■Future Growth Strategy

FanPep ＜4881 ＞ will continue to utilize the superiority of antibody-inducing peptides, which are unique technologies, and expand the development pipeline for diseases with high development significance from a wide range of chronic diseases, mainly in “inflammatory regions” where antibody pharmaceuticals have already been sold. Since target proteins are the same as antibody pharmaceuticals that have already been marketed, the time to identify lead compounds can be drastically shortened from normal, and safety and efficacy have already been confirmed with antibody pharmaceuticals, so development risks are also small. Furthermore, it can also be said that it is an advantage that the probability of successful development can be read to some extent based on the results of phase 1 clinical trials. This is because by investigating to what extent antibody titer rises in the body due to administration of antibody-inducing peptides, and to what extent the produced antibody has the ability to inhibit the movement of target proteins, it is possible to infer drug effects to some extent, and then establish subsequent development policies.

Taking these points comprehensively into account, it can be said that drug discovery using antibody-induced peptide technology has high research and development efficiency compared to general drug discovery. We believe that the fact that Shionogi Pharmaceutical signed an option agreement for “FPP004X” at the early stage of the preclinical trial stage was also evaluated, and we expect that there will be an increase in cases where future new research themes will progress to contract conclusion at the preclinical trial stage. Regarding the development of therapeutic vaccines using antibody-inducing peptides, Switzerland's AC Immune ＜ACIU＞ is conducting phase 2 clinical trials with Alzheimer's disease as an indication, and an exclusive option and license agreement was concluded with Takeda Pharmaceutical (4502) in 2024/5, and attention is rising again.

For this reason, the company plans to connect to license agreements while adding new pipelines at a pace of once every 2 years. As for the new pipeline, it can be said that the pace is sufficiently feasible based on the track record of adding 3 antibody-inducing peptides to the development pipeline in the last 6 years. Regarding human resource investment, the policy is to promote recruitment not only of human resources in basic research fields, but also of human resources with expertise related to CMC* in the future as development pipelines increase.

* CMC (Chemistry, Manufacturing and Control) means chemistry, manufacturing means manufacturing, and control means quality control for these. When applying for approval for pharmaceutical manufacturing, it is required to define products to be evaluated from non-clinical trials to clinical trials and post-marketing. A concept that integrates product formulations and standards, their evaluation methods and setting grounds, management of raw materials including packaging materials, manufacturing processes for raw materials and products, and performing product quality evaluations.

As for the subsidiary FunPep Healthcare, it is a strategy to cover part of development costs related to drug discovery by fostering non-pharmaceutical businesses such as the cosmetics field. Conventionally, cosmetics, disinfectant sprays, etc. that make use of the characteristics of functional peptides have been sold, and we aim to expand our business while proceeding with joint development with manufacturers in the future. In 2024/8, it was announced that “OSK9” was blended as a beauty ingredient* in all 7 items of the high-performance skin care series “Infiness,” which will be newly sold by Albion Co., Ltd.

* By blending “OSK9,” it exhibits fibroblast proliferation effects and collagen and hyaluronic acid production promotion effects, proliferates dermal cells at high speed and strength, and is expected to be more effective due to the “firmness” of the skin.

Also, Science, which signed a joint development agreement in February 2022, is proceeding with the development of next-generation wound irrigators that combine fine bubble technology with the company's functional peptides having antibacterial effects. The intention is to develop and sell it as a medical device for the purpose of treating skin ulcers such as pressure sores. Although the prototype has been completed, the specific development schedule is yet to be determined. Additionally, a joint development agreement for stem cell cosmetics ※ was signed with AS Medical Support and N3 in 2022/12, and a joint development agreement with Saint Louis International for femtech cosmetics containing functional peptides with antibacterial effects was signed in 2022/2, respectively, and joint development is currently underway. Joint development of nursing care products (oral care, antibacterial solutions, and deodorant care) for the elderly has also begun in 2023/12 with Saint Louis International. Since it is sales of raw materials, even if the product is a hit, the sales scale is thought to be a realistic level of tens of millions of yen per year, but if a hit product is born, interest in functional peptides will also increase, and there is a possibility that it will lead to new business negotiations. Therefore, we will continue to actively advance partnerships with companies that advance the development of functional products utilizing characteristics such as antibacterial effects and anti-aging functions, mainly in the cosmetics field, and aim to expand and monetize the same business.

* We are proceeding with the development of cosmetics with high skin regeneration effects by blending the group's functional peptides for increasing hyaluronic acid production and stem cell-inducing effects into stem cell cosmetics developed under joint contracts.

As for future earnings forecasts, since the research and development stage is likely to continue for several years in the drug discovery business, operating losses are expected to continue for a while unless large-scale contracts are concluded. However, the global market size of antibody pharmaceuticals in the area targeted for development of antibody-inducing peptides exceeds 50 billion US dollars for major products alone, and the growth potential when development is successful is extremely large. The company's policy is to continue to focus on in-house development of antibody-inducing peptides, but in the future, it is considering acquiring profits by providing “STEP UP,” which is a drug discovery platform technology for antibody-inducing peptides, to other companies, as an option, and I would like to keep an eye on future developments.

(Author: FISCO Visiting Analyst Joe Sato)