Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.

Fanpep <4881> is a bio-venture company established in 2013 with the aim of commercializing the research results of functional peptides from the Osaka University Graduate School of Medicine. It is engaged in the development of pharmaceuticals that can replace high-priced antibody drugs based on its proprietary functional peptide-based antibody-inducing peptide technology. In addition, in October 2022, it acquired Anti-Aging Peptide Co., Ltd. (now Fanpep Healthcare) as a subsidiary and is also working on the development of non-pharmaceutical business fields such as cosmetics.

1. The skin ulcer treatment drug 'SR-0379' is scheduled to start additional Phase 3 clinical trials from 2025.

In 2022, after completing Phase 3 clinical trials (01 trial) for skin ulcers (bedsores, diabetic ulcers), 'SR-0379' was found to be effective for specific patients (ulcer size less than 36 cm2) based on the results of subsequent data analysis. As a result, it was decided to start additional trials (02 trials) from 2025. If everything goes well, it is expected to be on the market by 2028. As the aging society progresses, the number of target patients is expected to increase. By using 'SR-0379', early surgical treatment becomes possible, contributing to the improvement of patients' quality of life.

2. The pollen allergy vaccine 'FPP004X' is scheduled to start Phase 1 clinical trials from 2025.

The development of the pollen allergy vaccine 'FPP004X' is currently underway. In March 2024, we signed an exclusive development and commercialization rights option contract with Shionogi & Co., Ltd. <4507> for the entire world. The contract includes an upfront payment of 0.3 billion yen, a maximum of 17.8 billion yen in milestone payments based on the exercise of the option rights and the progress of development and sales, and royalties based on sales. We plan to start Phase 1 clinical trials from 2025, and if the development progresses smoothly, it is expected to be on the market around 2032. 'FPP004X' is expected to have a lasting effect for several months with a single administration, and is attracting attention as a therapeutic drug with the potential for billions of yen in sales in Japan alone.

3. Efforts to strengthen research and development

As part of the efforts to strengthen research and development, we signed a research contract with Zeureka Co., Ltd. in August 2024 to provide AI drug discovery support services. The aim is to promote the efficient creation of antibody-inducing peptides using AI technology. We are also conducting research on next-generation formulation technology for antibody-inducing peptides with multiple companies, including POP Biotechnologies, Inc. (POP BIO) in the United States. POP BIO has announced that it has achieved certain results in the initial phase (mouse experiments) of the research and has started the late phase (experiments with monkeys, etc.). It is expected that by utilizing POP BIO's platform technology, it will be possible to create more effective candidate compounds.

4. Performance Trends

The consolidated performance for the second quarter of the fiscal year ending December 2024 was a flat operating income of 0.5 million yen compared to the same period last year, and the operating loss decreased from 622 million yen in the same period last year to 395 million yen due to a decrease in research and development expenses. The performance forecast for the fiscal year ending December 2024 is undecided, but the expected research and development expenses have increased from the initial plan of 500 million yen to 600 million yen due to the implementation of the SR-0379 phase 2 trial, and the expected selling and administrative expenses are 300 million yen. For the fiscal year ending December 2025, as the phase 2 trial officially starts, it is expected that research and development expenses will increase to around 1.1 billion yen. The cash and deposits at the end of the second quarter of the fiscal year ending December 2024 amounted to 1,961 million yen, and the intention is to secure funds for 2 to 3 years as working capital, so it is likely that funding will need to be raised from the stock market unless there are large-scale licensing contracts in the future.

■Key Points

- The treatment drug for skin ulcers will narrow down the target and conduct additional trials, aiming for market launch in 2028.

- The pollen vaccine is scheduled to start phase 1 clinical trials in Japan in the first quarter of the fiscal year ending December 2025.

- The antibody-inducing peptide targeting migraines or lipid disorders is a strong candidate for a new pipeline.

- Efforts are being made to generate early-stage candidate compounds through the use of AI technology and next-generation formulation technology.

(Written by FISCO guest analyst, Jo Sato)