FY04/22
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
For FY04/22, the company is projecting full-year consolidated operating revenue of JPY2.4bn (+132.2% YoY), an operating loss of JPY1.7bn (versus loss of JPY2.6bn in FY04/21), a recurring loss of JPY1.8bn (versus loss of JPY1.9bn in FY04/21), and a net loss attributable to owners of the parent of JPY1.9bn (versus loss of JPY2.0bn in FY04/21).
Behind the growth in top-line revenues the company sees full-year sales of absorbable local hemostat products and anti-adhesives rising to JPY2.4bn versus only JPY970mn in FY04/21. By region, it sees Europe generating sales of JPY1.1bn (versus JPY456mn in FY04/21), Australia sales of JPY650mn (versus JPY495mn in FY04/21), the US sales of JPY318mn (no sales in FY04/21), and other regions generating combined sales of JPY310mn (versus only JPY19mn in FY04/21).
On the operating expense side, the company sees total spending coming in at just over JPY4.1bn (versus JPY3.7bn in FY04/21).
Cost of sales is projected at JPY1.1bn (versus JPY719mn in FY04/21) while the cost ratio is forecast at 46.7% (versus 70.2% in FY04/21). Including raw materials for peptides, contract manufacturing charges, and other production costs, the projected cost of sales of JPY1.1bn is well above the JPY719mn recorded in FY04/21 due to an expected increase in sales and production volumes and a hike in the gross profit margin due to higher production volumes and changes in manufacturing processes that will bring down unit costs. Changes to the sterilization method used in the manufacturing process of hemostat products were approved by a European independent third-party certification body in May 2021. The transition to the new sterilization method is planned for 2H FY04/22 and is expected to reduce manufacturing costs by more than half. In the US, it is possible to simply submit a supplemental application to change the manufacturing process, and the company plans to adopt the same sterilization method in the US. In April 2021, the company submitted a partial change application to MHLW for the addition of the new sterilization method to the approved manufacturing process in Japan.
Planned R&D spending of JPY591mn is down from JPY785mn in FY04/21.
Planned SG&A spending of JPY2.4bn is up from JPY2.2bn in FY04/21. The projected increase is attributable to increased personnel expenses due to expanded hiring, higher transportation expenses, and increased license fees to MIT in line with the expansion in sales.
Breakdown of product sales forecast by geographic region
Broken down by geographic region, the company’s full-year forecast for product sales in FY04/22 sees Europe generating sales of JPY1.1bn, Australia sales of JPY650mn, the US sales of JPY318mn, and other regions sales of JPY310mn. While its full-year forecast for total product sales of JPY2.4bn points to an impressive 132.2% increase over JPY970mn in FY04/21, it still leaves product sales well short of the FY04/22 target of JPY4.8bn set under the company’s previous medium-term business plan (released in June 2020). The blame here goes to the disruptions to normal business operations caused by the pandemic; extending all the way through FY04/21, the disruptions impeded the company’s efforts to bring in new customers in Europe and Australia as previously planned, while the restrictions on hospital sales calls in the US slowed its efforts there to put together a sales team and plan its marketing approach. In Japan, the disruptions in the wake of the pandemic led to more than a six-month delay in getting production started after the company had already received approval from regulators for the domestic manufacturing and sales of hemostat products, with this in turn further delaying the startup domestic sales. The company’s product sales outlook for FY04/22 takes all this into account and the assumptions underlying its sales projections have been adjusted accordingly.
Europe
The company’s full-year estimate for product sales in Europe is JPY1.1bn versus JPY456mn in FY04/21. In years past the company has grown sales in Europe by narrowly targeting demand in the area of surgical and GI endoscopic procedures. In the process it has also been able to shrink operating losses, but in FY04/22 it has its set sights on putting European operations into the black on a regular monthly basis. Towards that end, 3DM has expanded its sales partnership agreement with FUJIFILM Europe BV to include the Middle East and, with the help of this, is looking to double sales through FUJIFILM Europe over pre-pandemic levels. Having recognized the relatively limited size of potential market in Europe for hemostat products used in surgical and GI endoscopic procedures (estimated at most to be about JPY8.0bn per annum), 3DM has set its sights on the much larger market for hemorrhage prevention products, thereby increasing the size of its addressable market several times over.
Already, the company has been working since FY04/21 to broaden its target market in Europe to include the cardiovascular surgery and otorhinolaryngologic surgery markets. In the case of the cardiovascular surgery market, it started selling in Italy, France, and Spain and worked out to the rest of Europe from there; in the case of the otorhinolaryngologic surgery market, it started in England and worked out from there. In both cases, the company first went after the key influencers and heavy users and, based on its success there, went on to build up sales elsewhere. The company estimates that its product sales in FY04/21 gave it roughly 3% of the relevant market in Europe, up from a market share of roughly 1.5% the previous year.
US
The company’s full-year estimate for product sales in the US in FY04/22 is JPY318mn; it had no sales in the US in FY04/21, restrictions on hospital sales calls in the wake of the pandemic having delayed its efforts to break into the market. The company said it had brought on board a total of four sales people for its US sales team by the end of FY04/21, allowing it to score its first client win soon after moving into FY04/22. Based on the average sales figure per salesperson in Australia (AUD1.0mn in sales of anti-adhesives for use in otorhinolaryngologic applications), the similarities between this market in Australia and the US, and the marketing skills in this area that it has built up through its operations in Australia, the company has set a FY04/22 sales target of USD0.7mn per salesperson in the US.
Following the premarket notification 510(k) approval in June 2021 of hemostat products for use in gastrointestinal endoscopic-related applications, the company is moving forward with the creation of a sales team and distribution channels so as to be able to also begin US sales in this area in FY04/22.
Japan
Having secured regulatory approval for sales of its hemostat products for use in gastrointestinal endoscopic-related applications in FY04/21, the company expects to get these items listed for reimbursement by Japan’s national insurance scheme and commercialize them in 2H FY04/22. During FY04/22, the company is looking to focus much of the efforts of its three-person sales team on medical institutions that participate in clinical trials and related institutions. Because there will not be much time in FY04/22 when the company will actually be able to book sales, it does not expect domestic sales to be very large this year but nevertheless expects to take major steps toward establishing its own sales team and sales methods, and through this set the stage for maximizing growth starting in FY04/23. The Department of Gastrointestinal/Liver Internal Medicine, Gunma University Hospital began using it from May 2021. The company has already confirmed needs at several prominent Japanese medical institutions and plans to proceed with clinical evaluation aimed at adoption of its hemostat by each medical institution.
According to the company, commercialization of hemostat products is more favorable in Japan than other countries because the company anticipates rapid penetration to about 30% of high-volume facilities through product introduction to the top 10 medical institutions participating in clinical trials or related medical institutions and through referrals. Only in Japan are medical devices individually covered for NHI reimbursement. This allows hospitals to procure medical devices without incurring an economic risk, which promotes active use of good medical devices. In other countries, a lump-sum reimbursement scheme based on disease (i.e., diagnosis related group or DRG) is used, so medical devices become a cost that reduces profits. There is also competition with hemostat products of major companies in Europe and the US, while 3DM effectively has the market to itself in Japan.
The company obtained marketing approval for its submucosal injection material for use in endoscopic procedures, PuraLift, in Japan in May 2021, and plans commercialization once the device has been listed in the NHI reimbursement price list. The company also plans to promote cross-selling of hemostat products in Japan.
Australia
The company’s full-year estimate for product sales in Australia is JPY650mn versus JPY495mn in FY04/21. In FY04/21 the company’s Australian operations moved into the black on a standalone basis even though disruptions in the wake of the pandemic caused it to fall short of its target for new customers. Moving into FY04/22, the company is looking to further improve the profitability of Australian operations while at the same time maximizing sales. More specifically, the company said it will be working especially to increase the usage rates of its products at existing customers so as to maintain the rapid sales growth rates realized in past years. Through this and other means, the company is also looking to expand its share of the Australian market for hemostat products used in otorhinolaryngologic settings from the 12% share recorded in FY04/21. Having put together a strong track record in Europe for hemostat product sales for used in gastrointestinal endoscopic procedures, the company is also looking to expand its share of this market in Australia from roughly 5% in FY04/21 to 7% in FY04/22. The company will also be working to put together data from clinical trials of its hemostat products used it much larger markets that it would like to enter, such as otorhinolaryngologic surgery and urologic surgeries (both at least twice as large as the gastrointestinal endoscopic surgery market), with the aim of finding new customers in these areas starting in FY04/23.
One-time contract payments
In Japan and the US, the company is moving forward with the selection of future sales partners to handle hemostat sales and, in Europe, is moving forward with the selection of future sales partners to handle hemostat sales for use in areas other than gastrointestinal endoscopic procedures (which it already has covered). Once these new sales partners have been selected and obtain regulatory approval to begin selling, 3DM will be able to book one-time contract payments/milestone payments in return for granting its new sales partners exclusive sales rights. With 3DM having changed its sales strategy in FY04/21 and now in the process of building up its own internal sales capabilities, it will no longer have to wait on finding a sales partner before starting sales but will always have the option of linking up with a partner if the timing and terms are right. As of June 2021, the company says the timing of new partnership agreements is hard to predict and therefore the timing of the receipt of one-time contract payments/milestone payments is similarly uncertain. Accordingly, its forecast for top-line revenues in FY04/22 only includes revenues from product sales.
Medium-term outlook
Medium-term management plan
In June 2021, 3DM announced a revised medium-term management plan. In compiling the plan, the company considered the progress of sales in individual regions and the progress of business in Europe, Asia, Oceania, South America, Japan, and the US.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Product revenues by region are Shared Research estimates based on company data.
For the company outlook on FY04/22, see the “Company forecast” section on previous pages. The company’s outlook for FY04/23 and FY04/24 are detailed below.
The medium-term plan calls for a return to profitability at the operating level in FY04/23 and growth in operating profit in FY04/24. As of July 2021, 3DM had already obtained marketing approval for the new products needed to meet the sales target of the medium-term plan (excluding next-generation hemostatic material slated for commercialization in Europe in FY04/23 and wound-healing material for colitis expected to be launched in the US in FY04/24) in each region. Lowering the cost ratio will be essential to move into the black at the operating level. In this regard, the new manufacturing process, which will enable the company to reduce the cost ratio, was approved in Europe in May 2021.
One-time contract payments and milestone payments
In Japan and the US, the company is moving ahead with the selection of sales partners to handle hemostat sales and, in Europe, is in the process of selecting of sales partners to handle hemostat sales for use in areas other than gastrointestinal endoscopic surgery. Once these new sales partners have been selected and authorized to begin selling, 3DM will be able to book one-time contract payments/milestone payments in return for granting its new sales partners exclusive marketing rights. With 3DM having changed its sales strategy in FY04/21 and now in the process of building up its own internal sales capabilities, it will no longer have to wait on finding a sales partner before starting sales though will still have the option of linking up with a partner if the timing and terms are right. As of June 2021, the company says the timing of any new partnership agreements is hard to predict and therefore the timing of the receipt of one-time contract payments/milestone payments is similarly uncertain. Accordingly, the company’s forecast for top-line revenues in FY04/22 only includes revenues from product sales.
Company revenue and earnings targets for FY04/23: Underlying assumptions
Product sales target
For FY04/23, the company is targeting total product sales revenue of JPY5.6bn, with Europe generating sales of JPY2.6bn, Australia JPY1.0bn, Japan JPY539mn, the US JPY1.4bn, and other regions JPY20mn.
Europe
The company’s FY04/23 target for product sales in Europe of JPY2.6bn represents an increase of 140% over its estimate of JPY1.1bn for sales in FY04/22. With operations running in the black, plans call for building on its FY04/22 sales plan and expanding sales of hemostat products throughout Europe via its sales partners. In the area of GI endoscopic surgeries, the company is looking to double sales again in FY04/23 after having doubled them in FY04/22, this feat being accomplished mainly by steadily expanding its sales territories into new countries as it did in FY04/22. In the area of cardiovascular and otorhinolaryngologic surgeries, plans call for focusing on key influencers that is has already won over and using their influence to help build a base of core users among central hospitals in the different regions. The company estimates that its product sales in FY04/22 will give it roughly 3% of the relevant market in Europe, and that the expansion of sales in FY04/23 will push its market share up to 8%. It also expects to begin rolling out its next generation of hemostat products sometime during the course of the year.
US
The company’s FY04/23 target for product sales in the US of JPY1.4bn represents an increase of 333% over its estimate of JPY318mn for US sales in FY04/22. Having put together its US sales organization in FY04/22, patterning it after its successful operations in Australia for selling anti-adhesives for use in otorhinolaryngologic applications, in FY04/23 the company plans to simply expand its reach and build up its client base through the addition of more salespeople, expanding its US sales force from four to twelve with each salesperson expected to generate USD1.0mn in sales.
The company obtained premarket notification 510(k) approval to begin sales of hemostat products for use in gastrointestinal endoscopic surgeries in June 2021. It looks to establish its marketing plans in this area in the US during the course of FY04/23, patterning its efforts here after those used in Europe, where it has seen rapidly growing sales in this same market. In this relation, the company noted that the gastrointestinal endoscopic surgery market in the US is the fastest growing market and, in terms of the number of procedures performed, is about the same size as in Japan and Europe.
Japan
The company’s FY04/23 target for product sales in Japan is JPY539mn. The company is not projecting any product sales in Japan for FY04/22 but is saying that by the end of FY04/22 it expects its mucous membrane protuberance products to have been put on the list of medical products approved for reimbursement under the national health insurance scheme and be the subject of cross-sales efforts along with its hemostat product sales in the gastrointestinal endoscopic surgery market. In FY04/23 the company expects to expects to expand the size of its domestic sales force from three to six, and focus mainly on hospitals that handle at least 150 ESD/EMR surgeries a year. With each salesperson generating roughly JPY90mn in sales a year, the company is looking to capture a market share in this field of roughly 7%. The company believes it is being realistic in its expectations, especially compared with the rapid ramp-up in sales achieved in this same market when it started sales in Europe.
Australia
The company’s FY04/23 target for product sales in Australia of JPY1.0bn represents an increase of 55% over its estimate of JPY650mn for sales in FY04/22; in terms of profitability, the company expects its Australian operations to have an operating profit margin of roughly 30% by that time. The top-line growth projected for FY04/23 reflects the company’s expectation of continued rapid growth on the back of new customer wins in the rapidly growing gynecological surgical market, and also the urological surgical market, where its marketing efforts are expected to be bolstered by clinical trial results that are scheduled to come in during FY04/22. In terms of market share of the relevant markets, the company is looking to get its hemostat market share up to around 10% versus an estimated share of 7% in FY04/22.
Company revenue and earnings targets for FY04/24: Underlying assumptions
Product sales target
For FY04/24, the company is targeting overall product sales of JPY9.8bn (versus JPY5.6bn in FY04/23), with Europe generating sales of JPY4.0bn, Australia JPY1.5bn, the US JPY3.0bn, Japan JPY1.4bn, and other regions JPY24mn.
Europe
The company’s FY04/24 target for product sales in Europe of JPY4.0bn represents an increase of 50% over its estimate of JPY2.6bn for sales in FY04/23. Hemostat product sales to the GI endoscopic surgery market via its sales partners are seen growing by roughly 30% YoY. In the cardiovascular and otorhinolaryngologic surgery markets, plans call for steadily building out its client base from its initial base of core users at central hospitals all across Europe. In terms of market share, the company is looking to get its share of relevant markets up to at least 11% versus an estimated 8% share in FY04/23. Plans call for additional contributions to sales starting in FY04/24 from sales of wound-healing products for use in new applications (specifically, radiation thyroiditis and ulcerative colitis-related applications) and the launch of next-generation hemostat products for the neurosurgery market.
United States
The company’s FY04/24 target for product sales in the US of JPY3.0bn represents an increase of 116% over its estimate of JPY1.4bn for US sales in FY04/23. The target figures assume the company will capture roughly 12% of the market for anti-adhesives and hemostat products for otorhinolaryngologic applications. In the gastrointestinal endoscopic surgery market, as this will be only the second year for the company and its hemostat products in the US, it is looking for a market share of roughly 3%. Plans also call for additional contributions to sales starting in FY04/24 from the start of sales of wound-healing products for use in radiation thyroiditis-related applications.
Japan
The company’s FY04/24 target for product sales in Japan of JPY1.4bn represents an increase of 151% over its estimate of JPY539mn for sales in FY04/23. In FY04/24 the company expects to expand the size of its domestic sales force from six to nine, and focus on hospitals that handle at least 120 ESD/EMR surgeries a year. With this, the company is looking to boost its market share in this field up to roughly 15% versus an estimated 7% in FY04/23.
Australia
The company’s FY04/24 target for product sales in Australia of JPY1.5bn represents an increase of 49% over its estimate of JPY1.0n for sales in FY04/23; in terms of profitability, the company expects its Australian operations to have an operating profit margin of roughly 40% by that time. In terms of market share of the relevant markets, the company is looking to get its hemostat market share up to around 12% versus an estimated share of 10% in FY04/23. The top-line growth projected for FY04/24 reflects the company’s expectation of continued rapid growth in sales to the rapidly expanding gynecological and urological surgery markets. Plans also call for additional contributions to sales starting in FY04/24 from sales of wound-healing products for use in new applications (specifically, radiation thyroiditis and ulcerative colitis-related applications), which because they will carry the CR mark indicating that they have been approved for sale in Europe can also be sold in Australia.
FY04/24 earnings outlook
The outlook for the sharp improvement in 3DM’s profit is based on the success of its ongoing efforts aimed at eliminating the bottlenecks on the production side that have thwarted past efforts to bring down product costs (as a percent of sales). With changes to its equipment sterilization processes and larger production lines, the company is preparing to modify its production processes so as to bring down product costs and, having already received a go-ahead from European regulators in May 2021, is now set to implement these changes to its production lines in Europe starting in FY04/22. These changes are expected to cut manufacturing costs by more than half. The company expects the cost ratio to fall from 70.2% in FY04/21 to 46.7% in FY04/22 and to 30.0% in FY04/24 as a result of the revised manufacturing process.
In December 2021, the company concluded an agreement with Germany-based PharmPur, which will serve as a new contract manufacturer. The company believes that growth in the volume of products produced by PharmPur will begin having a downward impact on manufacturing costs in FY04/23, augmenting the downward impact associated with changes in sterilization methods. This impact was not factored into the medium-term management plan the company announced in June 2021.
After moving into the black at the consolidated level in FY04/23, the company’s medium-term business plan is targeting a consolidated operating profit margin of 29.5% in FY04/24—the improvement here coming on the back of rapidly rising sales and despite increases in its employee headcount and SG&A spending.
Capital funding plans
With spending on clinical studies for products in its development pipeline and other R&D spending accounting for a large proportion of its funding needs, the company plans to continue fortifying its financial position in order to meet those needs going forward.
In this relation, we note that 3DM has procured some capital funding from Heights Capital Management, a US investment fund known for investing in the biotech industry, making private placements of Series 2 and Series 3 unsecured convertible warrant bonds and also privately placing Series 25, Series 27, and Series 28 warrants with the US-based investment company.
In addition to procuring additional equity capital, at the end of FY04/21 the company also renewed a committed credit line agreement of up to JPY300mn with Resona Bank so as to have access to a more flexible source of operating capital.
Business
Business description
3DM is a medical technology company that develops, manufactures, and markets a self-assembling peptide technology originally created at the Massachusetts Institute of Technology (MIT).
The key features of the company’s business are:
MIT holds the underlying patent for the self-assembling peptides that are the basis of the 3DM’s products. The Company has an exclusive global license from MIT for this technology that includes rights of development, manufacture, and marketing of applications that use these self-assembling peptides.
Self-assembling peptides have two main advantages over the medical products currently on the market they are intended to compete with. Firstly, as they are produced by chemical synthesis, there is no risk of viral or other types of contamination that can occur in goods derived from living organisms. Secondly, they can be mass-produced in a homogenous fashion.
These characteristics lend themselves to potentially large-scale use in surgery (such as absorbable local hemostat and mucous membrane protuberance materials) and in the regenerative medicine field (as alveolar bone reconstruction materials).
3DM’s business model attempts to minimize risks specific to medical product start-ups. Specifically, the products it is developing are categorized as “medical devices” rather than “pharmaceuticals.” Consequently, the duration from application to approval is shorter and costs are lower than would be the case if the company were to develop pharmaceuticals.
Self-Assembling Peptide Technology
The human body is made up of proteins, the smallest unit of which is amino acids. Peptides are molecules composed of a number of connected amino acids. Invented by Dr. Shuguang Zhang at MIT in 1992, self-assembling peptides are composed of a (16 base) RADA sequence that is made up of three types of amino acids; Arginine (R), Alanine (A), and Aspartic acid (D).
The peptides are suspended in an acidic solution, when this solution comes into contact with a neutral pH environment, for example blood or a salt solution, the peptide molecules ‘self-assemble’ to create a gel formed of nanofibers. Once the self-assembling peptides become gelatinous, they will not revert to a liquid state even if they returned to an acidic solution. Moreover, ADME (absorption, distribution, metabolism, and excretion) tests confirmed that self-assembling peptides do not accumulate in any particular organ but instead degrade into protease and are excreted from the body after approximately 30 days.
The gel that is formed is an environment similar to that for cells cultured in vivo and has a network structure similar to that of an extracellular matrix, such as collagen. The company is exploiting these characteristics to create applications in a variety of fields, including surgery, regenerative medicine, and drug delivery systems (DDS).
While MIT holds the patents on the self-assembling peptide technology, 3DM has an exclusive agreement with MIT for the basic patents for the self-assembling peptide technology: PuraMatrix™ is its first-generation product that uses these self-assembling peptides.
Self-assembling peptides are non-biological molecules produced by chemical synthesis and have the following characteristics:
Safety: As self-assembling peptides are produced via chemical synthesis, there is no risk of viral infection (as can occur in biologically-derived molecules) or contamination from foreign elements.
Ease of use: Water soluble and assumes a gelatinous form, while also being transparent and easy to handle; has a uniform quality that allows for mass synthesis
Development potential: Physical properties suitable for the target application can be created through changes in peptide sequence and concentration.
Main business segments
The company reports only one business segment, Medical Products. However, this can be further broken down into the Medical Products Development and Research Reagent Salessub-segments.
Medical products development
In this sub-segment, the company develops medical devices and treatments for use in the fields of surgery, regenerative medicine, and DDS (drug delivery systems) based on its self-assembling peptide technology.
The main development pipeline consists of:
Surgical field: absorbable local hemostat, mucous membrane protuberance material, and anti-adhesion material
Regenerative medicine field: alveolar bone reconstruction material, wound-healing material, and radiation proctitis healing material
3DM’s strategy has been to develop these applications in-house as medical devices and then to obtain marketing approvals for them. Its sales strategy involves independent marketing or distribution through sales agents. Depending on the product or the region the company may enter into exclusive marketing agreements.
As for the DDS space, 3DM has been working to launch products that combine self-assembling peptides with a variety of pharmaceuticals, with the peptides functioning as a carrier for the pharmaceutical material. While it is also likely that self-assembling peptides themselves can be developed to function as pharmaceutical materials, independently developing this would be time consuming for the company. Instead, it intends to license the technology out to third parties for this purpose and generate licensing revenue from doing so.
The company is also using joint research and MTA agreements with universities and other research facilities to acquire new self-assembling peptides application technologies.
Medical device development process
The medical products that 3DM is focused on are categorized as “medical devices.”
The processes for developing new medical devices and pharmaceutical products are the same: First, there is basic research, followed by preclinical studies, clinical studies, and an application for manufacturing and marketing approval. However, with pharmaceuticals the clinical-study stage requires a number of phases and generally speaking, involves a large number of patients. As a result, the pharmaceutical development process tends to be long.
More specifically, for pharmaceutical development the clinical studies have three phases; in Phase I and II, researchers test the drug/treatment on a small group of healthy people to evaluate its safety and effectiveness, while in Phase III they administer it to a large group of patients who suffer from the disease or condition that it is intended to treat to confirm its safety and effectiveness.
On the other hand, medical devices require a comparatively short development process of just one clinical study phase. The R&D process for medical devices can be summarized as follows:
All of these are based on the same sequence of self-assembling peptides (RADA 16) as absorbable local hemostat TDM-621.
In January 2014, 3DM received the CE marking in Europe for TDM-621. As of June 2021, the product was being sold in Europe, Asia, Oceania, and Latin America. In July 2020, the company obtained marketing approval in Japan.
In May 2021, the company obtained marketing approval for its mucous membrane protuberance material TDM-644 in Japan.
In April 2019, 3DM obtained FDA approval for its 510(k) premarket notification application regarding the use of the anti-adhesion material (TDM-651; PuraSinus) in otorhinolaryngology.
Wound-healing material (TDM-511), which obtained US marketing approval from the FDA in February 2015, was further approved for aesthetic applications in May 2020.
Medical reagent sales
3DM sells self-assembling peptides product, PuraMatrix™, through its partner Corning Incorporated as a research reagent to universities and other research facilities around the world. PuraMatrix™ is used in various medical applied studies and types of therapy.
3DM is marketing the product as a research reagent in the hope that the researchers using PuraMatrix™ will develop new commercially viable applications.
Main development pipeline
Absorbable local hemostat (development code: TDM-621, trade name: PuraStat)
3DM is developing the absorbable local hemostat TDM-621 based on its RADA16 self-assembling peptide technology. TDM-621 can be applied with a syringe to comparatively narrow openings where bleeding may occur during surgery and can also be used in conjunction with an endoscope.
TDM-621 becomes pH-neutral when it comes into contact with bodily fluids, such as blood. The peptides then self-assemble into nanofibers and become gelatinous. The gel perfectly coats the surface of the contact area, forming a coating that physically seals the surface film and peripheral blood vessels. In aortal blood vessels, it produces blood coagulation and hemostasis.
No risk of infection with TDM-621; advantageous in different types of surgery
Existing biological hemostats carry infection risk
Existing hemostats are categorized as liquid types (fibrin glue) or sheet/powder types (fibrin and collagen). Fibrin glue involves creating a paste out of blood-derivative fibrinogen, and there are questions over its safety (in terms of viral infection, and others).
Absorbable local hemostat (TDM-621) has low infection risk
TDM-621 has a number of advantages over existing hemostats. First, there is no risk of infection. The majority of hemostats currently in use are synthesized from human or animal blood, such as from fibrinogens, while the raw material for collagen is produced from the skin of animals. As these products are derived from living organisms, they carry the risk of viral infection. In contrast, TDM-621 is chemically synthesized from amino acids and so carries no risk of viral infection or contamination from unknown elements.
Informed consent not required
The medical use of biologically derived products is subject to strict controls:
Informed consent. Patients (or their families) must receive an appropriate explanation about their use and risks
Records of production and use must be kept
Reports must be created verifying absence of infectious diseases in the products
As TDM-621 is chemically synthesized product, there is no infection risk. Apart from obvious healthcare and legal benefits, this could also reduce administrative burden. In cases when biologically derived hemostats are used, patients (or their representatives) must sign off a consent form before the start of the surgery. When TDM-621 is used, no consent is required. As a result, if a surgeon determines that a hemostat is required during the course of performing a procedure, TDM-621 can be used immediately.
Infections transmitted during medical procedures have emerged as a serious public health issue in the recent years and there is substantial latent demand for new medical materials that can eliminate the risk of infection, reduce surgery time and alleviate the burden on patients.
Transparent liquid that preserves field of view
From a surgeon’s perspective, absorbable local hemostat TDM-621 also has a number of appealing features. A transparent liquid, it becomes a pH-neutral gel only after coming into contact with bodily fluids such as blood. Therefore, it does not obscure a surgeon’s view and can be easily applied via a catheter or into a narrow tissue entrance. In contrast, standard hemostats are cloudy liquids and can obscure a surgeon’s view of a damaged area, especially when operating remotely with a camera. Finally, unlike surgical glue, TDM-621 does not self-solidify, so it can be applied via a catheter.
Hemostatic performance of TDM-621 is high
3DM notes that TDM-621 induces hemostasis in, and perfectly seals surface membranes and peripheral blood vessels, meaning it can induce a greater hemostatic effect than existing products (which induce hemostasis by bonding the tissue or covering it with an adhesive material.