CONSOLIDATED FINANCIAL REPORT For the First Quarter of Fiscal Year Ending April 30, 2018 (Under Japan GAAP)

Transcription

1 English translation is only for your information purpose. Should there be any discrepancies between the Japanese original and this English translation, the Japanese original shall prevail. CONSOLIDATED FINANCIAL REPORT For the First Quarter of Fiscal Year Ending April 30, 2018 (Under Japan GAAP) Company name: 3-D Matrix, Ltd. Stock exchange listings: Tokyo JASDAQ Stock code number: 7777 URL: 3d-matrix.co.jp Representative: Jun Okada, President Inquiries: Tomoyuki Arai, Director Telephone: Quarterly statement filling date (as planned): September 14, 2017 Supplemental material of quarterly results: None Convening briefing of quarterly results: None September, 2017 (Figures are rounded down to the nearest million yen) 1. Consolidated results for the first quarter of FY 2017 (May 1, 2017 July 31, 2017) (1)Consolidated operating results (cumulative) Business Revenues Operating income Ordinary income (%:Growth year on year) Net income ( million) % ( million) % ( million) % ( million) % 1Q FY (415) (332) (355) 1Q FY (82.7) (397) (522) (548) Note: Comprehensive income: 1Q Fiscal ( %) 1Q Fiscal ( %) Basic Net income per share Diluted Net income per share ( ) ( ) 1Q FY 2017 (16.28) 1Q FY 2016 (25.50) (2)Consolidated financial positions Total assets Net assets Shareholders equity per share ( million) ( million) % As of April 30, ,299 2, As of April 30, ,423 2, Dividends Annual dividends per share 1Q end 2Q end 3Q end Year end Total ( ) ( ) ( ) ( ) ( ) FY FY 2017 FY 2017(Forecast) Note: Revisions to the latest dividend forecast: None

2 3. Consolidated financial forecasts for FY2017 (May 1, 2017 April 30, 2018) Full fiscal year Business Revenues Operating Income Ordinary income Net income (%:Growth year on year) Basic Net income per share ( million) % ( million) % ( million) % ( million) % 304 (50.6) (1,675) (1,675) (1,700) (78.88) ~2,354 ~282.3 ~630 ~630 ~620 ~28.77 Note: Revisions to the latest dividend forecast: None Note (1) Changes in number of significant subsidiaries during the period (changes in specified subsidiaries resulting in a change in scope of consolidation): None (2) Application of special accounting treatment in preparation of consolidated quarterly financial statements: None (3) Changes in accounting policies, accounting estimates and restatements 1) Changes in accounting policies in connection with revisions to accounting standards: None 2) Changes in accounting policies other than 1): None 3) Changes in accounting estimates: None 4) Restatements: None (4) Number of shares issued (common stock) (shares) 1) Number of shares issued as of the end of the 1Q FY ,207,200 FY ,615,200 reporting period (including treasury stock) 2) Number of treasury stock shares as of the end of 1Q FY FY the reporting period 3) Average number of shares outstanding 1Q FY ,805,902 1Q FY ,522,288 (cumulative) Indication regarding execution of quarterly review procedures. This quarterly financial results report is exempt from the quarterly review procedures in accordance with the Financial Instruments and Exchange Act. At the time of disclosure of this quarterly financial report, the review procedures for quarterly financial statement in accordance with the Financial Instruments and Exchange Act have not been completed. Disclaimer regarding forward-looking information including appropriate use of forecasted financial results The forecasted statements shown in these materials are based on information currently available and certain assumptions that the Company regards as reasonable. Actual performance and other results may differ from these forecasted figures due to various factors. Please refer to page 4 for details with regard to the assumptions and other related matters concerning consolidated financial results forecasts.

3 Table of Contents of Appendix 1. Qualitative Information on Quarterly Financial Results 2 (1) Explanation of Results of Operations...2 (2) Explanation of Financial Position.4 (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information Consolidated Quarterly Financial Statements and Primary Notes.. 5 (1) Quarterly Consolidated Balance Sheets 5 (2) Quarterly Consolidated Statements of Income and Comprehensive Income 6 (3) Notes to Quarterly Consolidated Financial Statements.8 (Notes to Going Concern Assumptions)....8 (Notes in Case of Significant Changes in Shareholders' Equity)... 8 (Segment Information, Etc.)... 8 (Significant Subsequent Events)...8 1

4 1. Qualitative Information on Quarterly Financial Results (1) Explanation of Results of Operations 3-D Matrix Group continued to focus on developing medical devices using self-assembling peptide, which is the Group s core technology. Specific products include the surgical hemostat TDM-621 ( Hemostat ) and the endoscopic mucosal resection aid TDM-641 ( Endoscopic Mucosal Resection Aid ) in the field of surgery and the dental bone filler TDM-711 ( Dental Bone Filler ) and the wound treatment material TDM-511 ( Wound Treatment Material ) in the field of the regenerative medicine. Hemostat [Research and Development Status] Japan: The Group constructed a clinical trial plan for implementing a comprehensive assessment, including evaluation of efficacy and safety of the hemostatic effect on hemorrhage per diapedesis under endoscopic submucosal dissection, and submitted a clinical trial plan notification to the Japan s Pharmaceuticals and Medical Devices Agency (PMDA) on April 11, 2017 in order to commence the clinical study. This clinical trial will compare the efficacy of the product with conventional hemostasis methods in the area of gastrointestinal endoscopy. Following the clinical trial plan notification, the first case was registered and surgery performed on August 8, 2017 in the second quarter of the current fiscal year, and the clinical trial subsequently proceeded at multiple clinical trial facilities. The study period is expected to be approximately one year, and the Group plans to apply for manufacturing and marketing approval following the end of the study. United States: The Group has been continuing to consult with the U.S. Food and Drug Administration (FDA) regarding the protocol in order to launch a clinical study in the U.S., and it has also commenced consultation with the FDA aimed at the commercialization of anti-adhesion material, another development candidate. The Group is selecting and prioritizing the best development candidates with an eye to the U.S. market, and will promote development aimed at commencing clinical studies and application during the fiscal year ending April [Sales Progress (Europe/Asia/Oceania/Latin America)] FY2017 1Q FY2017 2Q FY2017 3Q FY2017 4Q Product sales (forecast) 41.6 million 70.7 million 71.9 million million Product sales (actual) 66.2 million Percentage change from forecasts Up 59.1% Percentage change QoQ Up 721.2% Europe: After the product obtained CE marking on January 14, 2014, product sales were launched through wholesalers/distributors (that are specialized in the sales in their respective home country) targeting major medical institutions in Germany, France, the U.K., etc. in order to generate business revenue. In the Europe region, the Group made agreements with distributors in each country and started 2

5 sales activities. With regard to sales in the first quarter, sales to individual medical institutions proceeded, and remained in line with sales forecasts. In the second quarter of the fiscal year, the Group plans to make an agreement with French distributor PENTAX, and some tendering at public hospitals in Spain and Italy, which was not factored into the full-year forecasts, will be started. Going forward, the Group will concentrate efforts toward achieving forecasts, including running further promotions to enhance operations at distributors in each area. The Group also continued to negotiate with prospective distribution partners (companies that have a distribution network and promotion function covering the entire target area) for a sales tie-up agreement for the purpose of starting to sell product in a broader area in Europe. As a resolution of the agreement issue, we will work toward an agreement during the current fiscal year by accumulating further sales and use record data in Europe and sales and use records in Oceania. Asia, Oceania: product sales were commenced in Australia in the previous fiscal year through Maquet Australia Pty Ltd. (Maquet). During the first quarter under review, sales at Maquet were robust, resulting in product sales of 38 million, which was approximately three times the sales forecast. As of the end of the first quarter, the progress rate stood at 57.6% of the sales forecast for the current fiscal year. As sales also continued in Hong Kong and Indonesia, we will continue product promotion, primarily in Australia, in and beyond the second quarter, as we work to expand sales. Moreover, our application for product registration in South Korea through South Korean firm Daewoong Pharmaceutical Co., Ltd. (Daewoong) is expected to be approved during the current fiscal year. Latin America: We have concluded sales agreements with local distributors in Brazil, Mexico, and Chile aimed at product sales, and have been working to expand sales during the current fiscal year. The sales forecasts for the current fiscal year were conservative for sales from the second half, but sales are progressing steadily compared with forecasts as we implemented product sales in Brazil in the first quarter under review, and expect product orders in Chile in the second quarter. Endoscopic Mucosal Resection Aid The Group started clinical studies in Japan on December 11, However, the Group temporarily halted them at its decision on February 16, 2015 in order to consider the improvement of the test method and pharmaceutical preparations so that the effectiveness of the product can be more clearly demonstrated. We will continue to study the competitive advantages of the product, but it has not been factored into the Mid-Term Business Plan (April 2018 April 2020). Dental Bone Filler The product has been used as part of clinical studies in 15 cases and the related follow-up has been completed in the U.S. to produce favorable results and data regarding bone formation. Consequently, the Group moved on to the next phase of clinical study in the first quarter of the current fiscal year after obtaining the FDA approval. The clinical study is still underway as the follow-up process takes considerable time as it needs to confirm bone formation. Going forward, the Group will continue to push ahead with the development activities toward product commercialization Wound Treatment Material 3

6 On October 23, 2014, the Group submitted to the FDA an application for 510(k) premarket approval, which is part of the approval process for medical devices in the U.S. On February 16, 2015, the Group was granted the permission to sell the product from the U.S. FDA. Seeking to achieve a higher curative effect of the product when it is administered in combination with other pharmaceuticals (administration of a mixture with an antibiotic, anticancer agent, hyaluronic acid, etc.), the Group is working on the commercialization aiming to introduce a high value-added product focusing primarily on the fields of burn treatment and skin cancer treatment, but also on other fields such as cosmetic surgery. Other fields The Group mainly focuses on the joint project with the National Cancer Center to cure triple negative breast cancer by nucleic acid-based drugs targeting ribophorin II (RPN2) and has provided the self-assembling peptide A6K as the drug delivery system (DDS) for sirna-based drugs. In the previous fiscal year, an investigator-initiated clinical trial at the National Cancer Center has been started using the new sirna-based drug TDM-812 (RPN2siRNA/A6K complex), which has been developed by the Group jointly with the Center and its Research Institute. The clinical trial continues to progress in the second quarter under review. This clinical trial is the world s first first-in-human trial targeting patients of treatment-resistant breast cancer who have a local mass that is palpable from the surface of the body. As a result, in the first quarter of the fiscal year, product sales of Hemostat (approximately 27,414 thousand in Europe, approximately 37,691 thousand in Asia-Oceania, and approximately 1,151 thousand in Latin America) resulted in business revenues of 66,256 thousand (an increase of 58,188 thousand as compared with the same period of the previous year). Compared with forecasts for the first quarter, sales exceeded forecasts by approximately 159%, and the Group will concentrate its efforts on sales in the second quarter and beyond with the aim of achieving forecasts. Expenses remained within the range of the full-year plan. As a result, the Group posted an ordinary loss of 332,381 thousand (compared with an ordinary loss of 522,973 thousand in the same period of the previous year) and a net loss attributable to the shareholders of the parent company of 355,006 thousand (compared with a net loss attributable to owners of the parent of 548,918 thousand in the same period of the previous year) (2) Explanation of Financial Position As of July 31, 2017, total assets stood at 3,299,770 thousand (down 123,873 thousand from the end of the previous year). Current assets totaled 3,263,995 thousand (down 124,185 thousand). This was mainly due to a decrease of 30,778 thousand in inventories despite a 351,104 thousand increase in cash and deposits due to a 482,629 decrease in accounts receivable. Non-current assets totaled 35,775 thousand (increase of 312 thousand). This was mainly due to an increase in investments and other assets of 312 thousand. Liabilities totaled 740,737 thousand (down 75,563 thousand). This was mainly due to decreases of 16,183 thousand in income taxes payable and 59,379 thousand in current liabilities and others. Net assets totaled 2,559,032 thousand (down 48,311 thousand). This was mainly due to a 355,006 thousand decrease in retained earnings due to net loss attributable to owners of the parent despite increases of 179,179 thousand in capital stock and 179,141 thousand in legal capital surplus. 4

7 (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information There is no change in our forecast of financial results for the fiscal year ending April 30, 2018, announced on June 14,

8 4. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheets Previous Fiscal year (as of April 30, 2017) (Thousands of yen) First quarter of FY2017 (as of July 31, 2017) Assets Current assets Cash and deposits 1,747,624 2,098,728 Accounts receivable 582,396 99,767 Inventories 814, ,549 Advance payments 215, ,074 Other, net 84,726 97,121 Allowance for doubtful account (55,936) (49,246) Total current assets 3,388,180 3,263,995 Noncurrent assets Property, plant and equipment Intangible assets Goodwill Other, net Total intangible assets Investments and other assets 35,463 35,775 Total noncurrent assets 35,463 35,775 Total assets 3,423,643 3,299,770 Liabilities Current liabilities Short-term loans payable 450, ,000 Income taxes payable 29,357 13,174 Other, net 336, ,563 Total current liabilities 816, ,737 Noncurrent liabilities Other, net Total noncurrent liabilities Total liabilities 816, ,737 Net assets Shareholders' equity Capital stock 5,955,311 6,134,491 Capital surplus 5,945,178 6,124,319 Retained earnings (9,638,451) (9,993,458) Treasury stock (153) (153) Total shareholders' equity 2,261,885 2,265,199 Accumulated other comprehensive income Foreign currency translation adjustment 25,904 (47,639) Total accumulated other comprehensive income 25,904 (47,639) Subscription rights to shares 319, ,473 Total net assets 2,607,343 2,559,032 Total liabilities and net assets 3,423,643 3,299,770 6

9 (2) Quarterly Consolidated Statements of Income and Comprehensive Income Quarterly consolidated statements of income for the three months ended July 31, 2017 Three months Ended July 31, 2016 (From May 1 to July 31, 2016) (Thousands of yen) Three months Ended July 31, 2017 (From May 1 to July 31, 2017) Business revenues Sales 8,067 66,256 Research and development revenues Total business revenues 8,067 66,256 Business expenses Cost of goods sold 5,497 56,373 Research and development expenses 120, ,712 Selling, general and administrative expenses 279, ,058 Total business expenses 405, ,144 Operating loss (397,562) (415,887) Non-operating income Interest income 1, Foreign exchange gains 84,974 Other, net Total non-operating income 2,453 86,168 Non-operating expenses Interest expenses 1,566 2,493 Commission fee 1, Stock issuance cost 125,261 Other, net 32 Total non-operating expenses 127,864 2,663 Ordinary income (loss) (522,973) (332,381) Extraordinary income Gain on reversal of subscription rights to shares 4,588 Total extraordinary income 4,588 Extraordinary loss Settlement money 30,230 22,322 Total extraordinary loss 30,230 22,322 Loss before income taxes and minority interests (548,615) (354,704) Income taxes-current Income taxes-deferred Total income taxes Net loss 548, ,006 Net income attributable to noncontrolling shareholders Net loss attributable to owners of the parent 548, ,006 7

10 Quarterly consolidated statements of comprehensive income for the three months ended July 31, 2015 Three months Ended July 31, 2017 (From May 1 to July 31, 2017) (Thousands of yen) Three months Ended July 31, 2016 (From May 1 to July 31, 2016) Quarterly net (loss) (548,918) (355,006) Other comprehensive income Foreign currency translation adjustment 111,230 (73,544) Total other comprehensive income 111,230 (73,544) Comprehensive income (437,687) (428,551) Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to noncontrolling shareholders (437,687) (428,551) - - 8

11 (3) Notes to Quarterly Consolidated Financial Statements (Notes to Going Concern Assumptions) For the three months ended July 31, 2017 (From May 1 to July 31, 2017) Not applicable. (Notes in Case of Significant Changes in Shareholders' Equity) For the three months ended July 31, 2017 (From May 1 to July 31, 2017) Not applicable. (Segment Information) For the three months ended July 31, 2017 (From May 1 to July 31, 2017) Since the Group has only a single segment (medical products), segment information is omitted. (Significant Subsequent Events) Not applicable. 9