| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥768.7B | ¥940.4B | -18.3% |
| Operating Income / Operating Profit | ¥-9.0B | ¥210.3B | +121.1% |
| Ordinary Income | ¥-2.1B | ¥212.8B | +113.8% |
| Net Income | ¥21.4B | ¥139.4B | -84.6% |
| ROE | 1.5% | 9.1% | - |
The fiscal year ended March 2026 results show Revenue ¥768.7B (YoY -¥171.6B -18.3%), Operating Income ¥-9.0B (YoY -¥219.3B +121.1%), Ordinary Income ¥-2.1B (YoY -¥214.9B +113.8%), and Net Income attributable to owners of the parent ¥21.4B (YoY -¥118.0B -84.6%). The company experienced revenue decline and turned to operating and ordinary losses, with Net Income also sharply down. The primary cause was a steep decline in pharmaceutical license contract income (Prior year ¥204.2B → This period ¥17.8B, approx. -¥186B), contracting the top line while SG&A increased by ¥34.0B YoY, producing pronounced operating deleverage. Special gains of ¥35.1B (gain on sale of investment securities ¥20.2B, gain on sale of fixed assets ¥13.7B, etc.) secured a final-period profit, but highlighted the fragility of recurring earnings. Operating margin was -1.2% (prior +22.4%), Net margin was 2.8% (prior +14.8%), and Gross margin was 52.0% (prior 62.3%), with profitability metrics deteriorating across the board.
Revenue was ¥768.7B (YoY -18.3%), a substantial decline. By segment, the core Pharmaceutical Business (Drugs) declined to ¥743.3B (-18.8%). Within this, product and goods sales were ¥725.5B (prior ¥711.4B) with a slight increase, while license contract income plunged to ¥17.8B (prior ¥204.2B), down roughly ¥186B and driving most of the revenue decline. Real estate business remained resilient at ¥25.4B (+2.5%). By region, Japan was ¥640.3B (prior ¥674.3B), representing 83.3% of sales and remaining the core; Europe collapsed to ¥0.9B (prior ¥181.5B), while North America expanded substantially to ¥94.2B (prior ¥41.3B), altering the sales mix. Gross margin fell to 52.0% (prior 62.3%), down 1,030bp, with changes in the mix of products and licenses pressuring profitability.
Cost of sales rose to ¥368.8B (prior ¥355.0B), reducing gross profit to ¥399.9B (prior ¥585.3B). SG&A increased to ¥408.9B (prior ¥375.0B, +9.0%); R&D expense was ¥205.9B (26.8% of sales, prior ¥187.3B), reflecting continued investment, resulting in Operating Income of ¥-9.0B (prior ¥210.3B), a swing to loss. Non-operating income included dividend income ¥5.8B and interest income ¥2.8B totaling non-operating income ¥9.7B, while non-operating expenses of ¥2.7B (including foreign exchange losses ¥1.7B) were recorded, leading to Ordinary Income of ¥-2.1B (prior ¥212.8B), a loss. Special gains were ¥35.1B (gain on sale of investment securities ¥20.2B, gain on sale of fixed assets ¥13.7B) and special losses were ¥9.9B (impairment loss ¥8.4B), yielding Profit before tax ¥23.1B and Income taxes ¥1.7B, resulting in Net Income ¥21.4B (prior ¥139.4B, -84.6%). In summary, the company delivered lower revenue and operating losses, but one-off asset sale gains produced a final-period profit.
The Pharmaceutical Business (Drugs) recorded Revenue ¥743.3B (YoY -18.8%) and Operating Loss ¥-22.8B (Operating margin -3.1%), a substantial deterioration. The prior year recorded Operating Income ¥196.6B (margin 21.5%), implying a YoY decline of ¥-219.4B. The main drivers were the precipitous decline in license contract income (approx. -¥186B) and operating deleverage from increased R&D and SG&A. The Real Estate Business posted Revenue ¥25.4B (+2.5%) and Operating Income ¥13.8B (Operating margin 54.1%), maintaining high profitability and acting as a near-flat support to consolidated earnings. The Pharmaceutical Business accounts for 96.7% of sales, so its earnings volatility drives overall company performance.
Profitability: Operating margin was -1.2% (prior +22.4%), down 23.6pt; Net margin was 2.8% (prior +14.8%), down 12.0pt. Gross margin contracted to 52.0% (prior 62.3%), -10.3pt, due to product/license mix changes and pricing pressure. ROE declined to 1.5% (prior 9.4%); DuPont decomposition shows deterioration from lower Net margin and decreased total asset turnover (0.431x, prior 0.486x) alongside reduced financial leverage (1.21x, prior 1.27x). ROA was -0.1% (prior +11.7%). R&D was ¥205.9B, or 26.8% of sales (prior 19.9%), maintaining high investment levels. Cash quality: Operating Cash Flow (OCF) turned negative to ¥-110.8B (prior +¥297.8B), and the OCF/Net Income ratio was -5.17x vs Net Income ¥21.4B, indicating very weak cash realization of earnings. The main causes were timing of tax payments (Income taxes paid -¥106.5B) and working capital deterioration (increase in trade receivables +¥18.4B, decrease in trade payables -¥7.7B). Working capital cycle: DSO 92 days, DIO 189 days, DPO 36 days, CCC 208 days, all worsening YoY and showing deteriorated inventory turnover and receivables collection efficiency. Investment efficiency: Capital expenditures ¥30.0B (3.9% of sales), depreciation ¥30.6B roughly in line. Intangible investment ¥24.3B added to development assets. ROIC (NOPAT / Invested Capital) was -0.8%, negative due to operating loss and sharply reduced capital efficiency. Financial soundness: Equity Ratio was 82.8% (prior 79.0%), extremely high; Current Ratio 452.1%, Quick Ratio 416.2%, indicating strong liquidity. Interest-bearing debt was ¥38.5B (short-term borrowings only), and cash & deposits ¥447.1B plus short-term securities ¥59.9B totaled ¥507.0B, yielding Net Cash +¥468.5B and effectively debt-free operations. Debt/Equity was 2.5%, Debt/EBITDA 1.78x, indicating very low financial risk.
OCF was ¥-110.8B (prior +¥297.8B), a large negative. Operating cash flow subtotal (before working capital changes) was ¥-12.3B, reflecting operating loss. Working capital deterioration drivers included Income taxes paid -¥106.5B (prior -¥8.4B) as a timing factor, plus increased trade receivables +¥18.4B and decreased trade payables -¥7.7B causing cash outflow. Investing cash flow was +¥3.1B (prior -¥196.5B), a net inflow due to proceeds from sale of tangible fixed assets +¥31.4B and sale of investment securities +¥31.2B exceeding capital expenditures -¥30.0B and intangible asset investment -¥24.3B. Free Cash Flow was ¥-107.6B (prior +¥101.3B), a large deficit; dividend payments -¥64.9B and share buybacks -¥23.4B could not be covered, and financing cash flow was cash outflow -¥88.4B (prior -¥53.7B). Consequently, Cash and cash equivalents decreased by ¥-193.8B, ending balance ¥507.1B. OCF/EBITDA was -5.13x, indicating very weak short-term cash generation.
Recurring operating earnings are weak: Operating Income ¥-9.0B and Ordinary Income ¥-2.1B, both negative, showing a large deterioration in recurring earnings power. Non-operating income totaled ¥9.7B (dividend income ¥5.8B, interest income ¥2.8B, etc.), or 1.3% of sales, limited in scale; after non-operating expenses ¥2.7B (including foreign exchange losses ¥1.7B), the net non-operating contribution was marginally positive. Special gains ¥35.1B exceed Net Income ¥21.4B, with gain on sale of investment securities ¥20.2B and gain on sale of fixed assets ¥13.7B as one-off contributors to the final profit. After special losses ¥9.9B (impairment loss ¥8.4B, etc.), Profit before tax ¥23.1B remains heavily dependent on special items. Comprehensive income ¥38.1B exceeds Net Income ¥21.4B and includes Other Comprehensive Income ¥16.7B (foreign currency translation adjustments ¥8.1B, valuation difference on available-for-sale securities ¥5.5B, retirement benefit adjustments ¥3.1B). The accrual ratio ((Net Income - OCF) / Total Assets) = 7.4% is neutral territory, but because OCF is negative, earnings quality is weak. The large shortfall of OCF relative to Net Income is due to timing factors (tax payments) and deteriorated working capital efficiency; improving recurring cash generation is urgent.
The company plan for the fiscal year ending March 2027 projects Revenue ¥899.0B (YoY +17.0%), Operating Income ¥79.0B (Operating margin 8.8%), Ordinary Income ¥86.0B (Ordinary margin 9.6%), and Net Income ¥65.0B (Net margin 7.2%), expecting a V-shaped recovery. Versus this period, Revenue would increase by ¥130.3B (+17.0%), Operating Income would recover by ¥88.0B to profitability, and Net Income would rise ¥43.6B (+203.7%). Achieving this assumes recovery of license income, control over SG&A and R&D, and working capital efficiency improvements. Progress rates at period-end: Revenue 85.5% of plan, Operating Income behind plan (loss), Net Income achieved 32.9% of plan, implying large recovery expected in H2. Dividend guidance is Annual ¥95.0 (Final ¥95.0), halved from this period’s ¥190.0, and the payout ratio relative to planned Net Income ¥65.0B is 55.4%, a normalization toward an appropriate level.
This period’s dividend was Annual ¥190.0 (Final ¥95.0, Interim ¥95.0; interim included special dividend ¥40.0), producing a payout ratio of 335.9% (Total dividends ¥72.0B vs Net Income ¥21.4B, on an issued shares basis), exceeding underlying earnings power. The calculated total dividend amount is ¥72.0B, but the Cash Flow statement shows dividends paid ¥64.9B (financing cash flow), reflecting timing differences. Share buybacks of ¥23.4B were executed, and combined with dividends total shareholder returns were approx. ¥88.3B (Total Return Ratio approx. 412%), substantially exceeding Free Cash Flow ¥-107.6B. These returns were enabled by ample liquidity—Cash & deposits ¥447.1B and short-term securities ¥59.9B totaling ¥507.0B—but sustainability requires recovery in Operating Cash Flow. The company plan for FY2027 adjusts annual dividend to ¥95.0 (payout ratio 55.4%), normalizing returns in line with earnings recovery.
Volatility of license income: Pharmaceutical license contract income fell steeply from ¥204.2B in the prior year to ¥17.8B this period, reducing gross margin by -10.3pt and worsening Operating Income by -¥219.3B. The timing of recognition for license/milestone income is irregular, representing the largest risk to topline and profitability. Regionally, Europe sales fell from ¥181.5B to ¥0.9B, which may reflect changes in partnership structures or market access.
Deterioration of working capital efficiency: DSO 92 days (+19 days YoY), DIO 189 days (+10 days), CCC 208 days (+33 days) have significantly worsened, being the main cause of OCF -¥110.8B. Income taxes paid -¥106.5B is a timing factor, but increased trade receivables +¥18.4B and decreased trade payables -¥7.7B suggest worsening collection and payment terms, posing liquidity risk. CCC 208 days is high for a pharmaceutical company; improving inventory turnover and receivables collection is urgent.
Control of SG&A: SG&A rose to ¥408.9B (YoY +¥34.0B, +9.0%) despite revenue decline, causing pronounced operating deleverage. R&D remains high at ¥205.9B (26.8% of sales), but with falling sales SG&A ratio jumped to 53.2% (prior 39.9%), and fixed cost burdens pressure profitability. The company’s plan to recover Operating Income assumes SG&A growth rate is kept below sales growth rate.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -1.2% | -94.2% (-358.4%–8.6%) | +93.1pt |
| Net Margin | 2.8% | -101.5% (-373.7%–5.9%) | +104.3pt |
Profitability metrics materially exceed the industry median, placing the company relatively well within the pharmaceutical industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -18.3% | -0.6% (-22.4%–13.3%) | -17.7pt |
Revenue growth lags the industry median, temporarily depressed by the sharp decline in license income.
※ Source: Company compilation
Turn to operating loss and dependence on one-off gains: Operating Income ¥-9.0B and Ordinary Income ¥-2.1B indicate a major deterioration in recurring earnings. The final profit ¥21.4B depends on Special gains ¥35.1B (gain on sale of investment securities ¥20.2B, gain on sale of fixed assets ¥13.7B), making recovery of recurring earnings the top priority. License income declined from ¥204.2B to ¥17.8B (~-¥186B), so normalization of license/milestone income is a prerequisite for achieving the company plan of Revenue +17.0%.
Significant deterioration in working capital efficiency and OCF turning negative: OCF ¥-110.8B lags Net Income ¥21.4B, with OCF/Net Income -5.17x, indicating severe issues converting profit to cash. While Income taxes paid -¥106.5B is a timing factor, DSO 92 days, DIO 189 days, CCC 208 days show worsening cycles requiring structural improvement. Dividend payout ratio 336% and Total Return Ratio 412% indicate shareholder returns have far exceeded fundamental earnings, so early recovery of OCF is essential for sustainability.
Continued R&D investment and timing of revenue realization: R&D expense of ¥205.9B (26.8% of sales) maintains the medium-to-long-term growth foundation. However, SG&A increased by ¥34.0B YoY, causing operating deleverage in a declining revenue environment. The company plan projects Operating Income ¥79.0B (Operating margin 8.8%) for a V-shaped recovery, but the degree of license income recovery and SG&A control will be the keys. Financial foundation is very strong—Equity Ratio 82.8% and Net Cash +¥468.5B—so short-term funding risk is limited, but returning to operating profitability and improving working capital efficiency are top priorities.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are compiled by the company based on publicly available financial statements and are provided for reference. Investment decisions are your responsibility; consult a professional advisor as appropriate.