OncoTherapy Science,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥431M
• Operating Income: ¥-475M
• Net Income: ¥-555M
• EPS: ¥-1.89

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Weak quarter with heavy losses despite sharp top-line growth, sustained by equity financing rather than self-funded operations. Revenue rose 91.9% YoY to 4.31, while cost of sales was 4.03, implying an inferred gross profit of roughly 0.28 and a thin gross margin of about 6.5%. SG&A was 2.18, and operating loss widened to -4.75, equating to an operating margin of approximately -110.2%. Ordinary loss was -4.93, with non-operating expenses of 0.18 and minimal interest expense (0.01). Net loss was -5.55 and EPS was -1.89 yen, reflecting continued losses with no YoY comparator provided. Operating cash flow was -5.25, broadly in line with the accounting loss (OCF/NI ~0.95x), indicating losses are largely cash-real rather than purely non-cash. Financing cash flow of 14.27 suggests the company relied on equity or similar funding to extend runway. Cash and deposits were a sizable 16.75 against total assets of 19.35 and current liabilities of 2.19, supporting a very high current ratio of 862.6%. Balance sheet equity remains positive at 16.46, but retained earnings are deeply negative (-274.63) and offset by large capital surplus (282.53), evidencing repeated equity raises. ROE was -33.7% driven by a very negative net margin (-128.8%) and low asset turnover (0.223) with modest leverage (1.18x). Gross margin is slim and operating margin deeply negative; margin expansion or compression vs last year is not computable due to missing YoY margin data. Earnings quality is weak due to persistent cash burn, even though OCF tracks NI. Near-term solvency risk is low given cash on hand, but funding risk persists if burn remains elevated. The 91.9% revenue growth likely reflects lumpy licensing or milestone revenue, not necessarily a repeatable run-rate. Forward-looking, sustainability hinges on securing recurring revenue (e.g., licensing, partnerships) and reducing burn, or continued access to capital markets.

Profitability Analysis

ROE decomp (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-128.8%) × 0.223 × 1.18 ≈ -33.7%. The dominant drag is the net profit margin, reflecting deep operating losses and minimal non-operating offsets. Asset turnover is low (0.223), typical for pre-commercial biotech with limited product revenue relative to asset base. Financial leverage is modest at 1.18x, so leverage does not amplify returns meaningfully. The largest change driver vs a typical profit structure is margin deterioration from high R&D/SG&A burden and limited gross margin contribution; we lack prior-period components to quantify delta. Business reason: limited scale, likely milestone-heavy or service-type revenue with low gross margin, while fixed costs (personnel, R&D collaboration, overhead) keep operating leverage negative. Sustainability: without structurally higher-margin recurring revenue or cost rationalization, margin pressure is likely to persist; any one-time milestone would be non-recurring. Concerning trends include operating expenses (SG&A 2.18) high relative to gross profit (~0.28) and revenue, implying unfavorable operating leverage. We cannot assess SG&A growth vs revenue growth due to missing YoY SG&A, but the current cost structure far exceeds gross profit.

Growth Assessment

Revenue grew 91.9% YoY to 4.31, but the composition is unclear; growth may be driven by non-recurring contracts or milestones rather than scalable product sales. Gross margin inferred at ~6.5% is too low to support profitability at the current SG&A level, indicating growth quality issues. Operating loss of -4.75 and net loss of -5.55 underscore that scale benefits are not yet materializing. With asset turnover at 0.223, efficiency remains weak; improving utilization would require either meaningful, recurring licensing revenue or commercialization progress. Outlook hinges on pipeline and partnerships; absent disclosed R&D details, we assume continued volatility in quarterly revenue. Without evidence of cost base adjustment or higher-margin revenue, near-term profitability is unlikely. Positive catalyst would be new licensing deals with upfronts and royalties; negative risk is a gap between milestones leading to revenue troughs.

Financial Health

Liquidity appears strong: current ratio 862.6% (8.6x) and cash/deposits of 16.75 vs current liabilities of 2.19. No warning on current ratio (<1.0) or D/E (>2.0); D/E is a conservative 0.18x. Equity of 16.46 against assets of 19.35 implies an equity ratio near 85%, indicating low leverage. Maturity mismatch risk is limited near term given cash exceeds current liabilities by a wide margin. We do not have a detailed debt schedule; interest-bearing debt is unreported, but interest expense is negligible (0.01), suggesting minimal borrowings. Off-balance sheet obligations are not disclosed; potential R&D collaboration or lease commitments may exist but cannot be assessed from available data. The large capital surplus (282.53) and negative retained earnings (-274.63) indicate repeated equity issuance to fund operations.

Cash Flow Quality

OCF/Net Income is 0.95x, slightly below 1.0; this is acceptable in terms of alignment but still signals persistent cash burn consistent with accounting losses. Operating CF of -5.25 in H1 implies an annualized burn rate around -10.5, before changes in working capital or milestones. Investing CF not disclosed; capex was modest at -0.61, suggesting low capital intensity. Financing CF of 14.27 indicates reliance on external capital; cash balance (16.75) provides estimated runway of roughly 1.5–2.0 years at the current burn rate, absent new revenue or cost cuts. FCF cannot be computed precisely due to missing investing CF detail; qualitatively, FCF is negative given OCF negative and capex outflow. No clear signs of working capital manipulation; AR is small (0.45) relative to revenue and no inventory reported. The negative interest coverage metric is a mechanical artifact of negative EBIT with minimal interest; debt service risk is not the primary issue, funding the burn is.

Dividend Sustainability

Dividend data are unreported; given persistent losses and reliance on financing CF, dividends are unlikely and would be unsustainable. Payout ratio is not calculable, but negative NI and negative FCF imply no capacity to distribute. Corporate priority is likely pipeline and partnership funding rather than shareholder returns. Policy outlook: expect continued suspension of dividends until sustained positive operating cash flow is achieved.

Risk Assessment

Business Risks:

• Revenue concentration and milestone timing risk leading to lumpy sales and cash inflows
• Clinical development and regulatory approval risk typical of biotech pipelines
• Commercialization risk with low current gross margins (~6.5%)
• Partner dependency risk for licensing, co-development, and funding

Financial Risks:

• Ongoing cash burn (OCF -5.25 in H1) requiring continued access to equity markets
• Potential shareholder dilution given large capital surplus history and recent financing CF of 14.27
• Negative retained earnings (-274.63) limiting financial flexibility
• Sensitivity to delays in milestone receipts which could compress runway

Key Concerns:

• Very weak profitability: operating margin about -110% and NPM -129%
• Low asset turnover (0.223) indicates limited scale
• Earnings quality acceptable alignment but cash burn persists (OCF/NI ~0.95x)
• Data gaps (no gross profit disclosure, no R&D breakdown, no investing CF details) limit visibility

Investment Implications

Key Takeaways:

• Top-line surged 91.9% YoY but margins remain severely negative, implying low-quality growth
• Cash runway appears 1.5–2.0 years at current burn, aided by recent financing inflows
• ROE -33.7% driven by extremely negative margins; leverage is not a factor
• Balance sheet conservative (D/E 0.18x), but funding model depends on equity issuance
• Quarterly results likely to remain volatile given milestone-driven revenue

Metrics to Watch:

• Run-rate OCF and quarterly cash burn
• Visibility on recurring revenue vs one-time milestones
• Gross margin trajectory and cost discipline (SG&A trend vs revenue)
• Pipeline milestones and partnership deals (upfronts/royalties)
• Cash balance vs 12–24 month funding needs

Relative Positioning: Within Japan small-cap biotech peers, the company exhibits typical pre-commercial characteristics: high operating losses, low asset turnover, and dependence on equity financing. Liquidity is stronger than many peers due to recent capital raises, but profitability and revenue quality lag without clear recurring revenue or high-margin products.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis