Perseus Proteomics Inc.

Antibody drug development has an extremely low probability of success, and there is a risk that R&D may be delayed or discontinued due to insufficient efficacy in clinical trials, serious side effects, or failure to obtain regulatory approval. If development delays occur or additional trials become necessary, unplanned additional fundraising will be required, and there is uncertainty as to whether such fundraising can itself be achieved. The Company strives to reduce these risks by formulating clinical trial designs under the guidance of physicians and other experts, but fundamental uncertainty cannot be eliminated.

As an R&D-focused company, the Company has continuously recorded operating losses, and operating cash flow has remained negative. While the Company's policy is to raise funds through upfront and milestone payments from out-licensing partners as well as through new share issuances, if these efforts do not progress as planned, there could be a material impact on future business development. Because the majority of revenue depends on contracts with pharmaceutical companies, there is also an inherent risk that revenue could fluctuate significantly due to delays in R&D progress or changes in the policies of licensing partners.

The Tokyo Stock Exchange plans to apply, from 2030 onward, a listing maintenance criterion of a market capitalization of ¥10 billion or more for stocks that have been listed for more than five years. As of the filing date of this document, the Company's market capitalization is below this criterion. The Company is working on management measures to satisfy the listing maintenance criteria, but if it fails to meet the criteria, there is a possibility of delisting. Delisting could lead to the loss of fundraising methods and damage to corporate credibility, which could have a material impact on business continuity.

PPMX-T002 (Radioisotope-labeled Anti-CDH3 Antibody), the Company's key pipeline asset, was returned after its rights were licensed to FUJIFILM, and the Company is currently proceeding with a change to a different radioisotope (actinium-225) and selecting a new out-licensing partner; however, there is a risk that development could be delayed or discontinued due to the possibility of not finding a partner or the launch of competing new drugs. PPMX-T003 (Anti-TfR1 Fully Human Antibody) completed its Phase I trial in June 2024 and is currently undergoing out-licensing activities, but finding an out-licensing partner may take significantly longer than expected. In either case, if pipeline development is delayed or discontinued, the need for additional fundraising will arise.

The pharmaceutical industry is subject to regulations such as the Pharmaceuticals and Medical Devices Act as well as pharmaceutical regulations and healthcare insurance systems in various countries, and these regulations may be revised or changed during the long development period. Regulatory changes may require modifications to the existing R&D framework (manufacturing methods, development approaches, clinical trial procedures, etc.), creating risks of additional costs and development delays. The Company's policy is to gather information on and appropriately respond to changes in laws and systems, but it is difficult to completely avoid the impact of such changes.

In the antibody drug market, many competitors, including venture companies primarily in Europe and the United States, have entered the field, and there is a risk that the Company's business advantage could decline if competitors' products in development lead in the same disease area. In addition, the development of competing modalities such as small molecule drugs, nucleic acid drugs, and regenerative cell therapies could mean that the antibody drug market does not expand as expected. The Company strives to secure competitive advantage through means such as obtaining patents, but cannot completely control changes in the market environment.

Not all filed patent applications are necessarily granted, and there is a potential risk that superior patented inventions by other companies could render the Company's patents ineffective. Because the interpretation of patent laws and guidelines differs by country, obtaining patents overseas may not proceed as initially expected, and there is also a risk that third parties could use the Company's patented technology without authorization. If contracts for rights licensed to the Company are terminated or revised under unfavorable terms, this could also affect the Company's business results and financial condition.

The Company outsources key operations such as active pharmaceutical ingredient and formulation manufacturing, non-clinical studies, and clinical trial monitoring to CROs and manufacturers both in Japan and overseas, and there is a risk that natural disasters, infectious disease outbreaks, or deteriorating financial conditions at these outsourcing partners could make stable supply of active pharmaceutical ingredients or timely provision of services difficult. For overseas outsourcing partners, differences in local laws and business practices as well as geopolitical risks (such as war or conflict) could also constrain business activities. Unexpected contract termination or revision of contracts under unfavorable terms could lead to delays or suspension of R&D activities.

With fewer than 40 employees, the Company is a small organization, and securing excellent personnel with specialized knowledge and skills in the R&D field is essential for business growth. If the Company cannot secure the necessary personnel or if key personnel leave the Company, this could hinder organized business development and the advancement of R&D. The Company's policy is to strengthen its internal management structure and secure R&D personnel in line with future business expansion, but reliable acquisition of talent in the highly competitive specialized personnel market is not guaranteed.

There is a risk that negligence or intentional acts by officers, employees, or outsourcing partners, or cyberattacks, could cause system outages or interruptions, or the leakage of confidential or personal information. Since R&D is central to the Company's business, the leakage of confidential information such as intellectual property could directly damage its competitiveness. The Company strives to strengthen security through operations based on its information security management regulations and personal information protection policy, internal audits, and the use of external experts, but it is difficult to completely eliminate this risk.