Good morning, everyone. Despite your busy schedule, thank you for your participation. This is Tamura from IR Department of Ajinomoto. First, I would like to introduce today's speakers. From Ajinomoto, Representative Executive Officer, President Fujie.
Hello, this is Fujie. Thank you for participation.
Forge Biologics Executive General Manager, Bio-Pharma Services Department, Bio & Fine Chemicals Division, Otake.
This is Otake. Hello, nice to have you.
From Forge Biologics, President and Chief Executive Officer, Mr. Maslowski?
Yes, thank you very much, and good morning.
CTO, Dr. Dismuke.
Hello, nice to meet you. Thank you.
So those are the four gentlemen as a speaker. Other than that, we have participant, Mr. Shiragami, Representative Executive Officer. Hello, nice to have you. And we have Mr. Maeda, Executive Officer, Vice President and Manager, Bio & Fine Chemicals Division. Maeda, nice to have you. Mizutani, Executive Officer and Vice President in charge of Finance Investor Relations. Mizutani speaking, hello. Those are the three participants also. I would like to explain to you the flow of today's schedule. First, opening remarks by Fujie. Then from Mr. Otake, Mr. Maslowski, and Dr. Dismuke, we will be having explanation on gene therapy, manufacturing process of Forge, and the video of site tour of Forge. Lastly, but not least, is the Q&A session. The whole time will be about an hour and a half. Today's material is loaded on Ajinomoto's IR website. Please refer to them.
We would be recording today's contents, including the Q&A session. Later on, they will be uploaded on our IR website. I would like to have your understanding. Without any further ado, we would like to start the meeting. Fujie-san, please.
Ladies and gentlemen, nice to meet you. Thank you very much for taking time out of your busy schedule to attend our IR event. This is the messages that I'd like to deliver today. There are three major messages. With the mid-term ASV initiative 2030 roadmap is underway. Together with Forge, we are working towards achieving ASV indicators, and we are making steady progress. Next. Regarding the company Forge, which is already creating business synergy within the Ajinomoto Group, the details will follow in today's presentation. Number three, the management structure itself is evolving, and we'd like to further accelerate the pace of corporate value enhancement for the entire Ajinomoto Group. Those are the major topics today. Next. Ajinomoto's purpose, as you can see, is to contribute to the well-being of all human beings in our society and planet, through the power of AminoScience.
With that in mind, Forge is an indispensable part of our business. Next, regarding the business structure aiming towards 2030 roadmap. Of the 4 BMX areas, which will be the core businesses, in 2021, Bio & Fine Chemical was one and Food Business was one. So 50/50 ratio. That was a breakdown of the profit structure. But we are to make solid progress in Food Business. But other biopharma business will exponentially grow so that we can achieve the higher percentage going forward. Next slide describes the ideal state. CDMO business is an important pillar in order to enable the future growth. We are making speed up and scale-up efforts. Forge is expected to grow significantly going forward, and it will be a major contributor for the business. Regarding Forge Biologics, it is a relatively young company. It's been only four years since inception, and it's rapidly growing.
In 2024, the sales top JPY 10 billion and an operating loss of JPY 7.5 billion is expected. However, during 2025, we are aiming to make a profit in the EBITDA line. Performance-wise, on a monthly basis, some months actually reported some positive figures, which is a good sign. Regarding the Forge top management, at the end of September, according to the CEO succession plan, Forge implemented this new succession plan and appointed a new CEO President, and John was named as the new CEO. Tim was the former President, and as an entrepreneur, he has led the organization quite successfully. Tim decided to actually pass the baton to someone who has a new perspective because the organization has reached the level of having 350 individuals in the organization. So he made the decision to pass the baton to a new person.
We are very grateful for his contribution in the last one year and a half for the PMI period. We are expected to dine him together when he comes to Japan. So we truly look forward to develop our personal ties going forward and wholeheartedly support Tim's new endeavors. John, who is taking over, has been leading Forge business from CCO position. With his long career in the biopharmaceutical industry and management experience at several biopharmaceutical companies, I am confident that he is the most suitable person to unite and lead Forge going forward as CEO. Also, Mr. Otake, who chairs the board at Forge and serves as the Head of the Bio-Pharma Services Department, along with CEO John, continue to be supported by Forge's intangible assets of gene therapy experts who have profound knowledge in the field.
So we expect them to drive future growth while furthering collaboration with the Ajinomoto Group. Today, from Forge location in Ohio, we have the honor to have three members participating from their location, Mr. Otake, CEO John, and CTO David. Taking on a challenge in the field of gene therapy will itself contribute to ASV. Together with Forge, we aim to contribute to patients suffering from rare diseases. So we would like to further promote ASV under this new collaboration. Gene therapy may still be embryonic, but the potential for treating diseases that previously had no effective cure is rapidly growing, and significant progress is expected going forward. We believe that gene therapy can save patients' lives and contribute to their healthy living and well-being, and this is going to be an invaluable and significant contribution to those patients. Now let us connect to Forge in Ohio.
Hello, President John and everyone else.
Hello.
I am glad to meet you all on this special occasion of Forge's new beginning. Now, we'd like to invite John to give us a few remarks about your future ambitions. The floor is yours, John.
Thank you very much, Fujie-san, and welcome and greetings to everybody on the call. Thank you for joining here. We're live at Forge Biologics in Columbus, Ohio, and we look forward to giving you background on the gene therapy industry and about Forge's operations and offerings. I will move and pass along to Otake-san, who will introduce our gene therapy section, and then we'll move along with myself and CTO Dr. David Dismuke as we share with you the forward vision and business model.
Good morning. This is Otake, Head of the Bio-Pharma Service division. As was reported by Fujie, we are progressing with growth and Forge, after its four years of establishment, is making JPY 10 billion and over sales. With John and Tim and David's strong leadership, I think we were being able to make this growth. As was mentioned by Fujie-san earlier, in the biopharma business, they've been very supportive. We're very grateful. Bio-Pharma Service and Tim, we are going to have a consulting agreement, and from outside Forge, Tim is going to support the growth of Bio-Pharma Service division's business. Today, I will show you one slide and briefly explain to you about Forge Biologics, and from John, we will be hearing more about the gene therapy, and from CTO David, we would like to talk more in detail about it.
After that, I would like to talk about the current business status of Forge as well as the PMI situation afterwards. So, overview of the Forge Biologics. Already in the gene CDMO industry, this company is being focused. We have a manufacturing capacity and manufacturing track record that is notable. We currently have 20 GMP suites. In the future, the expansion could be three times. Another feature here is that, as for gene therapy and therapy drugs, we have a capacity of 5,000 L reactors that we own. This is the world's largest manufacturing facility in this kind, and therefore, it enables us to meet the future increases in demand. With this short period of time since its foundation, we were able to gain 50 and more customers. Without further ado, I'd like to call John to make the explanation. John, please?
Thank you, Otake-san. Before explaining what gene therapy is, let me first explain how the body works. The human body is composed of cells, and each have a nucleus, which contains chromosomes, which are clusters of DNA. Genes are located in this DNA, and they are the blueprint for the production of proteins in the cell. The genetic information encoded in the DNA is transcribed into mRNA when needed, and the necessary proteins are produced based on the mRNA. The proteins produced are the components of the cells and the enzymes necessary to sustain life. These steps are the basis for maintaining homeostasis in cells. Next slide, please. However, an abnormality in one gene may prevent the production of protein with the required function. In this case, the protein with inadequate function cannot keep the organism functioning properly and may touch off diseases.
One method of treating these patients is gene therapy. Gene therapy is a medical technology that treats genetic abnormalities that cause disease by repairing or adding genes to the cells. Next slide, please. Among gene therapies, adeno-associated viral vectors, or AAVs, are currently the focus of much attention. In gene therapy, a gene for treatment or a target gene, which is designed to manufacture or produce the necessary protein, is introduced into targeted cells. In order to efficiently introduce the target gene into target cells, a carrier called a vector is often required. These vectors are often called viral vectors, which are based on viruses that have lost their infectivity, and in particular, many of them use AAVs. The introduced therapeutic gene can remain in the cell and produce a persistent functional protein. This allows a long-term therapeutic effect to be achieved with a single treatment.
This method does not involve any genetic modification and will be complementary to the required gene. Now that you have an overview of gene therapy, I would like to move on to the next video. Please move to the next slide. 40 years ago, gene therapy was science fiction. Now it's just science.
Here at our 200,000 sq ft facility, we manufacture genetic medicines at a scale the industry has never seen before. To date, we're the largest dedicated AAV manufacturer in the world, and AAV is what we use to deliver genetic medicines.
It might seem like magic, but it is not magic, it is science.
AAV is the most commonly used vehicle for gene therapies, and gene therapy is a powerful thing.
It is powerful because there is an enormous unmet demand for gene therapy manufacturing. This means Forge is adding value to Ajinomoto while bringing hope to patients and their families across the world.
In this film, we will pull back the curtain of our facility. To fully appreciate the significance of the work we are doing here, we first need to understand gene therapy itself.
Genes in our DNA serve as instructions for making proteins, much like a recipe in a cookbook. Each gene is a recipe, providing detailed instructions on how the DNA can make a specific protein. Genetic diseases are a result of faulty DNA, which can create proteins that do not function properly. At Forge Biologics, we manufacture gene therapies to address the underlying cause of these diseases. It is important to distinguish gene therapy from gene editing. The main difference between the two is how they fix genetic problems. Gene therapy adds a new healthy gene to the cells to supplement a faulty one. Unlike gene editing, gene therapy does not change the existing DNA.
It simply provides new instructions to help the cell function correctly. Here at Forge, we are focused on gene therapy using adeno-associated virus, or AAV vectors, as delivery vehicles for the therapeutic genes, which are inserted into a shell or capsid and can be administered via intravenous drip or direct injection. AAV vectors are ideal because they do not cause disease, and they can work in various types of cells. Gene therapy offers the potential for long-lasting and possibly curative effects with just one treatment by adding new genes which stay in the target cells and keep creating proteins that function properly. Our goal is to effectively manufacture these therapies for our clients so that patients have access to these life-saving medicines.
There are an estimated 10,000 rare genetic diseases. That means that nearly one in 10 people in the world has a genetic condition.
As a gene therapy manufacturer, we work with clients that have already designed and developed the therapy. Some clients may be early in the process as they are testing their product, and others come needing commercial manufacturing. These clients come to Forge because we can help them turn their therapy into a fully manufactured drug product and enable patient access to these much-needed life-saving drugs.
What is a drug? Traditionally, pharmaceutical companies have designed small molecule drugs that are difficult to develop but relatively easy to manufacture. However, in gene therapy, this dynamic is reversed. For gene therapies, drug design is more straightforward, but manufacturing them on a large scale is much more challenging. Here you get a sense of the complexity of a small molecule drug compared to an AAV vector, which is a delivery device for genetic medicines and what we make here at Forge.
Our hope is that the gene therapy products manufactured here at Forge will improve the quality of patients' lives. This aligns so well with the Ajinomoto mission of improving the well-being of all human beings. We are working together with Ajinomoto to create shared value in many ways, like supply chain optimization, development, and supply of culture media for viral vector manufacturing, and leveraging commercial relationships across the globe. As more and more gene therapies are approved throughout the world, the demand for manufacturing has surged. Biologics manufacturing is very complex and every program is unique. Because gene therapy is generally still so young, industry standards for manufacturing are still being developed. There is limited expertise, process inefficiencies, and bottlenecks in development timelines. All of these present delays, which are challenges for the therapeutics companies that can reduce their value and even put their programs at risk.
Being a part of the Ajinomoto family, Forge is uniquely positioned at the forefront of setting those standards, speeding up access to life-changing drugs, and for patients with rare genetic diseases, every second counts.
We have observed tremendous growth for gene therapy, including both in the number of global developers and the dollars invested in the space. Approximately $12 billion was invested in selling gene therapy just in 2023 alone. Forge was created to address this demand by building a team of gene therapy experts to offer full end-to-end services in a state-of-the-art manufacturing facility. The services that Forge provides include process and analytical development, plasmid manufacturing, in-house testing, and cGMP manufacturing from clinical to commercial scale. In the short term, we expect a number of our clients' therapies to be approved for commercialization as their programs progress. Our long-term vision for Forge is to service many commercial drug products over a broad range of indications. We believe that Forge is uniquely positioned to meet this demand for gene therapies, developing tremendous value for our organization over the coming decades.
Gene therapy as an industry is still young, but market acceptance is on the rise. 2023 was a record year in market approval of gene therapy products, and predictions show this trend increasing significantly. Here at Forge, we're not only able to help streamline manufacturing of genetic medicines, but we also help pave that path forward for our clients to make market approval with global governing authorities more efficient. We also benefit from having our own therapeutics pipeline, which means that we have regular and current communication with the FDA and other regulatory agencies. Our clients benefit from having a manufacturing partner that understands the regulatory challenges and what the health agencies require.
When we remove the bottleneck in gene therapy manufacturing, therapies come to life at a rate the world has never seen before. We realized early on that when you solve the manufacturing problem, you literally save lives. The future AAV therapies is extremely bright.
Hello, I'm David Dismuke. I'm the Chief Technical Officer at Forge. Before introducing the following video, let me first explain the AAV manufacturing process. Shown here is a simple summary of the entire process. There are three steps in total. The first is to produce plasmids, materials necessary for AAV production. The second is to introduce the plasmids into production cells and culture them to produce AAV. After production, the target AAV is purified from the culture medium. The obtained highly purified AAV is then filled and becomes the final product. Next slide, please. Let me explain the plasmid and AAV process in more detail. First, we will discuss the process of producing plasmids needed to create AAV. There are three types of plasmids needed in total. The first plasmid are the target genes necessary for treatment. Second is plasmids necessary for making building blocks of the virus.
The third are helper plasmids that assist in viral replication and internalization of the target gene. Forge uses helper plasmids developed in-house to support high productivity. Each of these is produced industrially using microorganisms. The plasmid-introduced microorganisms are cultured in large scales from which they are extracted and purified to obtain plasmids of required quality and quantity. Next slide, please. Once the plasmid is ready, it is time to start manufacturing the AAV. The production line is HEK293, a human embryonic kidney cell line often used in the production of biopharmaceuticals. Forge recommends the use of a proprietary strain called Ignition Cells, which is used by our customers because the strain is highly stable and has a proven track record. First, this strain is cultured step by step to increase the number of cells. Next slide, please. The three prepared plasmids are then introduced into these cells.
This process is called transfection. By culturing the transfected cells, AAV containing the target gene is produced by the cells. Each cell produces 10,000 to several hundred thousand target particles per cell. Next slide, please. After the culture is completed, the target AAV is separated and purified to obtain the target AAV with high purity. The obtained AAV goes to the filling process, and the final AAV is delivered to the patient. Now that you have a general understanding of the production processes, we hope that you will watch the video and learn more about Forge. Next slide, please.
Welcome to the Forge Biologics facility, a place that we call The Hearth. To us, it is so much more than just a building. It is where we manufacture gene therapies for life. For many families affected by rare genetic diseases, it is a place where hope becomes real. We have designed our facility, and our team, to solve for the pain points we ourselves experience when building gene therapy programs. Our AAV manufacturing process streamlines the journey from discovery to the clinic, and our platform approach sets up programs for safety, scalability, and speed. Now, let us have a look at the process. Here is an overview of the gene therapy manufacturing process. First, we manufacture plasmid, an essential component in preparing the product for transfection.
After sufficient development and testing, the AAV vector is ready for manufacturing, where we scale up our drug product in bioreactors, then purify and filter the product during our downstream process. Lastly, the drug product is filled into final containers and is ready to be stored or shipped to our clients. Now, let us have a look around. This is our in-house plasmid lab. Plasmid is essential in the gene therapy manufacturing process. We take the therapeutic DNA that our clients provide and insert it into special cells. We then grow these cells in our incubator, and to check how the plasmid is doing, we use various tools and equipment to understand which version of the cells or clones is the best one to use.
Our proprietary pEMBR Ad helper plasmid helps ensure the best possible yield and makes this part of the process seamless for our clients, ensuring that we are consistently creating the highest quality drug product. Process development is like the bridge between a concept for a medicine and the manufacturing of a physical drug. It is divided into two portions, upstream and downstream. In the upstream process, our team takes the plasmids and manufactures the AAV capsids through a process called transfection. Transfection introduces the plasmid DNA into the cell to be used for the manufacturing of the AAV capsid. The cells come from our proprietary Ignition Cells line, which are used by over 95% of our clients. At this point, the cell has all the ingredients and instructions it needs to become a mini factory that creates AAV vector.
The more cells that are transfected, the more vector will be produced. The scale of the run depends on how much drug product our client needs. Our processing scale can be as small as shake flasks all the way up to large-scale commercial runs. Production at these volumes has presented a challenge for many companies in the past, but this is where the Forge team excels. After the upstream process is complete, the downstream process begins. This starts with filtering out unwanted parts from the product. Ultracentrifugation is a process that helps us identify and isolate our specialized AAV capsids by spinning them at very high speeds, pushing the heavier full capsids to the bottom, while lighter or empty capsids remain towards the top. The AAV is then filtered again to make sure it's in the right solution.
The purified product is then handed over to our drug product team, who fill it into final containers. Then it's stored in our special freezer area until it's ready to be used. The analytical development lab is where we create and test methods to check and approve our drug products. Gene therapy vectors are unique, and we need over 30 different tests to make sure our products are safe and effective. Having an in-house analytical development team allows us to make the workflow more efficient for our clients. We use a wide variety of tools to help us test the quality of our drug product, verify the purity of the genetic material, and measure the amount of full and empty capsids. This allows us to ensure that the drug product meets the highest standards for quality. cGMP manufacturing is where the actual medicine is made.
cGMP stands for current good manufacturing practice, which means that our facility and processes meet the highest standards for quality and safety. Up until this point, it's all about process and building the foundation upon which cGMP manufacturing is built. At Forge, we are at the forefront of creating the new industry standard for manufacturing these complex medicines. Our facility has 20 different clean room suites where we can make GMP products. We also have two 5,000-L bioreactors. We're the first and only company in the world making AAV using bioreactors at this scale. As we've seen before, this manufacturing process has both upstream and downstream elements. The upstream process involves scaling up the drug product in our bioreactors, and the downstream process involves filtering and purification. Our facility was specifically designed to create an optimal environment for gene therapy manufacturing.
It's critical that our labs and clean rooms have the mechanical support they need. We have advanced air filtration units to ensure that highly purified clean air reaches all of our labs. We have double the capacity that we need, which means that if one half needs to be turned off for maintenance, the other half can keep the air flowing so that the facility always has the right environment. We also have an uninterruptible power supply within the building to make sure that everything keeps working, even in the case of an emergency. This means the work that's being done inside the labs is safe from any external elements or events. The cGMP manufacturing clean rooms were designed with a unique feature, walkable ceilings. This ceiling lets us access important parts like lights, air systems, and valves without interrupting any work going on below.
It also makes future changes to our facility much faster and easier. This part of the building is available for future expansion, and the foundation has been prepared to make construction faster and with minimal disruption to our operations. The GMP warehouse is the heart of our supply chain. We carefully check all the approved materials that come in, then store them in our climate-controlled 25,000 sq ft warehouse. We have space for 1,100 pallets and a special freezer farm for storing materials at very cold temperatures, all the way down to -150 degrees Celsius. After the materials finish the manufacturing process and pass quality control, they're stored here until our clients are ready to receive them. Behind the complex science and technology, all of our work here at Forge Biologics shares a singular goal, improving patients' lives through excellence in gene therapy manufacturing.
There is great hope that gene therapy will save patient lives and help them achieve improved health and wellbeing. We are making progress every day with the goal of reaching and benefiting as many patients as quickly as possible. Thanks so much for taking this tour of the Forge Biologics facility, where we are manufacturing gene therapies for life.
Thank you for viewing this video. From Otake, I would like to talk about the current status, the environment, and the progress of PMI and et cetera. This slide shows, it has been used several times in our IR meetings. This shows the rapid growing gene therapy CDMO market and its possibility. The current market size is worth $7 billion or about JPY 1 trillion. CAGR is 27%, and in 2030, this is going to become $46 billion or approximately JPY 7 trillion market by 2030. In addition, the market for the delivery of genes to target sales for therapy is expected to grow, especially for AAVs, a non-pathogenic and safe method that Forge specializes in. Next, please. This shows Forge Biologics' customer acquisition status and sales forecast. Because of the interest rate situation in U.S., fundraising was a difficult situation for the venture capitals and entrepreneurs.
But in recent months, the fundraising environment has begun to improve in North America, and funds are beginning to circulate to the ventures. On the left-hand side, shows the order received, compared to year-on-year, about 2.5x of orders have been received. For sales, on the right-hand side, you can see we are definite to make more than double of the sales after April. Every month, we see growth in our business. As mentioned by Fujie, for a single month, we were making a profit. Next, please. Also, the Ohio region in the United States, where Forge is located, is like Silicon Valley for semiconductors with high concentration of gene therapy researchers.
For this reason, the area is attracting excellent human resources in this field as our source of innovation, and Forge has a lot of experts with more than 50 professor doctor degree experts. The employee retention rate is extremely high, meaning that we are able to accumulate knowhow in-house in addition to the high level of expertise, and that is the strength of Forge, we believe. Next. It's the PMI situation, especially how are we creating the synergies. Ajinomoto Group has a very advanced research and development capabilities, and if we combine this with Forge's manufacturing know-how, we will be able to make more efficient production of AAV. Especially, Ajinomoto has technological expertise in the development of culture media for biopharmaceuticals and regenerative medicine.
By developing culture media in collaboration with Forge, which will strengthen AAV production, we will be able to develop media that are optimized for Forge's technology, and it will provide greater value to our customers. Ajinomoto's culture medium development team has already begun development and evaluation by Forge's research team is underway. We have, by the way, three people coming from Ajinomoto on a business trip together with David and with younger researchers. They are having communication and try to develop a new segment. In addition, Ajinomoto has established an R&D team for AAV production, making full use of its expertise and human resources in bio and fine chemicals, that was established in April, and has already started joint research activities with Forge on various themes. We are confident that we can create synergies by combining the expertise of each team. Next, please.
In the biopharma service business, the supply chain was optimized by integrating overlapping functions. To be more specific, Ajinomoto Althea, based in San Diego, the plasmid manufacturing function, which was carried out by Althea, was transferred and consolidated into Forge. Researchers are doing a very much good communication in between, and know-how are being transferred from Althea to further strengthen the plasmid manufacturing businesses. Althea is going to focus on their own strength. Next, please. Next is PMI situation that is strengthening our foundation. First, becoming an Ajinomoto Group. I think Forge is able to become a member of the Ajinomoto Group and improve reliability by strengthening the management base and introducing various system, including the governance.
Before noon today, by the way, we had a visit by the customer and they said that with the support of Ajinomoto Group, the management is stable, and they said that was advantageous for the customers as well. We got this comment. Another advantage is Ajinomoto's Bio-Pharma Services network spanning from Japan, U.S., and Europe. Forge is able to reach out to a different customer base than before. In reality, the Japanese sales team and Forge's team is visiting Japanese customers and to U.S. very large customer, OmniChem, and Ajinomoto sells a customer at this point of time. They've been visiting Forge to think and consider about the new area. Next week, by the way, we will be having a global sales conference on Bio-Pharma Services, and therefore the synergy is going to be created, and it will accelerate.
Furthermore, Ajinomoto's Bio-Pharma Service locations, excluding Forge, has a rich experience in commercial manufacturing, and this experience and the know-how will be shared to Forge. How to cope with the regulation and so forth will also be a help. That is another creation of synergy in between us. Next, please. This is the healthcare area. The key to growth is to strategy of anticipating advanced medical modalities, building unique and differentiated technologies through AminoScience, and establishing a business foundation. Our healthcare business, which began as a pharmaceutical use amino acid business, has two major business streams, CDMO and amino acid-based culture media. In CDMO, we have evolved our business by creating proprietary technologies such as AJIPHASE and building a global business foundation through acquisitions such as OmniChem, while anticipating advanced medical modalities from small molecule drugs to biopharmaceutical and regenerative medicine.
In the culture media businesses as well, the company has anticipated new modalities and expanded from serum-free culture media to culture media for biopharmaceuticals and regenerative in medicine. In anticipation of the PFO in 2050, the company has set its sights on gene therapy and cell therapy as future growth area where it can anticipate new modalities and differentiate itself through AminoScience. In this context, the acquisition of Forge has provided the company with a business platform for gene therapy CDMO and Forge's unique and differentiated technology. The acquisition of Forge also provides the company with a foothold to expand into the cell therapy field. In the gene and cell therapy field, we believe that the CDMO business and the culture media business will be able to expand through greater synergy.
In this way, we will be fully utilize the tangible and intangible asset of Ajinomoto, and we will be able to provide more value for the company as well as the stakeholder and the society. We will be able to contribute to the new growth of Ajinomoto. Thank you. That's all from me.
Thank you very much, Otake-san, and those of you attending from Forge. Thank you very much for your presentation. Now we'd like to entertain questions from the audience. Regarding how to raise questions, this is an instruction for the audience. Those of you who wish to ask questions, please raise your Raise Hand button on the screen, and we will call out your name. If your name is called, then please unmute and state your questions. Those of you attending from overseas, you can ask questions directly in English. Simultaneous interpretation will be provided.
Regarding the number of questions, please limit the number of questions to two per person. We would like to solicit your cooperation on this matter. Due to time constraints, there may be an occasion where not all questions may be addressed within that time. Now we would like to start the Q&A session. Those of you who have questions, please raise your hand or press the Raise Your Hand button. First question from Saji-san, Mizuho Securities.
Thank you very much. I have two questions. First, regarding Fujie-san. This is to Fujie-san. On slide six, page number six, regarding the sales and the profit for this year projection. On a single month, you achieved certain profits on a single-month basis, you mentioned. Why is the performance improving? That is my question. Also regarding goodwill amortization or depreciation. Excuse me, intangible asset amortization amounting to JPY 2 billion.
In order to show a profit, is it including the amortization or not? Is it after depreciation and amortization or not? Versus forecast, how is the current performance trending versus the forecast? Is it likely to take root, so stably keep generating profits going forward?
Saji-san, thank you very much for the questions. First, yes, the performance is steadily improving and enhancing. That means that we have robust progress with the customer negotiations, and we receive solid orders from customers. On a single-month basis, we received certain amounts of orders, and production is stable, and the costs are minimized thanks to the stable incoming orders. To take your point, on a single-month basis, yes, we show the profit. However, it is not a full year, making profit throughout the year. That will not be until the year 2025 when EBITDA starts to show a profit.
We believe that it is quite likely that we hit the target. We would like to further enhance the customer base, increase the number of customers, and stabilize production lines so that we can enhance the business going forward. Thank you very much for the questions.
Thank you. One more follow-up question. This is not a seasonal trend. You are showing profit, and it is likely that it is going to take root throughout the year, the rest of the year. Is that right?
Yes, that is correct. We will make sure that we will increase the number of customers going forward.
Thank you very much. Number two, second question. In 2030, Forge forecast $46 billion. That is the size of the market. Last year, it was $34 million, and it is going to be a 12-time increase. It is going to be $400 million.
I would like to address this question to Otake-san or John-san. By 2030, forecast gene therapy. While Forge Biologics, AAV, $46 billion, that is the size of the market. Previously, you mentioned that the metabolic-related diseases and the central nervous system and eye ophthalmology, those were the target gene therapy areas, target areas for your gene therapy. Those were the sector or segment-wise information you have given before. At Forge Biologics, what is the therapeutic area-wise characteristics for each AAV? When the size reaches $400 million, which area, which segment, or which therapeutic area is likely to lead the growth? That is my second question.
This is Otake speaking. I would like to take that question. Speaking of our AAV market, it is going to increase its size rapidly, significantly going forward. That is our perception. In reality, consulting with our customers, they expect a huge growth as well.
Regarding rare diseases, rare diseases are the main topic of AAV. However, outside rare diseases, therapeutic areas are our targets of the gene therapy that are on the horizon. On the other hand, Forge's strength, where does it lie? AAV is currently used for nine particular purposes. AAV 1 and AAV9, and Forge has the capacity to manufacture all these AAV types, AAV 1 and AAV9. So we are one of the two global companies who can do this, and that is where our strength lies.
By therapeutic area, can you name a few?
Yes. Hello, this is John. I can add on to Otake-san's points. Therapeutic areas actually would not be limited as targets. We can treat all different types of therapeutic areas. I think of particular interest are CNS disorders, muscular disorders, that require obviously the entire body to be treated. We can produce AAV that treats across all these different types of modalities and really target a large amount of patients who suffer from those diseases. Although that might be some of the lead disorders we would pursue, our clients have also gone into all the other therapeutic areas you previously mentioned. We have looked into eye disorders, hearing disorders, some cancers. As you can see, even some non-rare disorders. There is a very broad way to treat most of the population through many, many diseases using all these AAV capsid types.
Thank you very much. So I have a high expectation of your business. Thank you very much for your questions.
Next question is, Miyazaki-san from Goldman Sachs.
Hello, Miyazaki from Goldman Sachs. I have two questions. First, Forge Biologics management. Today, we have met the CEO and President, and he succeeded this company, and I was explained about this background. Tim-san is away, and you are going to do the PMI. How long did you expect this as Ajinomoto? Ajinomoto, after acquisition, were there any strategic changes? Can you talk about this change of succession? That is my first question. Another question is, on page 13 of the materials, you talked about gene therapy and the market and its growth. In 2023, you have shown us, according to the material, 2023 and 2024's progress seems to be Is it outperforming the market or in a short period of time, is it underperforming? Can you talk us about the trend?
Is it from the macroeconomic perspective or impact or from the customers changes and so forth? Can you talk us about this market trend as well?
Miyazaki-san, thank you very much. The first part I would like to answer from Fujie, and the second part will be answered from Otake-san. For the first part, from the acquisition point, a certain period of time, we asked him to be involved in PMI for a certain period of time. PMI went through smoothly for one year. As I mentioned to you earlier, the startup, zero to one, he is good at it, the team. Current status of this Forge company is making one to 10 and more. In that sense, I think the management is very important.
During our discussion with everybody, I think, we have asked him to stay for at least one year, and that is what we thought. Within that time period, succession was carried out successfully. Mr. Otake, as mentioned, and John and David, they are all with us. Of course, having the aspiration of Tim with us, but as was mentioned by Otake-san, he is going to stay with us as a Bio-Pharma Services Advisor. He is going to support us, so that he will support the growth of Forge as well.
Thank you very much.
The second item about the market side, the current growth. Is it along with this growth of the market? I would like to comment on that.
Naturally, in 2024, the data, we have not updated the latest figures and numbers, but Forge’s business is growing, and we have increased number of pipelines as well. At least, I think, there is not a big change or deviation from this growth of the market.
Yes. Hello, this is John. I would like to add onto Otake-san’s comments. I think Forge recognized some of its strongest sales growth over this same market period. Although as we commented earlier, the industry itself saw some fundraising challenges through the years, post-COVID and coming off of 2022 and 2023. We still saw a steady increase in client uptake and also, work sold during that timeframe, and I think competitively against some of our other peers. We have seen in 2024, a rebound of the financial markets for contribution towards gene therapies. I think both from a macroeconomic standpoint with interest rates in the U.S., but also a revisit of a lot of the gene therapy companies now from investors and really putting back in cash to invest in these very important therapies.
We have seen that trend as well in our total contract value increases in 2024, and I think it's been reflective of a strong gene therapy market and a growing AAV business at Forge.
Thank you very much, indeed.
Thank you very much.
Next question is in English. Bernstein , Euan-san, the floor is yours. Would you like to raise your question?
Hi. Good morning. I've got a question about supply chain optimization. We saw Ajinomoto Althea's regulatory announcement of 71 layoffs on September 30th, and there was reference to transfer of operations to Forge. Can you help us understand which operations are moving from Ajinomoto Althea to Forge and how this transfer is going to impact Forge's utilization and margins? Also from the Ajinomoto Althea perspective, can you help us understand what percentage of the workforce these layoffs represent? How material the savings are likely to be, and are there any one-off expenses associated? Thanks very much.
Otake-san, would you like to take the question?
Yes. On August 1st, as we made a press release, streamlining the supply chain, as part of that effort, we announced these details. Ajinomoto Althea had the drug substance business and a fill-and-finish process, drug product business. Those were the main pillars in Ajinomoto Althea. Regarding drug substance business overlaps with that of Forge. Therefore, what business structure is ideal for Ajinomoto Group? That is what we considered. As a result, we decided to terminate the drug substance division to be transferred to Forge, and 71 personnel were laid off, as you are aware. Currently, out of 550, it is reduced to 480, so it is a 15% reduction in terms of the payroll, the number of employees. Regarding this layoff, there were some settlements or compensation had to be paid amounting to JPY 2 million.
Having said that though, this drug substance business is now transferred to Forge. Therefore, in San Diego, Ajinomoto Althea cost reduction will be further realized in San Diego at the Ajinomoto Althea facility. Thank you very much.
Sorry, can I maybe just follow up on the—
Follow up.
—from the Forge perspective, how is this going to help the path to EBITDA breakeven for Forge? What are the implications of adding these drug substance production to Forge's operations?
Thank you very much for the question. To be more specific, how much increase on the EBITDA level, we cannot comment, unfortunately. However, we have secured a robust production capacity already at Forge, and this particular department was transferred in order to further enhance that production capacity. Production stability and reliability will be further enhanced. By doing so, it will be conducive to the business enhancement and business expansion going forward.
Thank you very much.
I hope I answered your question.
Thank you very much, McLeish-san, for your questions. Now we'd like to attend the second question.
Morita-san from Daiwa Securities, please.
Hello, this is Morita from Daiwa. I have two questions. First is a follow-up to Saji-san's question. The single month's turning black for the profit. Listening to the answers, I think it seems to be this is outperforming your expectation. Am I correct? Outperforming the plan means I want to know why were you able to outperform. I need to know this background. The second question is the potential or possibility of Forge. You've talked to us about the potentiality, but still, this is a small business and you have uncertainties. The vision, in order to achieve your future vision, is there any risks or challenges or uncertainties that you are aware of at this point of time? Can you elaborate on the risks that is known at this point of time by yourselves?
Thank you very much, Morita-san.
The first question, I would like to answer the question, and it's the second from Otake-san. As was mentioned by Fujie-san, yes, single month's profit has been achieved, and we're very all happy about them. Structurally, would be able to continue, I think according to our expectation. As you know, every month in this industry, we do not have same amount of orders and same amount of production. By months, there are differences in orders and productions. A single month, we received a big order and that created us a profit. According to Otake-san's explanation, one of the uniqueness of Forge is able to provide and have very big reactors from 1 L- 5,000 L. Challenging thing is how to expand it as Ajinomoto Group, which will be able to support.
For the single months, we had a very big order with a large volume, and we were very successful in the production consecutively. We were very happy about this surprise. Scalability is proceeding very successfully, and that is the reason why we were able to address this big order in a single month. It is not that what has been changed or what is unexpected. It is that we had a good, big order, and we were able to address it. This is a big surprise, a nice surprise for us. That was a single month. For that single month, that was very surprising, nice thing for us.
For the risk part, I have one more additional question to this. This time, your message is that business profit in 2025, EBITDA turning into black, is on track. It is smoothly done.
This is not beating continuously doing. I think our foothold is very strong. At this point of time, we're not changing any forecast or outlooks. As you are all aware, I think we are conservative, so to speak. At this point of time, we're very strong, but we're not changing our forecast. That is not the decision that we're making at this point of time. Rather than smooth, well, robust, the things are going well.
Yes, Otake-san, can you take the risk part?
Yes, I will explain about the risk part. This is Otake speaking. The business itself, yes. In the future, are there any big concerns or risks? No, we don't have any big risks. But the challenge could be that still this company is young, four years after its foundation. Operations and the organizations, there are rooms for more optimization.
And in this aspect, Ajinomoto Bio-Pharma Services Department are good at it, and OmniChem is good at it. I think they can support us, and we can do the optimization of the operation. As was mentioned earlier, yes, single month's profit has been achieved. But of course, there are rooms to grow and improve now. For the clinical testing, we are doing GMP production, and we are able to afford that. But commercial, we are going to be dealing with the commercial products. We need to increase our level, cGMP, and the regulation. We need to address and cope with that situation at a higher level. Using the Ajinomoto's network, Chris' video was saying that we have our own pipeline at Forge. Utilizing that, we can have good communication with FDA and other regulatory things.
We will be able to make more improvement in that area as well. Furthermore, the production facility that we have is busy, is occupied. As was shown in the presentation, we have expandable room for three folds. If our decisions are being delayed, and if that will be a bottleneck, that is going to be a challenge. At the appropriate timing, appropriate level, we would like to make another investment decision. The fourth thing, to answer your question, is that earlier John mentioned that in the past few years
We have high interest rate in U.S. and the customers, meaning the biopharmaceutical companies, venture companies, and including Forge, have been struggling because of this high interest rates. But I think we have now a very strong foothold, and in order to strengthen this further, we need to know the customer portfolio, and we need to increase the customer portfolio. Not just the venture companies, but we want to go with larger customers so that it would lead a stable management of the business. In this aspect, I think Japanese team can support us. We have a good connection with the Japanese team, and next week, we will have global sales conference, which will support that effort as well. Thank you. That's all for me.
Thank you very much. A follow-up question. Yes, I understand that the market is going to expand. How about the competition?
Is there any risks that you cannot survive in this market? The competition, vis-à-vis competition.
Yes. Can I comment on this part?
Yes.
Sorry. Otake speaking. Maybe too much. Technologically speaking, I think we have room to grow and make improvements. Ajinomoto Group's AminoScience technology and Forge's technology, I think these two needs to be fused well, combined well, so that we can improve the level of the AAV production and its processes. I think we are very competitive in this area, and we will be more competitive. There are, I think, Forge research workers mentioned that they can do it. Any additional comment, John or David?
Yeah. I'll just add to that. I think very good collaboration between Ajinomoto researchers and Forge researchers, in improving our manufacturability of AAV, and this really helps the entire field. It helps being able to produce for, as we're saying, non-rare diseases, and to be able to make those treatments available. We see growth, really, because of these technological improvements, really much greater increases in yield and maintaining really high quality of the AAV. That really an expansion of what we're able to offer for our clients. Some of this we talked about was really—
Thank you.
—around cell growth media. Then there's other things that we're working on that we can't disclose at this time.
Thank you very much.
Thank you very much, Morita-san, for your questions. We are receiving more questions at this point of time. Any additional comments or questions? If you have any, please raise your hand button. Please press them. Next question, Goldman Sachs, Miyazaki-san.
This is my second time. My first question, let me confirm. You mentioned a single month's profit was registered. Is it the business line profit, or was it EBITDA for your Forge business? That is my first question. Also, my second question pertains to the current business and revenue of Forge Biologics. Is it at a commercial production level or pre-commercial level is the main source of revenue? That is my question. Because going forward, moving on to the phase III or commercial-level production, the scalability will be further enhanced, and it's going to further boost your performance going forward.
But what is the expected stage change and phase change going forward that could impact your business? Currently, you are increasing the number of orders that you are expanding customer base. I truly understand that. But going forward, in terms of the actual stage of customers, where are they at? Is it at a clinical level, commercial level? How do you expect them to further evolve down the road? That is my second question.
Thank you very much. Otake-san, could you please answer those questions?
Well, regarding the single month's profit, it's at the business profit line. As [Maeda-san] mentioned earlier, it was a large-scale manufacturing project that we won, and we were able to produce it successfully during that particular month, and that led us to generate or show a profit in that single month.
To answer your second question, in terms of the main revenue resource or revenue source, as I mentioned earlier, until last year, there was a difficulty in financial situation that put us in a very difficult position. We acquired customers, but we were unable to actually conduct a GMP production. But now the customers are more cash-rich, so they are ready to go with the GMP production at Forge. In August, we were able to actually use super-size reactors for multiple batches, and all of those batches were successful, and that's why we made a single profit in that particular month. But that doesn't mean that the large-scale reactors are actually utilized on an ongoing basis. That's why it is quite difficult to achieve a single month's profit each and every month.
But going forward, we'd like to further expand our pipeline and also customer base so that we can stably generate monthly, on a monthly basis of show a profit on a monthly basis. In terms of the main Forge revenue source, commercial products are yet to exist because it's a relatively young company, so we are yet to the commercial level yet. However, 10 batches of GMP production is on the way. That means at the clinical level, we have experiences, accumulated experiences of producing clinical products, and that is the main source of revenue.
Yeah, this is John, and I would like to add to Otake-san's comments. I think that the important aspect of the question is pointing to the strong future of the Forge pipeline. These are clinical-grade GMP runs, which infers that the future growth will then focus on late- stage phase III and ultimately commercial, where we will have more certainty of batch success due to repeated runs and more focus on forecasting. So knowing exactly how many batches per year these clients will require based on their disease state forecasting.
The other component of potential revenue during these clients transition is the work they need to perform to prepare for their biologics license application or other worldwide license applications, which include a lot of due diligence work, but also characterization, which can be quite extensive, that Forge can execute for them to help them properly characterize, test, and validate their process and file that for as part of their BLA. Not only would we see revenue benefits from expanded batches and increased scale, but also the work required to actually file these properly in the different geographic regions.
Thank you very much for clearly answering my question. I appreciate it. Thank you very much for the questions.
Next question is from Sawada-san, from JP Morgan Asset Management.
This is Sawada from JP Morgan. Do you hear my voice?
Yes. Clearly, yes.
This is one question about technology. Helper plasmid that you have. Helper plasmid. An ordinary normal helper plasmid is E4, E1, E4, VA RNA. I think is included in an ordinary ones. But looking at the patent information, in your case, E1a is not included, seems to be. This helper plasmid size itself seems to be relatively smaller than the competitors. With this helper plasmid, you have the uniqueness compared to others, competitors. What is advantage? Can you elaborate on this point? For this helper plasmid size, by being smaller than others, GOI plasmid size, would you be able to make the size larger? Currently, gene therapy, the GOI size is 4.5 kb. Are you able to expand, increase the size? That's another question.
Thank you very much. Otake-san, please.
Yes. I think David is able to answer this question.
Yes. Thank you. This is David. Our ad helper plasmid we call pEMBR, again, is innovation that we have created here at Forge. I think it is part of the rich culture of Forge and Ajinomoto to always be innovating and improving. The pEMBR that we have, as you are rightly saying, does not include the E1a gene. The E1A gene is actually within the cell, so we do not have to provide that within the ad helper plasmid. So it is really just E2A, the VA RNA, and the E4 genes that are required. The smaller size helps us because a smaller size plasmid is much easier to produce than a larger plasmid. So from overall manufacturability of the plasmid is improved.
Now, as far as the size, for your second question, the size of the gene that can be put into AAV, we do have some clients that exceed the limit of the 4.5 kb, 4.7 kb. We can go up to about 5 kb is the largest size that we have been able to produce for AAV. The yields are less for those larger size transgenes, but we can produce them, if that answers your question.
Thank you very much. Yes, in that sense, then this helper plasmid size is smaller, and by having it smaller, you have higher productivity, yield, and GOI size other than the competitors, you will be able to entertain larger size. My understanding. Is this correct?
Yes, I think pEMBR is part of the process. It really is all the pieces that come together that allow slightly larger genes to be produced. It is not just the pEMBR, but yes, we are able to produce slightly larger genes, about 5 kb.
Thank you very much. That was all from me. Thank you.
Thank you, Sawada-san, for your question.
Next question will be asked in English. Euan-san from Bernstein. Would you like to start your question?
Thanks very much. This is a question for John, please. John, what are your most important strategic priorities over the next 12 months or 18 months? Are you focused mainly on acquiring new development customers? Are you focused mainly on acquiring new commercial manufacturing customers? Are you focused on trying to get some of these clinical trials into commercial manufacturing? I would just like to understand what do you see as being the most winnable, the most actionable of those opportunities, and can you help us to understand the sort of relative value proposition for each of these, and how that is going to impact your growth outlook? Thanks very much.
Thank you for the question, Euan. I think you touched on a couple aspects of our growth business we are focused on. Primarily now, I think we're focusing Forge on the operational excellence and quality-minded future and really, again, focusing on clients who are advancing into late stage, which we do have some clients now who are contemplating the transfer to phase III, are already engaging Forge on questions around characterization, PPQ, which is PPQ, which is late stage process performance qualification, and their impending BLA. I think strategically, that is the strongest focus for Forge because it puts us into more, as I mentioned on the previous question, predictable path of GMP lot performance. Looking at our year-over-year forecasting, that really helps us focus in on better precision on our profitability. I think that's a strong primarily focus.
We have an internal initiative which we have teams that are working towards really having packages put together for commercialization, and again, clients now currently moving through that process. Now you've touched on a second aspect of our focus, which is as we do grow our commercial capabilities and as Otake-san mentioned, also our internal capacity, we will still continue to forge for new R&D partners who have new capabilities, especially those who are very well-funded, have good preclinical science, and allow us to vet them in a much clearer rate of who can come into the pipeline and we think have a high rate of success to be future commercial products that we can support into the out decades of Forge.
I think in short, to answer your question, commercialization is a big focus. We continue to sort of grow our top of our pipeline with new clients. But I think in all, really the main focus is on execution, and also quality-minded products. I think all contribute to the success of Forge over the coming years.
John, if I'm understanding correctly, we shouldn't get too hung up on the number of customers that you got. It's more about the progress of moving the existing customers through the pipeline. Is that the right way to think about it?
Yeah, I think that is actually a very smart view of gene therapy as well, because a lot of these customers that come in have multiple products from a single pipeline. Although they come in with a single gene therapy product, we already now have customers who have brought product two and product three to Forge. Although we do think the number of customer uptakes is very important, it is actually cultivating each individual customer and maximizing their platform at Forge. Multiple diseases, but using a same gene construct or using the same platform with different gene targets, that is I think actually where we see tremendous value because we already have an established relationship and we simply grow through upsell in that same client.
Fantastic. Thanks, John. Appreciate that.
McLeish-san, thank you very much for your questions. We would like to take a few more questions.
Any additional questions? Please raise your hand if you have any questions.
I think this concludes the Q&A session.
Lastly, closing remarks from Mr. Fujie.
Today, thank you very much for your participation despite your busy schedule. Gene therapy, the explanation and the current status and the forecast of Forge was explained today in detail, and I hope that you have a deep understanding of their businesses. Today, we had connected the two locations and this was a challenging thing for us. There may have been a bit of an issue, but I think everything went on smoothly. In any case, we expect a lot and expanded to Forge, and I think this is a nice members to be under a same purpose to a big goal that we have. The information will be shared with you in appropriate timing, appropriate level.
I would like you to expect Forge continuously. Thank you very much for being with us. Thank you.
This concludes today's meeting. Thank you for your participation. Have a nice day.
Thank you. Bye-bye.