Non-consolidated Financial Results for the Nine Months Ended September 30, 2021 [Japanese GAAP]

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Non-consolidated Financial Results

for the Nine Months Ended September 30, 2021

[Japanese GAAP]

November 5, 2021

Company name: Oncolys BioPharma Inc.

Stock exchange listing: Tokyo Stock Exchange

Code number: 4588

URL: http://www.oncolys.com

Representative: Yasuo Urata, President & CEO

Contact: Keiji Yoshimura, Vice President

Email: oncolys_information@oncolys.com

Scheduled date of filing quarterly securities report: November 5, 2021

Scheduled date of commencing dividend payments: ―

Availability of supplementary briefing material on quarterly financial results: No

Schedule of quarterly financial results briefing session: No

(Amounts of less than one million yen are rounded down.)

1. Financial Results for the Nine Months Ended September 30, 2021 (January 1, 2021 to September 30, 2021)

(Reference) Equity: As of September 30, 2021: ¥4,144 million As of December 31, 2020: ¥1,995 million

2. Dividends

Annual dividends

3. Financial Results Forecast for the Fiscal Year Ending December 31, 2021 (January 1, 2021 to December 31, 2021)

(% indicates changes from the previous corresponding period.)

(Note) Revision to the financial results forecast announced most recently: No

* Notes:

1. Accounting policies adopted specially for the preparation of quarterly financial statements: No
2. Changes in accounting policies, changes in accounting estimates and retrospective restatement
3. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
4. Total number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares): September 30, 2021: 17,341,100 shares
      December 31, 2020: 14,641,900 shares
   2. Total number of treasury shares at the end of the period:

September 30, 2021: 36,462 shares

December 31, 2020: 14,462 shares

3) Average number of shares during the period:

Nine months ended September 30, 2021: 16,770,384 shares

Nine months ended September 30, 2020: 14,356,563 shares

• These quarterly financial results are outside the scope of quarterly review by certified public accountants or an audit corporation.
• Explanation of the proper use of financial results forecast and other notes

(Note regarding forward-looking statements, etc.)

The earnings forecasts and other forward-looking statements herein are based on information available to the Company at the time of the release of these materials and certain assumptions deemed reasonable, and do not represent a commitment from the Company that they will be achieved. In addition, actual financial results, etc. may differ significantly due to a wide range of factors. For the assumptions used in forecasting financial results and notes regarding the use of financial forecasts, etc., please see "1. Qualitative Information on Quarterly Financial Results for the Period under Review (3) Explanation of Financial Results Forecast and Other Forward-looking Information" on page 4 of the supplementary material.

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1. Qualitative Information on Quarterly Financial Results for the Period Under Review

(1) Explanation of Business Results

Uncertainty about the future continued to prevail in the Japanese economy during the nine months ended September 30, 2021, as a state of emergency and priority preventative measures were issued in multiple prefectures in response to the renewed spread of COVID-19 led especially by the delta variant, first detected in India. On the other hand, the number of newly infected people trended downward and there were signs of recovery in production activity, as a result of the government measures taken to prevent infection and the promotion of vaccination, followed by additional measures and the economic recovery abroad.

Under these circumstances, Oncolys BioPharma Inc. (hereinafter "the Company") endeavored to increase management efficiency and actively expanded its research, development, and licensing activities in the drug discovery business. For details of the Company's activities, please refer to "3. Supplemental Information (1) Research and development activities."

The Company was previously composed of two reportable segments classified as the "pharmaceutical business" and the "diagnostic business." However, since more than 99% of net sales of the Company are from the pharmaceutical business and the trend is expected to continue, the Company changed the method of performance management and changed to a single segment of the "drug discovery business" from the first quarter of the fiscal year under review. Information by segment is therefore omitted.

In the drug discovery business during the nine months ended September 30, 2021, Chugai Pharmaceutical Co., Ltd. (hereinafter "Chugai"), with which the Company entered into a licensing agreement for the development of the Telomelysin virotherapy in April 2019 (hereinafter the "Agreement"), pushed ahead with the clinical trial in Japan of the treatment used in combination with radiation therapy for esophageal cancer as well as a clinical trial for hepatocellular cancer. However, Chugai, which was working on the solicitation of patients to participate in the "Phase I clinical trial in combination with chemoradiotherapy for esophageal cancer" and planning on "Phase I clinical trial in combination with atezolizumab, an anti-PD-L1 antibody, and chemoradiotherapy for head and neck cancer," decided to cancel both trials due to factors including delays in the manufacturing of Telomelysin investigational drugs, which the Company was responsible for and outsourced, and impact of case registration because of the number of has been increasing of COVID-19 patients.

Furthermore, as explained in "Announcement of Cancellation of Telomelysin Licensing Agreement" released on October 19, 2021, the Company and Chugai decided that "continuation of the development under the tie-up deal between the two companies may not lead to maximizing Telomelysin's product value" and, after considering the Company's future business strategy from a comprehensive perspective, agreed to cancel the Agreement. Also, both Chugai and the company emphasize that this decision was in no way related to the efficacy or the safety of Telomelysin.

The official date of cancellation of the Agreement, which will remain effective until October 2022 at the latest, will be decided after negotiations with Chugai. Therefore, the clinical trial being conducted by Chugai in Japan will be proceeded by Chugai, which is responsible for clinical trials, as long as the Agreement remains effective. The Company will continue to negotiate with Chugai to decide the share of manufacture and development costs for Telomelysin to be taken on by each company.

The Company decided to contract out the production of Telomelysin to Belgium's Henogen SA, which has a wealth of experience in manufacturing virus vectors, as the second contractor after Lonza Houston, Inc. of the United States, our existing contractor. This is aimed at enhancing the manufacturing framework for Telomelysin toward its commercialization and diversifying manufacturing locations to mitigate risks.

The Company now plans to work on its own to apply for approval for Telomelysin in Japan. Under this assumption, the Company will work to prepare pharmaceutical affairs and clinical development structures toward achieving the application for approval in 2024. The Company, however, intends to seek partners for Telomelysin's

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sales and distribution after its launch. As regards regions outside Japan, the Company will proceed with the clinical trial of Telomelysin under way in the United States while at the same time pursuing new opportunities for licensing agreements.

As regards OBP-2011 for the treatment of COVID-19, the Company confirmed its effectiveness against coronavirus variants identified in India and South Africa, respectively through in vitro experiments. As a result, its effectiveness was confirmed on all "Variants of Concern (VOC)" designated by the World Health Organization, namely: alpha (first detected in the United Kingdom), gamma (first detected in Brazil), delta (first detected in India), and beta (first detected in South Africa). In addition to these results, OBP-2011 exhibited a similar degree of effectiveness against viruses that cause the severe acute respiratory syndrome (SARS) and the Middle East respiratory syndrome (MERS), proving its effectiveness in suppressing the growth of a wide variety of coronaviruses. Furthermore, pharmacokinetic study results in rats and dogs demonstrated its oral absorbability.

The Company commissioned GMP manufacturing of formulations for investigational drugs to SPERA PHARMA, Inc. The Company is working on the development with Shin Nippon Biomedical Laboratories, Ltd. (hereinafter "SNBL"), with which the Company has concluded a joint research agreement on preclinical development, and Spera Nexus, Inc. (previously known as Iwaki Seiyaku Co., Ltd.), to whom the Company commissions GMP manufacturing of active pharmaceutical ingredients for investigational drugs, with an eye on applying for clinical trials by the end of the first half of 2022.

As a result, for the nine months ended September 30, 2021, net sales were ¥318,317 thousand (net sales of ¥207,611 thousand in the same period of the previous year), and operating loss was ¥963,649 thousand (operating loss of ¥1,167,504 in the same period of the previous year). In addition, the Company recorded interest income of ¥382 thousand, foreign exchange gains of ¥28,541 thousand, and other items as non-operating income, and interest expenses of ¥3,191 thousand, amortization of restricted stock remuneration of ¥28,116 thousand, share issuance costs of ¥11,007 thousand, and other items as non-operating expenses. As a result, ordinary loss was ¥976,891 thousand (ordinary loss of ¥1,185,938 thousand in the same period of the previous year), and loss was ¥979,679 thousand (loss of ¥1,545,408 thousand in the same period of the previous year).

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