Oncolys BioPharma : Non-consolidated Financial Results for the Three Months Ended March 31, 2023

NB: this is a summary translation of the press release original drafted in Japanese for the disclosure required in compliance with the TSE regulations.

Non-consolidated Financial Results

for the Three Months Ended March 31, 2023 [Japanese GAAP]

May 12, 2023

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: [e-mail]

Scheduled date of filing quarterly securities report: May 12, 2023

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 Three Months Ended March 31, 2023 (January 1, 2023 to March 31, 2023)

(1) Operating Results						(% indicates changes from the previous corresponding period.)
			Net sales			Operating profit			Ordinary profit			Profit
Three months ended		Million yen	%	Million yen	%		Million yen	%		Million yen	%
March 31, 2023		35	(81.9)		(325)	-		(323)	-		(323)	-
March 31, 2022		193	-		(384)	-		(349)	-		(328)	-
		Basic earnings		Diluted earnings
			per share				per share
Three months ended				Yen			Yen
March 31, 2023				(18.69)				-
March 31, 2022				(18.98)				-
(2) Financial Position
			Total assets			Net assets	Equity ratio
				Million yen		Million yen		%
As of March 31, 2023			2,280			1,835		80.1
As of December 31, 2022		2,650			2,159		81.2

(Reference) Equity: As of March 31, 2023: ¥1,827 million As of December 31, 2022: ¥2,151 million

2. Dividends

			Annual dividends
	1st	2nd	3rd	Year-end	Total
	quarter-end	quarter-end	quarter-end
Fiscal year ended	Yen	Yen	Yen	Yen	Yen
-	0.00	-	0.00	0.00
December 31, 2022
Fiscal year ending	-
December 31, 2023
Fiscal year ending
December 31, 2023		0.00	-	0.00	0.00
(Forecast)

(Note) Revision to the forecast for dividends announced most recently: No

3. Financial Results Forecast for the Fiscal Year Ending December 31, 2023 (January 1, 2023 to December 31, 2023)

Financial results forecast is not disclosed due to the difficulty of making reasonable estimates. For details, please see "1. Qualitative Information on Quarterly Results for the Period under Review (3) Explanation of Financial Results Forecast and Other Forward-looking Information on page 2 of the supplementary material.

* 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):

March 31, 2023: 17,405,200 shares

December 31, 2022: 17,405,200 shares

1. Total number of treasury shares at the end of the period: March 31, 2023: 86,238 shares
   December 31, 2022: 82,238 shares
2. Average number of shares during the period:

Three months ended March 31, 2023: 17,319,139 shares

Three months ended March 31, 2022: 17,332,511 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 2 of the supplementary material.

Table of Contents
1. Qualitative Information on Quarterly Financial Results for the Period under Review	2
(1)	Explanation of Business Results	2
(2)	Explanation of Financial Position	2
(3)	Explanation of Financial Results Forecast and Other Forward-looking Information	2
2. Quarterly Financial Statements and Primary Notes	4
(1)	Quarterly Balance Sheets	4
(2)	Quarterly Statements of Income	6
	Three Months Ended March 31	6
(3)	Notes to Quarterly Financial Statements	7
	(Notes on going concern assumption)	7
	(Notes in the case of significant changes in shareholders' equity)	7
	(Segment information, etc.)	7
	(Revenue recognition)	7
3. Supplemental Information	8
(1)	Research and development activities	8

1

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

1. Explanation of Business Results

During the three months ended March 31, 2023, the Japanese economy was constrained in its recovery from the COVID-19 pandemic, having been unable to keep pace with historic price hikes despite the March announcement of the first significant wage increase in 30 years, and the Bank of Japan's Tankan survey for March, released in April, showed a fifth consecutive quarter of deterioration in the manufacturing sector. In addition, the outlook for the global economy is becoming increasingly uncertain due to the prolonged crisis in Ukraine and a substantial economic deceleration in countries around the world due to monetary tightening by the U.S. Federal Reserve Board (FRB) and other major central banks.

Under these circumstances, the Company has been pursuing a vision of "Dedicating power to future cancer treatments, and leaving our footprint in the history of cancer treatment through those achievements," thus striving to increase managerial efficiency and actively expand research, development, and licensing activities.

In particular, the Company is promoting research, development, and licensing activities with the aim of "virus drug discovery" within the business fields of "virotherapy for cancer" and "drugs for the treatment of serious viral infectious diseases," with a focus on Telomelysin (OBP-301), a virotherapy for cancer, and OBP-2011 for the treatment of COVID-19. In addition, concerning OBP-601 (Censavudine), a nucleoside reverse transcriptase inhibitor, Transposon Therapeutics, Inc. (hereinafter "Transposon") is conducting multiple clinical trials in Europe and the U.S. entirely at its own expense based on a license agreement.

For details of the Company's activities, please refer to "3. Supplemental Information (1) Research and development activities."

For the three months ended March 31, 2023, net sales were ¥35,000 thousand (net sales of ¥193,125 thousand in the same period of the previous fiscal year), and operating loss was ¥325,578 thousand (operating loss of ¥384,747 thousand in the same period of the previous fiscal year). In addition, the Company recorded interest income of ¥149 thousand and foreign exchange gains of ¥3,192 thousand as non-operating income, and interest expenses of ¥855 thousand as non-operating expenses. As a result, ordinary loss was ¥323,092 thousand (ordinary loss of ¥349,628 thousand in the same period of the previous fiscal year). Moreover, gain on sale of non-current assets of ¥136 thousand was recorded as extraordinary profit. As a result, net loss was ¥323,691 thousand (net loss of ¥328,960 thousand in the same period of the previous fiscal year).

(2) Explanation of Financial Position

Assets at the end of the first quarter of the fiscal year under review were ¥2,280,737 thousand (14.0% decrease compared with the end of the previous fiscal year), primarily due to a decrease in cash and deposits. Liabilities were ¥445,159 thousand (9.5% decrease compared with the end of the previous fiscal year), mainly on account of a decrease in accounts payable ˗ other. Net assets were ¥1,835,577 thousand (15.0% decrease compared with the end of the previous fiscal year), due to net loss incurred, as well as other factors.

(3) Explanation of Financial Results Forecast and Other Forward-looking Information

The Company still has a small stable revenue base, and our financial results fluctuate greatly depending on contractual lump-sum payments from the conclusion of new contracts and milestone revenue payments generated from licensees achieving events. There is also a risk that disclosing our full-year earnings forecast for the fiscal year ending December 31, 2023 could affect our negotiations on economic terms for the Telomelysin domestic distribution partnership agreement planned for 2023, as well as our negotiations on terms for the Telomelysin collaborative research with a major pharmaceutical company in the United States that markets an immune checkpoint inhibitor.

For these reasons, we believe that it is difficult to calculate an appropriate and reasonable figure for the earnings forecast at this time due to the many undetermined factors that will affect our business performance, and

therefore, we refrain from disclosing the forecast. In addition, since the Company manages its performance 2