Announcement of Acquisition of Shares (Ownership) in Icon Genetics GmbH, a German Bio-pharmaceutical R&D Company

DENKI KAGAKU KOGYO KABUSHIKI KAISHA (Head­quar­tered at: Chuo-ku, Tokyo; Shin­suke Yoshi­ta­ka, Pres­i­dent & CEO, here­inafter ”Den­ka”) is pleased to announce that, it has agreed and entered into a share trans­fer agree­ment on August 6, 2015 with Nomad Bio­science GmbH (Head­quar­tered at: Munich, Ger­many; Prof. Dr. Yuri Gle­ba, CEO, here­inafter ”Nomad”) regard­ing its acqui­si­tion (the ”Acqui­si­tion”) in two phas­es of all of the shares of Icon Genet­ics GmbH (Head­quar­tered at: Halle, Sach­sen-Anhalt, Ger­many; Prof. Dr. Yuri Gle­ba, CEO, here­inafter ”Icon”), a Ger­man Bio-phar­ma­ceu­ti­cal R&D Com­pa­ny. Nomad is the par­ent com­pa­ny of Icon.

1. Pur­pose of Acqui­si­tion
In the field of health and med­i­cine, Den­ka Group is engaged in the busi­ness of macro­mol­e­c­u­lar sodi­um hyaluronate man­u­fac­tured based on its orig­i­nal cul­tur­al method and the busi­ness of var­i­ous vac­cines and diag­nos­tic reagents devel­oped and man­u­fac­tured by Den­ka Seiken Co., Ltd. (Head­quar­tered at: Chuo-ku, Tokyo; Tet­suro Mae­da, Pres­i­dent & Rep­re­sen­ta­tive Direc­tor, here­inafter ”Den­ka Seiken”), a major group com­pa­ny of Den­ka. Den­ka has announced that it will focus its man­age­ment resources on the field of health and med­i­cine, one of the growth fields under the Den­ka 100 man­age­ment plan, which set out ”Focus man­age­ment resources on new growth dri­vers and devel­op next-gen­er­a­tion prod­ucts” as the Group’s growth strat­e­gy. One of the most impor­tant themes is to devel­op the busi­ness of vac­cines and diag­nos­tic reagents con­duct­ed by Den­ka Seiken.

”mag­nI­CON®”, a tech­ni­cal plat­form held by ICON, is a tech­nol­o­gy to pro­duce high mol­e­c­u­lar pro­teins such as anti­bod­ies and vac­cine anti­gens by using plant-based genet­ic mod­i­fi­ca­tion tech­nol­o­gy. mag­nI­CON® is also an inno­v­a­tive plat­form which enables the mass man­u­fac­tur­ing of high mol­e­c­u­lar pro­teins safe­ly, at a low cost and in a short time, com­pared with the method of using micro­bi­o­log­i­cal cul­ture or insect and mam­malian cell cul­ture. It has been high­ly eval­u­at­ed by an exter­nal spe­cial­ized insti­tu­tion for its com­pet­i­tive­ness in terms of yield and pro­duc­tion costs as com­pared to oth­er sim­i­lar plant-based tech­nolo­gies.
As a result of the Acqui­si­tion, Den­ka Group is com­mit­ted to devel­op­ing norovirus vac­cine and oth­er vac­cines which have nev­er been pro­duced by the Group and, in rela­tion to sea­son­al influen­za vac­cines cur­rent­ly pro­duced by Den­ka Seiken, cre­at­ing a brand new pro­duc­tion tech­nol­o­gy that could replace the tra­di­tion­al one, as well as improv­ing man­u­fac­tur­ing tech­nolo­gies of anti­bod­ies to be used for test reagents. Den­ka Group is expand­ing its busi­ness toward the next 100 years by enhanc­ing its exist­ing prod­ucts and busi­ness­es, while accel­er­at­ing the research and devel­op­ment of next-gen­er­a­tion prod­ucts and beyond.

2. Out­line of Acqui­si­tion
Den­ka will acquire 51% of Icon’s shares from Nomad (the ”First Phase”) as a result of which Icon will become a sub­sidiary of Den­ka, and after two years of imple­men­ta­tion of the First Phase, Den­ka will acquire the remain­ing 49% of Icon’s shares, result­ing in Icon becom­ing a whol­ly owned sub­sidiary of Den­ka. Based on the agree­ment with Nomad, after the Acqui­si­tion, Icon will car­ry out research and devel­op­ment in the vac­cines and diag­nos­tic reagents busi­ness (the ”Tar­get Busi­ness”).

The imple­men­ta­tion of the First Phase is sched­uled to be made on August 20, 2015 after com­plet­ing the nec­es­sary pro­ce­dures for the Acqui­si­tion.

(1) Tar­get Com­pa­ny and Tar­get Busi­ness Icon, Vac­cines and Diag­nos­tic Reagents Busi­ness Com­mer­cial­iza­tion rights in the busi­ness­es oth­er than the above will be trans­ferred to Nomad.
(2) R&D Loca­tion Halle, Sach­sen-Anhalt, Fed­er­al Repub­lic of Ger­many
(3) Num­ber of Employ­ees 14 (as of the end of July 2015)
(4) Acqui­si­tion Amount Total of EUR 75 mil­lion in max­i­mum (approx­i­mate­ly, JPY10 bil­lion based on JPY135 per EUR)

(Note) The acqui­si­tion amount set out above is an esti­mat­ed amount, which may change sub­ject to price adjust­ment pre­scribed in the share trans­fer agree­ment.

3. Out­line of Icon

(1) Name Icon Genet­ics GmbH
(2) Loca­tion Halle, Sach­sen-Anhalt, Ger­many
(3) Title and Name of Rep­re­sen­ta­tive Prof. Dr. Yuri Gle­ba, CEO
(4) Details of Busi­ness Research and devel­op­ment, con­tract­ed research and pro­vi­sion of ser­vices for bio­phar­ma­ceu­ti­cals
(5) Amount of Cap­i­tal EUR 25 thou­sand
(6) Date of Incor­po­ra­tion 1999
(7) Major Share­hold­er and Stock­hold­ing Ratio 100% owned by Nomad
(8) Rela­tion­ship between Den­ka and Icon In March 2015, Den­ka is grant­ed an exclu­sive license by Icon to devel­op, man­u­fac­ture, use and sell CRP anti­bod­ies and norovirus anti­gens.
(9) Total Assets Approx­i­mate­ly EUR 995 thou­sand (for the year of 2014)
(10) Total Sales Approx­i­mate­ly EUR 1,915 thou­sand (for the year of 2014)

4. Out­line of Nomad

(1) Name Nomad Bio­science GmbH (2) Loca­tion Munich, Bay­ern, Ger­many (3) Title and Name of Rep­re­sen­ta­tive Prof. Dr. Yuri Gle­ba, CEO (4) Details of Busi­ness Research and devel­op­ment and pro­vi­sion of ser­vices for ener­gies, food-safe­ty, bio­ma­te­ri­als and agri­cul­tur­al char­ac­ters (5) Date of Incor­po­ra­tion 2008 (6) Rela­tion­ship between Den­ka and Nomad N/A

5. Future Prospects
The impact of the Acqui­si­tion on the con­sol­i­dat­ed results of Den­ka Group for the yeari end­ing on March 2016 will be min­i­mal and it is antic­i­pat­ed at this point of time that no change will be made on the con­sol­i­dat­ed busi­ness fore­casts for that year.
6. Ref­er­ence Infor­ma­tion

(1) What is mag­nI­CON®?
Icon’s mag­nI­CON® is a plant-based genet­ic mod­i­fi­ca­tion tech­nol­o­gy.

Using mag­nI­CON®, a pro­tein pro­duc­ing gene is insert­ed into a vec­tor*, which is a vehi­cle to deliv­er the rel­e­vant gene, and this vec­tor is intro­duced to the agrobac­teri­um. The gene-intro­duced agrobac­teri­um is mul­ti­plied by cul­ture. Then, the sub­ject plants are immersed in the gene-intro­duced agrobac­teri­um cul­tures and these infect­ed plants are grown to pro­duce the rel­e­vant pro­tein. mag­nI­CON® enhances the abil­i­ty of plants to pro­duce the rel­e­vant pro­teins by intro­duc­ing vec­tors that deliv­er pro­tein-pro­duc­ing genes.
*Vec­tor: a vehi­cle which can deliv­er to a host cell a gene of the pro­tein of inter­est which needs to be expressed.

(2) What is genet­ic mod­i­fi­ca­tion?
Genet­ic mod­i­fi­ca­tion means giv­ing a new nature to ani­mals or plants by incor­po­rat­ing spe­cif­ic genet­ic mate­r­i­al extract­ed from liv­ing crea­tures into plant cells.

(3) Safe­ty issues
The tra­di­tion­al method of man­u­fac­tur­ing pro­teins uses ani­mals, ani­mal cells or insect cells. Also, in the course of man­u­fac­tur­ing, raw mate­ri­als includ­ing ani­mal by-prod­ucts are often used. The inves­ti­ga­tion of the exter­nal spe­cial­ized insti­tu­tion has con­firmed that the safe­ty lev­els of plant-based pro­teins are much high­er than ani­mal-based pro­teins in respect of com­min­gling of dis­ease agents affect­ing humans.