| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥5157.9B | ¥4868.7B | +5.9% |
| Operating Income / Operating Profit | ¥922.4B | ¥597.5B | +54.4% |
| Pre-tax Profit | ¥926.5B | ¥593.3B | +56.2% |
| Net Income | ¥699.1B | ¥501.7B | +39.4% |
| ROE | 8.2% | 6.4% | - |
For the fiscal year ended March 2026 (this period), Revenue was ¥5157.9B (YoY +¥289.1B, +5.9%), Operating Income was ¥922.4B (YoY +¥324.9B, +54.4%), Ordinary Income was ¥932.7B (YoY +¥328.1B, +55.3%), and Net income attributable to owners of the parent was ¥697.7B (YoY +¥197.2B, +39.4%), delivering significant top-line and bottom-line growth. Gross profit margin improved to 72.5% (up +2.9pt from 69.6% a year ago) and operating margin improved to 17.9% (up +5.6pt from 12.3%), reflecting substantially improved profitability. High-margin royalty revenue expanded to ¥1731.8B (33.6% of sales), led by ¥1223B related to Opdivo from Bristol-Myers Squibb and ¥295B related to Keytruda from Merck. SG&A decreased to ¥1236.9B (-1.6%) while R&D remained high at ¥1470.4B (28.5% of sales), demonstrating continued aggressive investment. Operating Cash Flow (OCF) was ¥1368.2B (YoY +65.9%), 1.96x net income, and Free Cash Flow (FCF) was ¥969.6B, indicating robust cash generation. Equity Ratio was 76.9%, interest-bearing debt was ¥1103.9B (long-term borrowings reduced by ¥300B), maintaining a conservative financial foundation while ROE improved to 8.5%.
[Revenue] Revenue of ¥5157.9B (+5.9%) comprised product and merchandise sales of ¥3426.1B (+3.6%) and royalties & other of ¥1731.8B (+10.9%). Royalty income was driven by Opdivo-related ¥1223B (up ¥93B from ¥1130B a year ago) and Keytruda-related ¥295B (up ¥31B from ¥264B), improving the sales mix through higher-margin external revenue. By region, Japan declined to ¥2870.9B (-2.8%) while the U.S. grew to ¥1970.6B (+18.0%) and Europe to ¥123.2B (+64.2%), with an increased overseas share supporting company-wide growth. Major customer sales to BMS were ¥1367.0B (+9.9%), indicating continued value creation with external partners.
[Profitability] Cost of sales decreased to ¥1417.2B (-4.2%), expanding gross profit to ¥3740.7B (+10.4%) and improving gross margin to 72.5% (up +2.9pt). SG&A decreased in absolute terms to ¥1236.9B (-1.6%), reflecting effective cost control. R&D expense was ¥1470.4B (-1.8%), maintaining an R&D ratio of 28.5% and continuing investment for medium- to long-term growth. An increase in other expenses to ¥120.1B (up ¥72.6B from ¥47.5B) was a temporary drag, but Operating Income still rose substantially to ¥922.4B (+54.4%). Financial income of ¥39.6B and financial expenses of ¥35.4B largely offset, resulting in Ordinary Income of ¥932.7B (+55.3%). After corporate taxes of ¥227.4B (effective tax rate 24.5%), profit attributable to owners of the parent was ¥697.7B (+39.4%), achieving a net margin of 13.5% and concluding the year with higher revenue and profit.
[Profitability] Operating margin improved to 17.9% (up +5.6pt from 12.3%), and net margin improved to 13.5% (up +3.2pt from 10.3%), representing a significant uplift in margins. ROE improved to 8.5% (up +2.1pt from 6.4%), indicating better capital efficiency. Gross margin at 72.5% (up +2.9pt) was mainly driven by an improved revenue mix due to higher royalty ratio. [Cash Quality] OCF of ¥1368.2B is 1.96x net income, aided by inventory reduction of ¥189.6B and working capital improvement. OCF before working capital changes was ¥1528.3B, and actual OCF of ¥1368.2B implies a cash conversion of 89.5%, reflecting favorable working capital dynamics. FCF of ¥969.6B covers total dividends of ¥375.3B 2.58x, indicating sustainable cash generation. [Investment Efficiency] Total asset turnover was 0.47x (flat from 0.46x), where accumulated intangible assets of ¥3535.8B (32.0% of total assets) structurally depress turnover. R&D investment ratio remains high at 28.5%, reflecting ongoing resource allocation for future growth. [Financial Health] Equity Ratio improved to 76.9% (up +3.4pt from 73.5%), long-term borrowings were ¥750.0B (down ¥300.0B from ¥1050.0B), markedly reducing interest-bearing debt and enhancing financial flexibility. Current ratio is 286.2% (prior year 306.9%), cash & deposits are ¥2370.5B vs. interest-bearing debt of ¥1103.9B, implying net cash and very strong short-term liquidity and financial stability.
OCF of ¥1368.2B (YoY +65.9%) is 1.96x net income of ¥699.1B, generated from OCF subtotal of ¥1528.3B with inventory decrease +¥189.6B, trade payables decrease -¥263.1B, other working capital improvements +¥206.9B, and corporate taxes paid -¥164.1B. Inventory was compressed to ¥574.5B (down ¥174.1B from ¥748.6B, -23.3%), releasing working capital through inventory optimization. Investing Cash Flow was -¥398.6B, driven by capital expenditure ¥60.2B and intangible asset acquisitions ¥472.5B (mainly rights related to the development pipeline). The prior year included a large M&A with subsidiary acquisitions of ¥3648.2B, but this period returned to steady-state investment levels. FCF was ¥969.6B (OCF ¥1368.2B - Investing CF ¥398.6B), covering dividend payments of ¥375.3B 2.58x and supporting sustainability of cash generation. Financing Cash Flow was -¥654.9B, primarily due to long-term borrowings repayment of ¥300.0B, dividends ¥375.3B, and lease repayments ¥33.4B, partially offset by short-term borrowings procurement of +¥53.9B. Cash and cash equivalents increased to ¥2370.5B (up ¥324.8B from ¥2045.7B), including foreign exchange translation effects of +¥10.1B, leaving a healthy year-end balance.
Against Ordinary Income of ¥932.7B, Net Income was ¥699.1B, with an effective tax rate of 24.5% at an appropriate level and no abnormal one-off tax burden. Financial income of ¥39.6B and financial expenses of ¥35.4B largely offset, indicating no excessive reliance on non-operating income. The increase in other expenses to ¥120.1B (up ¥72.6B from ¥47.5B) is likely temporary and has not materially undermined the quality of recurring operating profit. Comprehensive income of ¥1037.0B exceeded net income by ¥337.9B; the ¥337.8B in other comprehensive income was mainly due to foreign operations translation adjustments +¥228.8B, valuation differences on available-for-sale securities +¥113.8B, and remeasurement of defined benefit plans +¥14.8B. The large increase in translation adjustments reflects the growing U.S. business mix and yen depreciation; attention should be paid to divergence between cash earnings and valuation gains, although fundamental earnings quality is high and supported by OCF at 1.96x net income. On an accrual basis, inventory decreases and trade payable decreases largely offset, but overall working capital improved and cash-based earnings realization is healthy.
Full-year guidance was Revenue ¥4550.0B, Operating Income ¥940.0B (YoY +1.9%), and Net Income ¥710.0B (YoY +1.8%). Actual results were Revenue ¥5157.9B (vs. forecast +¥607.9B, +13.4% above), Operating Income ¥922.4B (vs. forecast -¥17.6B, -1.9% short), and Net Income ¥699.1B (vs. forecast -¥10.9B, -1.5% short). The upside in revenue was mainly from higher-than-expected royalty income and M&A-related sales; Operating Income and Net Income missed slightly due to the increase in other expenses of ¥120.1B and overruns in some cost items. The fact that the excess sales did not fully convert to profit suggests temporary expense occurrences and possible M&A-related cost burdens. Net income progress rate was 98.5% (¥699.1B ÷ ¥710.0B), indicating overall delivery largely in line with the full-year plan.
Annual dividend is ¥80 (interim ¥40, year-end ¥40), total dividend amount ¥37.58B, and payout ratio 53.9% (based on profit attributable to owners of the parent ¥697.7B). The prior year dividend was also ¥80, maintaining the dividend level. FCF of ¥969.6B covers dividend payments of ¥375.3B 2.58x, supporting high dividend sustainability. Share buybacks were effectively ¥0.0B (cash outflow for buybacks -¥0.0B), concentrating returns on dividends. The payout ratio of 53.9% decreased from 75.1% in the prior year, meaning dividend policy has not fully followed the profit increase this period. Considering net cash of ¥2370.5B and long-term borrowings of ¥750.0B (difference ¥1620.5B), financial capacity is ample and there is significant room to raise payout ratios or resume buybacks. Given the priority to maintain R&D investment at 28.5% of sales, total shareholder return will likely be determined by balancing performance and pipeline progress.
Rising dependence on royalty income: Of royalties & other revenue ¥1731.8B (33.6% of sales), Opdivo ¥1223B and Keytruda ¥295B account for approximately 87.6%, meaning performance is highly linked to partner product sales trends, pricing policies, and label expansion/contraction. Intensified competition, price cuts, or post-patent erosion could materially deteriorate operating margins.
Concentration of intangible assets and impairment risk: Intangible assets of ¥3535.8B (32.0% of total assets) are mainly development pipeline rights, patents, and goodwill. Development failures, approval delays, or market changes could trigger impairments, causing temporary earnings deterioration and capital impairment. This period recorded impairment losses of ¥22.0B (down from ¥79.8B prior), but ongoing monitoring of intangible asset valuations is essential.
Prolonged inventory days and inventory risk: Inventory of ¥574.5B improved -23.3% YoY but days of inventory are long at approximately 148 days (¥574.5B ÷ ¥1417.2B × 365), leaving risk of valuation losses or write-offs if demand forecasts or supply/demand balance shift. Considering drug shelf life and storage costs, further inventory compression and turnover improvement are key to enhancing capital efficiency.
Profitability & Returns
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 8.5% | -19.7% (-58.1%–4.6%) | +28.2pt |
| Operating Margin | 17.9% | -94.2% (-358.4%–8.6%) | +112.1pt |
| Net Margin | 13.6% | -101.5% (-373.7%–5.9%) | +115.1pt |
Our company’s profitability ranks in the upper tier within the pharmaceutical industry, with ROE, operating margin, and net margin well above medians.
Growth & Capital Efficiency
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.9% | -0.6% (-22.4%–13.3%) | +6.5pt |
Revenue growth rate exceeds the industry median, delivering stable growth.
※ Source: Company compilation
Structural margin improvement from higher share of high-margin revenue: With royalty ratio rising to 33.6% and SG&A restraint, operating margin improved to 17.9% (+5.6pt). Cash generation is strong with OCF ¥1368.2B (1.96x net income), and FCF ¥969.6B covers dividends 2.58x. Going forward, continuity of royalty income and progress of new pipeline programs are key to sustaining margins.
Strengthened balance sheet and room to improve capital efficiency: Reduction of long-term borrowings by ¥300B improved Equity Ratio to 76.9%, and net cash positioning enhances financial flexibility. ROE of 8.5% is improving but not yet in double digits; concentrated intangible assets (32.0%) and low total asset turnover of 0.47x are structural issues. Future focus should be on improving capital efficiency via stronger shareholder returns (higher payout ratio, resumption of buybacks) and more efficient monetization of intangible assets.
Continued R&D investment and need to visualize pipeline progress: R&D expense ¥1470.4B (28.5% of sales) remains high, and intangible asset acquisitions ¥472.5B show active securing of development-related rights. Future sustainability of growth depends on achieving clinical milestones and approvals, making the balance between impairment risk and investment returns critical.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute investment advice for specific securities. Industry benchmarks are reference information compiled by our company based on public financial statements. Investment decisions are your responsibility; consult professional advisors as needed.