Business Overview 4. DX Regional Collaboration Project Signpost's DX and Regional Collaboration Project started in March 2022 with the establishment of the DX and Regional Collaboration Division. It aims to provide products and services that contribute to regional collaboration by collaborating with local financial institutions nationwide, utilizing its own DX technology and open innovation. In August 2022, it began working with Oita Made Co., Ltd., which was established with the investment of multiple companies in Oita Prefecture, including Oita Bank, to sell original products made in Oita Prefecture to both domestic and overseas markets and to match local companies and Signpost's products and services in order to promote the revitalization of Oita Prefecture's economy. In addition, in April 2024, it started offering DX support services for medium-sized and small businesses. As the first effort, it supports the creation of DX declaration by (The) Fourth Hokuriku Bank, Ltd. (Niigata City, Niigata Prefecture) to deploy DX declaration support services to the market. Furthermore, it will realize new solutions by commercializing its own technology and open innovation and promote regional collaboration through innovation.

1. Business Overview. P-B Systems <4447> is an independent SIer based in Fukuoka, with expertise in system virtualization technology and strong cloud-based infrastructure building capabilities that builds various information systems for mid-sized enterprises, SaaS providers, and public agencies. The secure cloud system business is the core of the business, supporting total security, resilience building related to cybersecurity, and the realization of DX with cloud technology, ranging from digital work promotion to experience-sharing VR theaters with MetaWalkers, a series of emotional system businesses. The company is also fostering metaverse businesses. The company has claimed to have been a "small group of professionals in system virtualization" to date. However, steering toward further growth in the future, the company plans to expand its scale from the FY2024, aiming to transform itself into a "professional group of hybrid clouds."

PhoenixBio's drug discovery support services include selling PXB mice, a high-quality human liver chimeric mouse developed in-house, selling PXB-cell related products derived from PXB mice, and commissioned drug evaluation services (drug efficacy evaluation, safety assessment, etc.). The commissioned testing services are conducted by the company's testing division as well as external CROs (contract research organizations) that it has collaborated with.

The company is engaged primarily in the North American market where major pharmaceutical companies have research and development bases. Approximately 80% of the company's customers are overseas pharmaceutical companies, research institutions, etc. (as of the year ending March 2024, 78.2% of revenues by customer were from overseas pharmaceutical companies, 4.4% from other overseas sources, 6.2% from domestic pharmaceutical companies, and 11.5% from domestic universities and research institutions). Within the business areas of each group company, PhoenixBio is responsible for research and development related to PXB mice, production and sales of PXB mice and PXB-cell related products, and commissioned testing services. The consolidated subsidiary, PhoenixBio USA Corporation, provides commissioned services primarily in the North American market. KMT Hepatech, Inc. produces PXB mice and PXB-cell related products for the North American market, while CMHL Consortium LLC engages in collaborative research with pharmaceutical companies and research institutions, among other activities.

2. Features, strengths, and main products.

A chimera refers to an individual with different genetic information within the same organism. The human liver chimeric mouse is a mouse whose liver has been partially replaced by human liver cells. Human liver cells are transplanted into laboratory animals (host animals), which are mice in this case, to produce the chimeric mice. The production process for the company's human liver chimeric mouse (product name: PXB mouse) involves transplanting human liver cells into cDNA-uPA/SCID mice, which are created by breeding SCID mice, which have no immune system, and cDNA-uPA mice, which have liver damage. After about 11 weeks post-transplantation, the estimated replacement rate of the recipient mice is 70% or higher, resulting in PXB mice with a human liver cell replacement rate of 70% or higher. The company developed cDNA-uPA in collaboration with the Tokyo Metropolitan Institute of Medical Science and Chugai Pharmaceutical Co., Ltd. (international patents obtained) and uses it as the host animal to produce PXB mice. PXB mice have the advantage of being able to maintain their humanization state for a longer period of time in a stable manner by using the host animal. The human liver cells used in the production of PXB mice are purchased in large quantities (almost all from the United States) from liver cells obtained from a single donor and are frozen and stored. The company currently produces more than 4,000 PXB mice annually.

The company's business area targets non-clinical trials in the process of developing new drugs for pharmaceutical companies and research institutions. Since the human liver cells in PXB mice is very similar to those in humans, various experiments related to human liver cells can be repeated using PXB mice carrying liver cells from the same donor, making it possible to predict the effectiveness and safety for humans during the non-clinical trial stage.

One of the reasons that drug development is generally difficult is that even if efficacy and safety are confirmed in non-clinical animal experiments, problems with efficacy and safety may arise when tested using humans in clinical trials. By using the company's PXB mice with human liver cells, it is possible to predict the effectiveness and safety in humans during the non-clinical trial stage, reducing the dropout risk in the clinical trial stage.

The main products related to human liver cells collected from PXB mice include fresh human liver cells (PXB-cells), premium liver cell culture medium (PXB-Shizuku) released in June 2023, and next-generation high-performance human liver cells for cell culture technology (PXB-cells RF) released in January 2024.

In general, when using frozen human liver cells commonly used in new drug development processes, the cells' functions may deteriorate to some extent once they are frozen. A major advantage of PXB-cells, which are Not frozen, is that they maintain high liver function. Furthermore, since they are shipped and delivered in advance in plates, they are convenient for researchers who can use them immediately. PXB-Shizuku is a medium formulated from human liver cells cultured in vitro in the laboratory and is a product targeting a wide range of users. PXB-cells RF is a product optimized to be supplied in a stable suspension state (floating) instead of the conventional adhesive state, while retaining the high performance of PXB-cells, and can accommodate various uses by customers.

In pharmaceutical companies and research institutions, the development of Microphysiological Systems (MPS), which combine new in vitro evaluation methods (tests that use tissues extracted from organisms such as humans and animals in containers such as test tubes and culture vessels to artificially create an environment similar to the body to study the effects of drugs) such as three-dimensional cultivation methods (spheroid cultivation, organoid cultivation) and 3D bioprinters, is progressing worldwide to meet the wide range of customer needs. They are actively promoting the development and introduction of new products to respond to these needs.

In March 2024, they formed a business partnership with Eco Cell Inc. Eco Cell Inc. was established as a venture originating from Yokohama City University in July 2022, and has been developing commissioned tests and spheroid prototypes based on its technology related to multicellular structures and spheroids (cell clusters). In this partnership, Eco Cell will use their spheroids to create them through using the PXB-cells RF product. Since spheroids are cell clusters that maintain a three-dimensional structure, it is expected to obtain experimental results that are closer to the liver.

In addition, in February 2024, a research team led by Professor Yasuyuki Sakai of the Graduate School of Engineering at the University of Tokyo announced a research paper, "Discovery of new organ-related mechanisms of the small intestine and liver through a dual organ perfusion MPS device." They revealed the organ cross-talk mechanism between the small intestine and liver in improving liver function using a new human organ cell culture system instead of animal testing. PXB-cells from the same company were used as liver cells in this study.

(Authored by FISCO guest analyst Masanobu Mizuta)