| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥21392.5B | ¥19123.2B | +11.9% |
| Operating Income | ¥3826.3B | ¥410.4B | +832.4% |
| Profit Before Tax | ¥3765.9B | ¥312.4B | +25.1% |
| Net Income | ¥2915.8B | ¥507.5B | +474.6% |
| ROE | 15.9% | 3.4% | - |
For the fiscal year ended March 2026 (FY2026), Revenue was ¥2兆1,392B (YoY +¥2,269B +11.9%), Operating Income was ¥3,826B (YoY +¥3,416B +832.4%), Ordinary Income was ¥5,131B (YoY +¥819B +19.0%), and Net Income was ¥2,916B (YoY +¥2,408B +474.6%), delivering a substantial profit recovery. The sharp rebound in Operating Income was driven by a reversal of large impairment and other charges recorded in the prior year (Other expenses: prior ¥2,358B → current ¥724B) combined with growth of core products, expanding the operating margin from 2.1% to 17.9% (+1,575bp). Gross margin remained high at 80.9%. SG&A was ¥8,603B, improving to 40.2% of sales (-2.1pt). R&D expense was ¥3,148B (14.7% of sales), maintaining industry-standard investment levels. Key strategic product PADCEV reached ¥2,212B (+34.8%) and XTANDI ¥9,608B (+5.3%) driven by global deployment; Other products totaled ¥7,496B (+18.0%), indicating diversification of growth drivers. Operating Cash Flow (OCF) was ¥5,602B (1.92x Net Income), Free Cash Flow was ¥4,935B, enabling reduction of long-term borrowings from ¥5,649B → ¥3,200B to drive de-leveraging. Equity Ratio improved to 51.3% and cash was ¥2,816B, strengthening financial soundness. Inventory built to ¥3,310B with days inventory outstanding at 296 days (high), and trade receivables increased to ¥7,468B, making working capital management a focus for the next period.
[Revenue] Revenue reached ¥2兆1,392B (YoY +11.9%), achieving double-digit growth. Core product XTANDI was ¥9,608B (+5.3%), representing 44.9% of sales and achieving expected peak levels globally. Among strategic products, PADCEV grew strongly to ¥2,212B (+34.8%); Other major products grew to ¥7,496B (+18.0%) and drove overall growth. By region: U.S. ¥9,457B (44.2% of sales +8.5%), Japan ¥3,171B (14.8% +13.2%), Other ¥8,765B (41.0% +15.3%) expanded in a balanced manner, aided by favorable FX. Major customers McKesson ¥3,125B and Cencora ¥3,071B (combined 28.9% of sales) remain concentrated, while product portfolio diversification is gradually progressing. Cost of goods sold was ¥4,084B, yielding a gross margin of 80.9% (slightly down from 81.7% prior year) but maintaining high profitability.
[Profitability] Operating Income was ¥3,826B (+832.4%), improving operating margin from 2.1% to 17.9% (+1,575bp). SG&A was ¥8,603B (+2.1%), restrained relative to revenue growth (+11.9%), improving SG&A ratio by 2.1pt to 40.2%. R&D expense was ¥3,148B (▲5.5%) but remained 14.7% of sales, continuing industry-standard investment to enhance pipeline value. Other expenses were ¥724B (prior ¥2,358B, ▲69.3%) and impairment losses were compressed to ¥542B (prior ¥1,876B, ▲71.1%), the largest contributors to the profit swing. Ordinary Income was ¥5,131B (+19.0%); non-operating items were neutral (financial income ¥80B, financial expenses ¥141B, net ▲¥61B), reflecting a return to business underlying earnings power. Profit Before Tax was ¥3,766B; after corporate taxes of ¥850B (effective tax rate 22.6%), Net Income reached ¥2,916B (+474.6%). The gap between Ordinary Income and Net Income of ▲¥2,215B reflects primarily one-off items such as Other expenses and impairment losses, but normalization from last year’s large losses contributed to the revenue-and-profit expansion.
The Group operates a single Pharmaceuticals segment; therefore, segment-level operating profit analysis is not available. Product- and region-level sales composition is provided below. By product, XTANDI at ¥9,608B (44.9% of sales) remains the largest core business, growing +5.3% YoY. PADCEV was ¥2,212B (10.3% +34.8%), Prograf ¥2,077B (9.7% +3.3%), and Other products ¥7,496B (35.0% +18.0%) supported overall revenue growth. By region, U.S. ¥9,457B (44.2%) was largest, Japan ¥3,171B (14.8%), and Other ¥8,765B (41.0%), indicating geographic diversification. XTANDI dependency remains high, but growth of PADCEV and other strategic products is gradually diversifying the portfolio. The operating margin of 17.9% demonstrates a high-profit model, with improvement in SG&A ratio to 40.2% contributing to overall margin expansion.
Profitability improved substantially: ROE 17.4% (prior 3.3%), Operating Margin 17.9% (prior 2.1%) normalized after prior-year one-off losses. Net income margin recovered to 13.6% (prior 2.7%). ROA on an Ordinary Income basis rose to 10.9% (prior 0.9%); combined with total asset turnover of 0.60, asset efficiency is in the normal range. Cash quality is sound with OCF/Net Income 1.92x, indicating adequate cash backing for profits. Free Cash Flow was ¥4,935B, significantly exceeding CapEx ¥577B and dividends ¥1,361B. Investment efficiency measured as CapEx/Depreciation was low at 0.30x, with growth investment shifting toward IP acquisitions and partnerships (intangible asset acquisitions ¥269B). Financial soundness: Equity Ratio 51.3% (prior 45.3%), current ratio ~117%, and financial leverage reduced to 1.95x following long-term debt reduction. R&D intensity at 14.7% aligns with industry norms, sustaining pipeline enhancement.
Operating Cash Flow was ¥5,602B (prior ¥1,945B, +188.0%), demonstrating strong cash generation at 1.92x Net Income of ¥2,916B. Operating CF subtotal (pre-working-capital changes) was ¥6,588B, supported by depreciation & amortization ¥1,946B and impairment losses ¥542B as non-cash items. In working capital, inventories ▲¥162B and trade receivables ▲¥638B increased, partly offset by customer deposit liabilities +¥433B and other working capital +¥644B, and corporate tax payments ▲¥986B, resulting in robust OCF. Investing CF was ▲¥667B, mainly due to tangible fixed asset acquisitions ▲¥577B and intangible asset acquisitions ▲¥269B, offset partially by interest/dividend receipts ¥60B and other investing inflows ¥118B. Financing CF was ▲¥4,048B, driven by repayment of short-term borrowings/CP ▲¥1,856B, long-term debt repayments ▲¥818B, and dividend payments ▲¥1,361B; there were no proceeds from bond issuance or new long-term borrowings, reflecting de-leveraging. Including FX translation +¥45B, Cash and Cash Equivalents increased from ¥1,884B to ¥2,816B (+¥932B). Free Cash Flow was ¥4,935B, providing ¥3,997B surplus after covering dividends and CapEx, supporting a “strong” cash generation assessment.
Ordinary Income of ¥5,131B vs Net Income ¥2,916B shows a gap of ¥2,215B, primarily due to Other expenses ¥724B, impairment losses ¥542B (one-off items), and corporate taxes ¥850B. In the prior year, Other expenses were ¥2,358B and impairment losses ¥1,876B, and tax benefits amounted to +¥195B (deferred tax asset recognition, etc.), so the current period reflects normalization of one-off charges and tax burden (effective tax rate 22.6%), returning to underlying earnings power. Non-operating income was limited (financial income ¥80B, other income ¥328B, representing 1.9% of Revenue); non-operating expenses were neutral (financial expenses ¥141B, equity-method losses ¥18B). Accrual quality is high as OCF ¥5,602B substantially exceeds Net Income ¥2,916B; excluding non-cash items (depreciation & impairment), working capital changes also support healthy earnings quality. The increase in customer deposit liabilities +¥433B supports revenue recognition and is not problematic; increases in inventory and receivables are within acceptable ranges for business expansion, though inventory days of 296 remain high and warrant monitoring.
Full-year guidance: Revenue ¥2,220B, Operating Income ¥3,950B, Net Income ¥3,000B. Against current results, achievement rates are: Revenue 96.4% (+¥808B), Operating Income 96.9% (+¥124B), Net Income 97.2% (+¥84B), indicating landing broadly on plan. With a standard progress rate of 100%, Revenue, Operating Income, and Net Income are slightly short at 96–97%, but given recovery from prior-year one-off losses, underlying earnings power appears as expected. No forecast revisions were disclosed; the initial plan was maintained. The ~3–4% shortfall vs standard progress is attributable to anticipated Q4 increases in SG&A, fluctuations in R&D spending, and seasonal inventory/receivables buildup. Order backlog metrics are not disclosed in pharmaceuticals, but prescription trends for XTANDI and PADCEV and clinical trial progress will determine future revenue visibility. The current results can be seen as laying the foundation toward the FY2026 plan target (Revenue > ¥2.2 trillion and core Operating Income > ¥600 billion).
Annual dividend was ¥78 per share (interim ¥39, year-end ¥39). With Net Income ¥2,916B, total dividends were ¥1,339B, implying a payout ratio of 48.4% (dividends-only basis). This represents a large increase from prior-year dividend of ¥37 to ¥78 (+¥41), reflecting enhanced returns alongside earnings growth. Share buybacks were limited at ¥7B; Total Return Ratio (dividends ¥1,339B + buybacks ¥7B) / Net Income ¥2,916B = 48.8%. With Free Cash Flow ¥4,935B vs dividends ¥1,361B, FCF coverage was 3.63x, indicating strong dividend sustainability. Equity Ratio 51.3% and OCF/Net Income 1.92x demonstrate robust financial and cash-generation capacity; cash ¥2,816B supports continuation of stable dividends and potential phased increases. FY2026 forecast dividend is ¥80 (+¥2); based on next-period Net Income forecast ¥3,000B, the payout ratio would be 47.7%, maintaining current levels. Dividend policy aims for gradual increases linked to profit growth, assessed as sustainable.
[Short-term]
[Long-term]
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 17.4% | -19.7% (-58.1%–4.6%) | +37.1pt |
| Operating Margin | 17.9% | -94.2% (-358.4%–8.6%) | +112.1pt |
| Net Income Margin | 13.6% | -101.5% (-373.7%–5.9%) | +115.1pt |
Profitability materially exceeds the industry median, reflecting normalization from prior-year one-off losses and an advantageous revenue structure within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 11.9% | -0.6% (-22.4%–13.3%) | +12.5pt |
Revenue growth outperforms the industry median, driven by core product expansion and growth of strategic products.
※ Source: Company compilation
Product concentration risk: High dependence on XTANDI (44.9% of sales); U.S. IRA implementation (Jan 2027) is expected to reduce FY2026 revenue by approximately ¥500B. Competition and patent expirations could directly impact revenues. While PADCEV and other strategic products are accelerating diversification, XTANDI dependence remains in the short term.
Inventory & working capital risk: Inventories at ¥3,310B with days inventory outstanding of 296 are high, posing risk of valuation losses from supply-demand imbalance or product obsolescence. Trade receivables of ¥7,468B are rising, and high customer concentration toward McKesson/Cencora (28.9% of sales) increases credit risk and potential changes in terms affecting liquidity. Optimization of working capital is a priority.
Intangible assets & goodwill risk: Intangible assets ¥9,969B (27.9% of total assets) and goodwill ¥4,412B (24.1% of equity) indicate high reliance on IP assets; development delays, clinical failures, or market changes could trigger impairment. Prior-year impairment of ¥1,876B underscores the importance of regular impairment testing and portfolio updates.
Reversal of one-off losses and normalization of earnings power: Prior-year large impairment and Other expenses (total ¥4,234B) decreased substantially to ¥1,266B this year, improving Operating Margin from 2.1% to 17.9%. Improvement in SG&A ratio to 40.2% and SMT-driven cost optimization of ¥65B supported profitability; ROE recovered to 17.4%. The ability of strategic product growth to offset XTANDI exclusivity expiry will be a focus next period.
Strong cash generation and financial repair: OCF ¥5,602B (1.92x Net Income), Free Cash Flow ¥4,935B, and reduction of long-term debt from ¥5,649B → ¥3,200B demonstrate progress in de-leveraging. Equity Ratio 51.3% and cash ¥2,816B reinforce financial strength; dividend ¥80 (payout ratio 47.7%) and FCF coverage 3.63x indicate substantial shareholder return capacity. Optimal allocation of surplus cash (growth investment, enhanced returns, M&A) is key to improving capital efficiency.
Balancing pipeline value enhancement with inventory operations: PoC achievement and Phase III starts for setidegrasib and ASP2138 and PADCEV label expansion support future growth, but high inventory days (296) raise quality alerts (stagnation/obsolescence). With R&D intensity at 14.7% and a substantial intangible asset base (27.9% of total assets), balancing continued pipeline investment against impairment risk is a central investment consideration.
This report is an AI-generated earnings analysis synthesized from XBRL filing data and PDF earnings presentation materials. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public filings. Investment decisions are your own responsibility; consult a professional advisor as needed.