FAQ

The following is a list of frequently asked questions and their answers.

※ This page will be updated as needed, May 9, 2022.

[Corporate Information]

When was the company founded?
Modalis Therapeutics Corporation was founded in Tokyo Japan in January 2016.
The consolidated subsidiary, Modalis Therapeutics Inc. was founded in Cambridge, Massachusetts USA in April 2016.
What does Modalis mean?
Modalis (pronounced “MO-DA-LIS”) is an original name that the Company has chosen to represent the Company’s proprietary gene modulation technology, CRISPR-GNDM, as a new modality (therapeutic technology) to assist patients fighting with genetic disorders. It is the key to treatment of genetic diseases, and the logo of the company name expresses “a gene switch” becoming the target of the CRISPR-GNDM technology.
What is Modalis’s scope of business?
You can see the outline of our business on the “Our Science” and “Business” pages.
The board of directors consists entirely of non-executive director other than the president, but what are your thoughts on the risks associated with the president running the execution just by himself?
Although all of our board of directors, with the exception of Mr. Morita, are non-executive director, our governance structure is similar more to the U.S. model, which is structured in such a way that directors and execution are separated and executive officers are delegated to execute the company’s operation.
The officers are currently three members: CEO who is in overall charge, CSO who oversees R&D, and CFO who oversees finance and administration. In addition, there are directors with relevant experience in pharma/biotech industries under them. So, we believe that we have a solid human resource base.
However, we also believe that strengthening our team structure is important for our future development, and we intend to continue to acquire excellent human resources.
(April 1, 2022)

[Financial]

When do you announce financial results?
We announce financial results following the end of every quarter. Please see the “IR Calendar” page.
When is the fiscal year end?
Annually on December 31st.
Where can I get copies of your past business results?
Please see the “Financial Results” page for past business results.
How can I check the video streaming of the briefing sessions?
We provide video streaming of our analyst meetings. Please see the video library available on our website.
Do you have any plans to disclose earnings forecasts or outlooks?
The earnings forecasts are not presented due to the difficulty of formulating reasonably accurate estimates at this time.
Do you have a timeline for turning a profit or making a leap forward at this point in time?
Since we do not disclose earnings forecasts, we cannot give a specific number of years as to when the company will become profitable.
We believe that the value inflection point shall come around 2024, considering the current pipeline status. This is because we are developing MDL101 based on the assumption that we will file IND in 2023 and interim results will be available within a short period of time after the start of clinical trials, as we have announced before. We believe that the pipeline that we are licensing out to our partners may also reach clinical trials at the same time, and the clinical results of these three pipelines should be enough to make a big leap forward. This does not preclude ample opportunities to earn upfront and milestone payments from the pipelines even before then.
(April 1, 2022)

[Stock Information & Shareholders Information]

On what exchange is the company listed?
Modalis listed on the Tokyo Stock Exchange Mothers on August 3, 2020 and on the Growth Market on April 4, 2022.
What is the stock code of Modalis?
4883
Do you plan to pay dividends?
We have not paid dividends since the establishment. As we will continue to carry out R&D activities that require large up-front investments, we will not pay dividends for the time being and will prioritize securing funds for continuing R&D activities.
We recognize that returning profits to shareholders is an important management issue. If the stable profit can be earned in the future and sufficient profit can be secured to cover R&D funds, we will also consider profit distribution after comprehensively considering the need to enhance internal reserves to prepare for R&D activities.
Do you currently have any preferential system for shareholders?
Not at the moment.
What is the number of shares constituting one trading unit of shares?
100 shares
Who do I contact to change share registration information such as ownership and changes of address?
Please contact your securities company.
When is the Ordinary General Meeting of Shareholder?
Annually in March.
Are there any plans to hire an IR person? Any chance we can get comments over the phone?
In our IR process, we accept questions only on our website (We do not respond to telephone inquiries), confirm all questions we receive, and answers to those that we believe need to be addressed are made public on our website and in disclosure documents. This is based on our policy that individual responses are not fair in terms of fair-disclosure, and that information that is deemed to require a response should be disclosed in a broad and fair manner. Therefore, we do not respond to individual inquiries by telephone or e-mail. We also do not offer tours of our offices or research facilities from security and confidentiality standpoints.
(April 1, 2022)

[About our Business, R&D, and Pipeline]

When will the operating revenue be recognized?
Our major operating revenues consist of upfront and milestone payments in R&D collaborations, as well as revenue from clinical/sales milestones and royalties from license agreements. Each revenue is recorded as operating revenue when the contract is signed or when the conditions stipulated in the contract are met. As a result, our operating revenue is not reported monthly or quarterly but fluctuates depending on achievement of results.
I understand that this is an industry where if you spend money in the business, the deficit may increase by that much, but what about using funds aggressively to advance development?
As one of our options, the company believes that the Company can reap more fruits by making a larger investment in R&D. On the other hand, the Company also believes that financial discipline is important.

To achieve financial discipline, by combining collaboration pipelines and the internal pipelines, Modalis aims to establish a “hybrid model” that benefits from early revenues from the collaboration pipeline and huge potential future profits from the internal pipeline.

The Company will aggressively invest more in our R&D within this framework of discipline.
When the license-out agreement is concluded, will IR be conducted accordingly? Or will it be at the time of financial announcement?
In accordance with laws, regulations, and rules, we will proactively disclose important corporate information, such as contracts that have a significant impact on our business performance, to investors in a timely manner. While we are unable to say whether or not such information should be disclosed on an individual basis, we believe that important corporate information, such as license-out agreements, is subject to timely disclosure.

On the other hand, we are unable to disclose any unpublished information that we deem not to be in a situation to be disclosed, even if we receive inquiries about it.
Other than during the announcement of financial results, do you release information/IR regarding the status of R&D activities (such as the NHP trial)?
The company is currently in R&D phase, so the release of IR regarding the status of individual pre-clinical R&D activities is restricted. Depending on the progress and expansion of future pipelines, we believe there may be increased opportunity for IR.

Moreover, regarding the status of individual R&D activities, we have decided that publicly disclosing this information is not favorable from a competition standpoint, as it could be advantageous for our competitors and could have a harmful impact on stock value in the long-term. Furthermore, when a license is being negotiated, details of the research status can be communicated only to the negotiating party, so restrictions on public disclosure are standard.

Disclosures regarding individual R&D activities occasionally give stockholders expectations which may have an excessive influence on the stock price. The company has decided to proactively disclose information that will have serious impacts for stockholders.
What does the sublicense deal of which Modalis and Astellas entered into certain CRISPR/Cas9 foundational patents for use in this second quarter mean to Modalis’ business?
This outcome was already contemplated under the terms of our existing license agreements for the two programs entered into in 2019 as well as under our business plan. The detail of the deal is not disclosed due to strategic reason. This was in line with our existing arrangements and our business plan and therefore this will not have impact on our business while this allows our partner, Astellas, and licensed products to pursue further development.
(August 5, 2021)
From 2021 Q2 there are non-current liabilities reported. What are the details of this liability? Furthermore, what type of impact will this have on the business results?
Modalis has secured the CRISPR/Cas9 basic patent license (patent right) from Editas Medicine Inc (“Editas”). In 2021 Q2, a portion of the licensing fees were received from the out-licensing party. As a result, the amount is being reported as a non-current liability.

The non-current liability in question will depreciate in accordance with the duration of the licensing agreement, so the corresponding depreciation expense for the license (patent right) will be effectively offset on the PL Statement.
(August 5, 2021)
What is current development status of MDL-101?
With the very positive safety profile we confirmed in NHP and efficacy data in 2 mice disease models, Modalis works on IND enabling studies as well as regulatory meetings with FDA.

At the same time, our manufacturing team has initiated process development so that we can hand over the recipe of manufacturing to CDMO for scale up and large-scale manufacturing. This is one of the key element that rules the timeline in the gene therapy product development and should contribute to the value of the program.
(November 5, 2021)
Having got the animal data, what is the current partnering status of MDL-101?
As stated in our November 5, 2021 financial disclosure, Modalis believes the data we’ve got suffices partnering hurdle and the manufacturing agreement, which clarifies and outlines the whole manufacturing plan, added more value on the program.
So, we do not believe that delays in the partnering should not damage the value of the program itself.
(May 9, 2022)
How does the CDMO collaboration impacts on business?
Manufacturing is one of the important element to start clinical trial of MDL-101. As Modalis does not have large-scale manufacturing capability, it needs to be transferred to the other party. The agreement with the 1st tier CDMO allows us to get access to its vector system and capability for manufacturing AAV and paves the way for sample production for GLP studies and clinical trials.
(November 5, 2021)
Why is the IND plan pushed back to 2023?
Like in typical development of gene therapies, GMP manufacturing is the rate limiting step in MDL-101. Through out our discussion with the CDMO, both parties analyzed availability of manufacturing slot and procurement of materials and found it is more realistic that the clinical sample becomes available in 2023.
(November 5, 2021)
What does US lab relocation mean to the company?
As of Oct 20, Modalis relocated its US operation to Waltham MA.
Since mid last year, the capacity of the US lab has become one of the limitation for our growth and we explored opportunities of relocation. But, due to supply-chain issues in US, our relocation had been pushed back by then.
With this relocation, we are able to accommodate process development function as well as further increase of research team. Thereby, we can expedite and deepen our product development including MDL-101.
The budget for this relocation was included in the plan for the current fiscal year.
(November 5, 2021)
How does the scale and process of manufacturing look like in product development for rare disorders?
Although you might imagine manufacturing scale for rare disease product is also small, it may not be the case for some of the genetic disorders. For instance, many type of muscular disorders require systemic injection and 1000L scale of production, which is a largest batch in many of the GTx manufacturing facilities, can produce products only for single digit to low 2-digit patients.
It is important to manufacture those products in a way that complies with GMP, and it makes sense for us to work with CDMO, which has experience, capability, and capacity to manufacture.
Our current strategy is to work with the CDMO which we made an alliance this time and revisit the strategy when we establish clinical PoC and risk is well mitigated.
(November 5, 2021)
Dose the professor Nureki’s step down matter to business and technology development?
Not at all.

The initial development of the CRISPR-GNDM® technology has already completed and necessary technologies and licenses have been transferred to the company far before the separation.
Additional technology development is being conducted 100% by the company and there is nothing we need to rely on Univ. Tokyo.
(November 5, 2021)
What is the future of your relationship with Astellas?
To date, we have conducted a total of five joint research projects with Astellas, two of which have resulted in licensing agreements.
With the conclusion of the MDL-204 collaboration, there are no ongoing research collaborations with Astellas. However, we continue to maintain a good relationship through collaboration on two licensed programs, MDL-201 and MDL-202, as well as exploring other collaboration opportunities.
We’ve confirmed that Astellas continues to explore the existing programs licensed to it, MDL-201 and MDL-202, currently in the pre- clinical stage.
(January 7, 2022)
What is the difference between MDL-206, which Modalis regained rights and put into internal program in August 2021, and the current MDL-204?
While both pipelines use the same CRISPR-GNDM® technology approach to create gene therapies, each program has its own technical challenges specific to the target gene, patient population size, and competition from other modalities.
In the case of MDL-206, the decision to continue the program as our own was based on reasons such as the target Angelman Syndrome’s affinity to the technology and the difficulty of approaching it with other modalities, as well as the assumed efficacy based on existing data. However, the decision to discontinue MDL-204 was based on a comprehensive judgment that it was not sufficiently superior or reasonable.
(January 7, 2022)
Do you foresee any increase or decrease in the pipelines in the future?
We have several new candidates, including those for which we are currently exploring the possibility of collaboration and those that are being incubated in-house. We plan to promote these to the pipeline at an appropriate stage.
Among existing pipelines, we will promptly discontinue those for which we believe there is no longer a possibility to continue research and development, such as MDL-204.
We believe that it is reasonable to optimize the size and quality of our portfolio by conducting an appropriate metabolism.
We also believe that making decisions at an early stage, especially at the research stage, is effective in increasing the chances of success in the costly development stage.
(January 7, 2022)
Several epigenetic modulation companies were established at the end of last year, will this affect the competitive environment?
We are delighted to see that epigenetic modulation is now widely recognized as an effective drug discovery technique.
The Company believes that, in addition to the protection provided by our existing intellectual property, we can continue to maintain our leading position by based on the collective experience we have gained in the six years since our establishment.
(February 14, 2022)
Does the outcome of CTGTAC meeting impact on Modalis’ development?
FDA’s Cellular, Tissue, and Gene Therapies Advisory Committee (CTGTAC) held a meeting on September 2nd and 3rd, 2021
This was to discuss the toxicity risks of adeno-associated virus (AAV) vector-based gene therapy product.
The meeting was held in response to toxicities observed in animals and humans after administration of gene therapy products including (1) hepatoxicity, (2) Thrombotic Microangiopathies (TMA), (3) Dorsal Root Ganglia neuronal loss, (4) brain MRI abnormalities, and (5)AAV vector integration and oncogenicity. We understand that the objective of the meeting was to provide recommendations for strategies to minimize the risk to patients receiving gene therapy products.
This will not significantly affect our development guidelines or timeline as most of the toxicities are not new to us and we have set up certain countermeasures, but we will take appropriate action based on our understanding of the authorities’ awareness of the issue.
The Company has been following up on necessary regulatory guidance, reports, meetings, and the latest papers related to gene therapy in a fairly extensive and timely manner, including this meeting, so the information can be reflected in the Company’s strategy as needed.
(February 14, 2022)
At what point in time are disclosures made about patents?
In principle, a patent application is disclosed to the public one year and six months after the filing date.
At this stage, a patent is not obtained, but the application continues to be examined. If the application passes the examination, a patent is granted.
After that, the patent is officially registered after the payment of the registration fee.
Therefore, in general, disclosure is made after the decision to grant the patent is received, and the Company takes the same approach.
(February 14, 2022)
What kind of employees are working in the U.S. laboratories?
The U.S. laboratory currently has approximately 30 people.
Of these, about 20 are involved in research and about 5 are involved in development, which consists of process development, preclinical, and project management. The rest are in administration.
The typical profile of research department personnel is that of a researcher with a Ph.D. and post-doctoral experience and a technician who had earned a master’s degree. Other mid-career personnel have experience in gene therapy research and development at pharmaceutical companies and other biotech companies.
(April 1, 2022)
I believe there are areas of the previous year’s plan that have not been achieved, and I would like to hear how you look back on that and what you think about the future outlook. In particular, I would like to know more about partnering.
With regard to partnering, we recognize that we have not been able to realize our previously stated goals. At the time we stated it, we had fundamentals and materials to negotiate with and partners to negotiate with that we believed was reachable, but partnering, on the other hand, is something with a partner, and we have not been able to achieve it due to the judgment of the other party.
While clarifying partnering goals is disclosed from the perspective of dialogue with investors, clearly too much about goals (time, deal size) is not desirable from the perspective of negotiation strategy because it tells our target to the counterparty.
We understand that some may be concerned that partnering, including MDL-101, has not been achieved in accordance with our previous goals, but we believe that it is only a matter of time, as the most important R&D to increase value is progressing well and discussions with interested companies are continuing.
(April 1, 2022)
I saw Modalis was posting a job of ophthalmology expert in the U.S. Does this mean that company has plan to enter ophthalmology field?
It is true that we were looking for a researcher in the field of ophthalmology. This is to explorer ophthalmologic opportunities as part of the central nervous system and does not mean that we are specifically exploring new areas.
(April 1, 2022)
What is the INTERACT meeting?
INitial Targeted Engagement for Regulatory Advice on CBER producTs (INTERACT) meeting is an informal non-binding consultation with the Center for Biologics Evaluation and Research (CBER) at FDA.
This in an opportunity for a sponsor (developer) that develops a cutting-edge product, to obtain consultation on innovative investigational products associated with unique challenges.
Considering recent low acceptance rate of the meeting, we believe our product is innovative enough to get attention of FDA.
The goal of the meeting for us is to clarify a path toward the clinic of not just MDL-101 but whole products based on CRISPR-GNDM® technology.

For more info, please visit FDA site
https://www.fda.gov/vaccines-blood-biologics/industry-biologics/interact-meetings
(May 9, 2022)
What does the presentation at ASGCT mean to Modalis?
The ASGCT is the largest gene therapy-related scientific organization in the world with approximately 5,000 members.
Last year’s annual meeting was held virtually but reportedly attended by approximately 6,800 people.
Every year, not only cutting-edge scientific findings are presented, but also pharmaceutical and regulatory aspects are discussed.
We believe that our presentation at this annual meeting is not only to showcase our progress, but also to share our knowledge with the academic community as part of our responsibility as a leader in Epigenetic Editing field.
(May 9, 2022)
As the schedule of MDL-205 change, any push back in development?
MDL-205, which is being researched in collaboration with Eisai, is progressing well as evidenced by the milestone recognition recorded in 1Q. With the aim of further improving the PoS of the product, both parties have agreed to extend the collaboration period.
Due to agreement with Eisai, we are unable to disclose the additional extension period or any other status of the collaboration.

PoS: Probability of Success
(May 9, 2022)
Can you elaborate a little more about the Utrophin patent?
This patent is for a therapeutic concept and molecules that uses GNDM technology to treat DMD. The treatment is based on a mechanism that supplements mis-functioning Dystrophin gene in patients by upregulating the expression of the fetal/juvenile form of the gene, Utrophin. The cDNA of the Dystrophin gene is 14 kbp, too large to be carried in an AAV vector, and this is a target that takes advantage of the GNDM, which is gene size agnostic. No disclosure is made for the collaboration program as to which patents correspond to which programs.
(May 9, 2022)
How does Broad’s victory in the U.S. patent interferences proceeding affect Modalis’ business?
The U.S. Patent Office (USPTO) had been conducting an interferences (#106,115) between Broad Institutes (Broad) and the University of California, the University of Vienna, and Dr. Emmanuelle Charpentier (collectively, CVC), challenging the prior inventions in the U.S. On February 28, 2022, the USPTO Board of Appeals (PTAB) ruled that Broad’s rights were not effectively interfered with in this interferences.
On February 28, 2022, the PTAB ruled in favor of Broad, holding that there was no interference in fact with the interferences.
The PTAB also rejected the CVC’s argument in No. 106,048, which was also the subject of an earlier interferences proceeding.
This indicates that Broad’s patent application for genome editing technology in eukaryotes, including humans, is valid in the United States.
As a result, the CRISPR foundational patents, which we have a right through the license agreement with Editas, will continue to be valid in our business areas and will continue to secure our business.
(May 9, 2022)
Is there any impact of the draft guidance to gene editing product published by FDA in Mar?
This Draft Guidance reflects the FDA’s findings in response to the recent progress of several genome-editing therapeutics to the clinical stage and is intended for companies primarily in preclinical stage.
The products we are developing are considered to fall under this category in a broad sense and we believe that the clarification of the hurdles to the start of clinical trials in this manner will make it easier for developers, including us, to plan preclinical strategies and to develop products.
We do not see any new hurdles in this guideline that we did not anticipate.

For more info, please visit FDA site.
https://www.fda.gov/regulatory-information/search-fda-guidance-documents/human-gene-therapy-products-incorporating-human-genome-editing
(May 9, 2022)
Is it fair to assume that the market size for diseases with small patient numbers is small?
The market size of rare diseases is estimated by multiplying the number of patients by the drug price. However, since there are no existing drugs that can be used as a reference, it is hard to estimate drug. In addition, drug prices tend to increase inversely correlated with the number of patients, and therefore, the number of patients and the market size are not necessarily correlated.
(May 9, 2022)

[Other]

Do you sell novelties such as Modalis T-shirts?
Branded goods are not for sale and are for internal use only.