Medrx Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥118M
• Operating Income: ¥-742M
• Net Income: ¥-320M
• EPS: ¥-14.84

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: FY2025 Q3 was weak with a deep operating loss despite ample liquidity; profitability deteriorated on a sharp revenue decline and heavy SG&A burden. Revenue was 1.18 (−53.9% YoY), while gross profit was 2.55, implying an unusual gross margin of 216.2% driven by non-product income recognition in cost-of-sales-light transactions (likely licensing/other operating income under JGAAP classification). SG&A was 6.35, resulting in operating income of −7.42 and ordinary income of −7.57. Non-operating income contributed 0.53 and non-operating expenses 0.16, offering limited offset. Net income was −7.69 (EPS −14.84 yen), indicating substantial losses. Operating margin was approximately −628%, underscoring minimal scale and negative operating leverage. We cannot quantify YoY basis-point changes for gross/operating margins due to lack of prior-period margin data; directionally, margins compressed alongside the >50% revenue decline. Earnings quality flags arise from the lack of disclosed operating cash flow; OCF vs NI cannot be assessed. The drop from profit before tax of −3.22 to net income of −7.69 suggests below-the-line losses (e.g., extraordinary losses or minority interests) not detailed in the dataset. Balance sheet remains robust: cash and deposits are 17.48 against total liabilities of 0.62, driving a current ratio of 3114% and D/E of 0.03x. Asset turnover is very low at 0.053 and financial leverage modest at 1.03x, so the extremely negative net margin (−651.7%) dominates ROE (−35.8%). With working capital of 18.72 and low liabilities, near-term solvency risk is limited despite losses. However, sustainability hinges on stabilizing recurring revenues or securing milestone/license income. Forward-looking, key watchpoints are revenue visibility (pipeline/milestone timing), SG&A discipline, and cash burn runway (estimated ~2+ years at the current operating loss pace). Absent cash flow disclosure, we infer runway by comparing cash on hand to operating loss magnitude. No dividend information was disclosed; negative retained earnings (−7.31) imply distributions are unlikely near term. Overall, the quarter underscores execution and commercialization risks typical of early-stage biotech, with liquidity as the principal buffer.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (−651.7%) × 0.053 × 1.03 ≈ −35.8%. The dominant driver of negative ROE is the extraordinarily negative net margin, reflecting small revenue scale versus fixed SG&A and potential below-the-line losses. Asset turnover at 0.053 is also weak, indicating limited commercialization scale relative to assets (cash-heavy balance sheet). Financial leverage (1.03x) is low, so leverage neither amplifies returns nor risks meaningfully. The business reason: revenue contracted 53.9% YoY while SG&A remained high at 6.35, producing negative operating leverage and deep operating losses; non-operating gains (0.53) were insufficient to offset. Sustainability: the margin pressure appears structural in the absence of recurring revenues; recovery depends on milestone/license timing or product launches, hence not assured. Concerning trends: SG&A (6.35) far exceeds revenue (1.18), and revenue volatility is elevated; we cannot confirm YoY SG&A growth due to missing prior data, but the scale mismatch is a clear red flag.

Growth Assessment

Top-line declined 53.9% YoY to 1.18, underscoring high volatility and likely dependence on episodic income (e.g., milestones/licensing) rather than steady product sales. Gross profit of 2.55 exceeding revenue signals accounting classification effects typical in biotech (subsidies, out-licensing) and/or low cost of sales, not durable margin structure. Operating loss widened to −7.42, with negative operating leverage from fixed SG&A. Ordinary loss of −7.57 and net loss of −7.69 indicate limited contribution from non-operating items. With asset turnover at 0.053, scaling remains limited. Outlook hinges on near-term catalysts (partnerships, trials, regulatory events) to restore revenue; without them, continued losses are likely. Given incomplete disclosure (no OCF, R&D, D&A), we cannot quantify expense mix or efficiency trends, but the revenue base is currently insufficient to cover SG&A.

Financial Health

Liquidity is very strong: current assets 19.35 vs current liabilities 0.62 yield a current ratio of 3114%; quick ratio matches given negligible inventories (not disclosed). Solvency is conservative: total liabilities 0.62 vs equity 21.49 implies D/E of 0.03x. There is no warning on Current Ratio (<1.0) or D/E (>2.0). Cash and deposits of 17.48 cover all liabilities ~28x, minimizing refinancing risk. Maturity mismatch risk appears low given low current liabilities and large cash. Interest-bearing debt details are unreported, but total liabilities are de minimis, suggesting limited financial risk. No off-balance sheet obligations were disclosed in the dataset; absence of disclosure does not preclude lease or collaboration commitments.

Cash Flow Quality

OCF is unreported, so OCF/Net Income and FCF cannot be calculated; earnings quality assessment is therefore limited. As a proxy, operating loss of −7.42 suggests a material cash burn; juxtaposed with cash 17.48, the implied runway is roughly 2.4 years if losses persist at a similar pace and excluding working capital swings and investments. Working capital composition: accounts receivable 1.10 is large relative to revenue 1.18, implying long collection cycles or milestone receivables; this concentration elevates cash conversion risk if collections are delayed. No signs of working capital manipulation can be concluded from the limited data. Dividend and capex outflows are unreported; with negative retained earnings, distributions are unlikely and FCF commitments probably focused on R&D.

Dividend Sustainability

Dividend data are unreported; retained earnings are negative at −7.31, and net income is −7.69, indicating no capacity to pay dividends under a conservative policy. Payout ratios and FCF coverage cannot be calculated. Given the loss-making status and need to fund R&D and operations from cash, dividend sustainability is effectively not applicable near term. Policy outlook: likely to prioritize cash preservation and pipeline investment until profitability or stable licensing cash flows emerge.

Risk Assessment

Business Risks:

• Revenue volatility from milestone/licensing dependence (−53.9% YoY revenue).
• Negative operating leverage with SG&A (6.35) far exceeding revenue (1.18).
• Pipeline execution risk (clinical, regulatory, partnership timelines) typical of biotech.
• Customer/partner concentration risk implied by small revenue base.
• Potential below-the-line losses given PBT −3.22 vs NI −7.69.

Financial Risks:

• Cash burn risk: operating loss −7.42 vs cash 17.48 implies finite runway.
• Receivables concentration (1.10 vs revenue 1.18) may delay cash conversion.
• Limited disclosure on OCF/FCF, capex, and debt terms narrows visibility.
• Capital efficiency very weak (ROIC −183.8% alert).

Key Concerns:

• Sustained negative ROE (−35.8%) driven by extremely negative net margin (−651.7%).
• Very low asset turnover (0.053) indicating commercialization shortfall.
• Dependence on non-operating income (0.53) to partially offset operating loss.
• Accounting classification causing gross margin distortion (216.2%), obscuring core unit economics.

Investment Implications

Key Takeaways:

• Quarter marked by deep operating loss (−7.42) on a sharply lower top line.
• Balance sheet strength (cash 17.48; D/E 0.03x) reduces near-term solvency risk.
• ROE of −35.8% driven by margin collapse; leverage is not the issue.
• Ordinary vs net income gap suggests undisclosed extraordinary items/adjustments.
• Runway estimate ~2+ years at current burn, but contingent on working capital and investments.

Metrics to Watch:

• Operating cash flow and quarterly cash burn.
• Milestone/licensing revenue cadence and backlog/contract visibility.
• SG&A trajectory and cost control initiatives.
• Accounts receivable collection and DSO trends.
• Pipeline/regulatory catalysts that could rebase revenue.
• Any disclosure on extraordinary items impacting NI below PBT.

Relative Positioning: Compared with profitable specialty pharma peers, the company resembles an early-stage biotech profile: ample cash and minimal leverage, but very weak profitability and commercialization scale; investment case is event-driven and liquidity-supported rather than margin/scale-driven.

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