■Company overview of Helios <4593>

1. Company History WaveLock Holdings <7940> originated from Japan WaveLock Co., Ltd., which was established in 1964 with equal investment from Nissho Co., Ltd. (currently Sojitz <2768>), Japan Carbide Industry <4064>, and Maruto Chemical Industry Co., Ltd. (currently Takeda Chemical Industries, Ltd.) for the introduction of the WaveLock technology regarding fiber-reinforced plastic sheet from Italy. The WaveLock method is a method of manufacturing a sandwich structure by synthesize fibers in a wave shape between two plastic films and fixing (lock) them. Resin processing sheets made by this method have the characteristics of not only elasticity but also a significant increase in physical strength. In the 1960s, vinyl products used in agriculture were weak in strength and susceptible to tearing, and the founder, Hiromi Kinebuchi, saw the need for WaveLock products in the same field and aimed to introduce the technology from agricultural raincoats. After that, the market expanded to include vinyl greenhouses, raincoats, industrial materials, and more, and the business grew. The operating income of products worth 10-30 billion yen were respectively 401/1288/60 million yen.

Helios is a biotechnology venture established in 2011 by current CEO Tadao Kagimoto, a former ophthalmologist, with the mission to "Increase 'life' explosively." The company conducts research, development, and manufacturing of cell pharmaceuticals and regenerative medicine products in areas where major causes of death in developed countries and new therapeutic drugs are sought (ARDS: respiratory domain, cerebral infarction: neuro domain, solid tumors: oncology domain).

In 2013, a patent licensing agreement was signed with iPS Academia Japan, Inc. and the RIKEN research institute (now RIKEN), leading to the start of the development of a treatment method using iPSC-derived RPE cell products targeting age-related macular degeneration, which has no radical treatment. In December of the same year, a joint development agreement was signed with Sumitomo Dainippon Pharma (now Sumitomo Pharma <4506>), and in 2014, a new joint venture company, Cylicken (with a shareholding ratio of 50%), was established for manufacturing and sales promotion. Additionally, the company acquired the business of the ophthalmic surgical aid "BBG250," which had been successfully developed by Acumen, Inc., founded by Kagimoto in 2005, and had begun sales in Europe (this business was transferred to DeNova Western Therapeutics Institute <4576> in 2017).

In 2016, the company focused on the MultiStem product, a somatic stem cell product that was being developed in the USA by Athersys for the acute phase of cerebral infarction. A license agreement was signed to conduct development and sales in Japan, and Phase 2/3 clinical trials were initiated (development code HLCM051). That same year, a joint development agreement was signed with Universal Cells, Inc., a US biotechnology company, for pluripotent cell products using gene editing technology to suppress immune rejection reactions.

※ Stem cells are important cells that exist in the body and maintain tissues and organs over a long period by differentiating into multiple cells and suppressing excessive inflammation.

In 2019, to concentrate management resources on the development of HLCM051, the joint development structure with Sumitomo Pharma in Japan was reviewed. Specifically, the lead developer was changed from the company to Sumitomo Pharma, with Sumitomo Pharma conducting clinical trials to reduce the burden of development costs. As a result of the change in development policy, the total amount of milestones to be paid by Sumitomo Pharma to the company was reduced from 1.6 billion yen (of which 0.7 billion yen has been received) to 1 billion yen, depending on the progress of development.

In 2021, a fund subsidiary in the field of regenerative medicine was established in the USA, Saisei Ventures LLC. In 2023, a new subsidiary, Procellcure, focused on actively promoting the development of HLCM051, and another subsidiary, eNK Therapeutics, which advances research and development of cancer immunotherapy using allogeneic iPS cell-derived eNK cells with gene editing technology, were established.

In January 2024, it was announced that MultiStem and related assets were acquired by the company following the bankruptcy of Asasis. Additionally, in April of the same year, a joint research agreement was concluded with the comprehensive medical group AND medical group to utilize the technology and cultured supernatant held by the company, and by June, a basic business partnership agreement concerning the distribution and sale of products handled by the company and a purchase agreement of 1.6 billion yen for ordinary corporate bonds were signed with Alfreza Co., Ltd., advancing the alliance strategy.

In June 2024, two ordinary corporate bonds (each 0.8 billion yen, interest rate 2%) were issued. The redemption dates are June 28, 2027, and June 28, 2030.

Having all the processes and manufacturing facilities necessary for the research and development of cell pharmaceuticals in-house is a strength.

2. Business Structure and Group Companies

When organizing the current business structure by area, it includes the development of cell pharmaceuticals targeting ARDS, acute cerebral infarction, and trauma using HLCM051, a somatic stem cell derived from bone marrow acquired from Asasis, along with the development of a new cancer immunotherapy using eNK cells derived from iPSC. In addition, the business develops manufacturing and sales of supernatants generated during HLCM051 culture, UDC (Universal Donnor Cel※1), iPSC cell lines, and the medical materials business which involves licensing sales of the automated freezing and thawing inventory management system SIFUTM (Secure Integrated Freezer Unit※2) acquired from Asasis.

※1 Refers to allogeneic iPS cells with suppressed immune rejection reactions (due to white blood cell antigen (HLA) incompatibility) using gene editing technology, allowing transplantation irrespective of the HLA type of the recipient. By removing multiple HLA genes that trigger rejection from allogeneic iPS cells and introducing immune suppression-related genes and suicide genes (which can induce cell death and eliminate abnormally functioning cells), the safety has been significantly enhanced. The aim is to utilize these for next-generation cancer immunotherapy, ophthalmology, and organ rudiments, while promoting collaboration with in-house development and academia.

※2 Cell pharmaceuticals are preserved by freezing in an environment below minus 130°C using liquid nitrogen and are thawed upon use; however, liquid nitrogen is designated as a hazardous material with explosion risks, incurring costs for maintaining safety during transport and storage. SIFU is a special cooling device that creates an environment of minus 150°C to 180°C, developed by Asasis, with the construction of the device outsourced. Although it requires power to operate the cooling device, the handling during transport and storage becomes simpler, providing benefits. Furthermore, the company possesses multiple researchers with Ph.D. qualifications and equipment for cell culture at the Kobe Research Institute, enabling comprehensive in-house execution of all processes necessary for research and development, from exploratory research of cell pharmaceuticals to recombinant experiments, animal testing, process development, and analytical tasks. In April 2024, three-dimensional culture technology capable of manufacturing cell pharmaceuticals with consistent quality was also acquired from Asasis and implemented in the research institute. If the development of cell pharmaceuticals proceeds smoothly, plans for expanding the business through investments in enhancing the capacity of the culture facilities will be made.

As of the end of June 2024, the group company consists of the company itself and seven consolidated subsidiaries, along with one jointly controlled company accounted for by the equity method, employing a total of 59 staff members. Following a review of the development pipeline, the employee count was streamlined to about half from a peak of 116 at the end of December 2021, but the goal is to maintain the current level while aiming for profitability. Additionally, the Saisei Bioventures, L.P. fund established in 2021 involves multiple major domestic financial institutions, including SMBC Nikko Securities Co., Ltd., Mizuho Capital Co., Ltd., and the Innovation Network Corporation of Japan, investing in several biotech ventures engaged in the research and development of next-generation therapeutic drugs and foundational technologies in the regenerative medicine field.

Acquisition of substantially all assets from Assasis.

3. Regarding the acquisition of substantially all assets of Assasis.

Following Assasis' bankruptcy in January 2024, the company acquired related assets including MultiStem and IP in April of the same year. This asset acquisition resulted in the elimination of payment obligations for milestones and sales royalties to Assasis regarding MultiStem (HLCM051), significantly reducing future payment burdens, and the acquisition of intellectual property including over 400 patents, enabling global development. If the development of HLCM051 is successful, its value will improve significantly compared to before.

* Due to the lack of statistically significant differences in the primary endpoint results of the interim analysis of the Phase 3 trial targeting cerebral infarction conducted in Europe and the USA, fundraising became difficult, and issues in the management system were also seen as a contributing factor to the bankruptcy.

Main acquired assets include all clinical data of the three pipelines (cerebral infarction, ARDS, trauma) of MultiStem that Assasis was developing, hundreds of clinical trial drugs of MultiStem, 3D culture devices, manufacturing know-how, licensing agreements in the animal field (USA market), and SIFU technology for safely transporting and storing cell pharmaceuticals. These will be assets that can be utilized in the future development and commercialization of HLCM051.

* Clinical data obtained up to the Phase 3 trial for cerebral infarction, Phase 2/3 trial for ARDS, and Phase 2 trial for trauma can be utilized in future development.

(Written by FISCO guest analyst, Jo Sato)