PeptiDream Inc. FY2026 Q2 Earnings Report

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Executive Summary

Although revenue continued to increase, the operating loss was not eliminated, resulting in another period in which the delay in monetization persisted. Revenue was ¥9.23B (¥8.54B in the prior year, YoY +8.0%), Operating Income was ¥-2.53B (¥-2.63B in the prior year, YoY +3.5%), and Net Income was ¥-2.00B (¥-2.12B in the prior year, YoY +5.8%). The gross margin improved to 43.0%; however, SG&A expenses increased at a faster pace than revenue growth, limiting the improvement in operating performance.

Factors Affecting Performance

【Revenue】Revenue was ¥9.23B, representing an 8.0% year-on-year increase. Radiopharmaceuticals, which accounted for 87.0% of the revenue mix, grew by 3.1%, while Drug Discovery and Development, which accounted for 13.0%, grew by 57.9%. The growth of the latter segment drove the overall revenue growth rate higher.

【Profitability】Gross profit was ¥3.97B, and the gross margin improved to 43.0% from the equivalent of 37.0% in the prior year. Meanwhile, SG&A expenses increased year on year to ¥3.84B, offsetting the improvement in gross profit. By segment, Operating Income in Radiopharmaceuticals declined by 44.4% year on year to ¥0.24B, with the operating margin falling to 3.0%. Drug Discovery and Development recorded an Operating Loss of ¥2.73B, a 9.4% year-on-year increase in the loss, as upfront investments continued. The Company recorded an Operating Loss of ¥2.53B and a Net Loss of ¥2.00B, resulting in higher revenue but lower earnings.

Segment Analysis

Radiopharmaceuticals generated revenue of ¥8.03B (+3.1%) and accounted for 87.0% of total Company revenue, making it the core business. However, Operating Income declined by 44.4% year on year to ¥0.24B, and the operating margin fell to 3.0%, highlighting the deterioration in profitability. Drug Discovery and Development achieved high growth, with revenue of ¥1.20B (+57.9%), but continued to bear a significant upfront investment burden, recording an Operating Loss of ¥2.73B, equivalent to a margin of -227.5%. The Company-wide Operating Loss of ¥2.53B does not reflect a structure in which the expansion of losses in Drug Discovery and Development exceeds the contraction of profit in Radiopharmaceuticals; however, both segments are commonly facing profitability pressure.

Key Financial Indicators

【Profitability】The Operating Margin was -27.5%, improving from the equivalent of -30.7% in the prior year, while the Net Profit Margin was -21.7%; both remained negative.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥-1.82B, equivalent to 0.91 times the Net Loss of ¥-2.00B. The direction of earnings and cash flow was broadly consistent; however, an increase in inventories (¥-0.49B) and a decrease in trade payables (¥-0.74B) absorbed cash, resulting in negative Free Cash Flow of ¥-2.43B.【Investment Efficiency】ROE was -4.1%. Total assets were ¥72.22B, and the total asset turnover ratio remained low, indicating that capital efficiency continues to languish.【Financial Soundness】The Equity Ratio remained high at 67.2%, and the Company maintained ample liquidity with cash and deposits of ¥23.60B. On the other hand, interest-bearing debt totaled approximately ¥15.69B, including both current and non-current debt, and because operating results are negative, the Company is unable to absorb its interest burden through earnings.

Cash Flow Analysis

Operating Cash Flow was ¥-1.82B, an 83.4% improvement from ¥-10.95B in the prior year, and remained broadly consistent with the Net Loss of ¥-2.00B. Investing Cash Flow was ¥-0.61B, of which capital expenditures accounted for ¥-0.52B, indicating that asset investments related to research and development continue. Financing Cash Flow was ¥-2.71B, with a substantial reduction in short-term borrowings and share repurchases of ¥-1.00B serving as the main sources of cash outflow. Consequently, Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was negative at ¥-2.43B, as headwinds from working capital resulting from increased inventories and decreased trade payables restrained cash generation. Cash and cash equivalents at period-end were ¥23.60B, providing sufficient financial flexibility for the immediate funding outlook.

Earnings Quality

Current-period results were primarily comprised of an Operating Loss of ¥2.53B. The net impact of financial income of ¥0.14B and financial expenses of ¥0.26B was a modest negative factor, and no significant one-off items equivalent to extraordinary gains or losses were identified. Profit Before Tax was ¥-2.66B, and income taxes were ¥-0.66B, resulting in a Net Loss of ¥-2.00B after tax. Comprehensive Income was ¥-2.01B, only slightly different from Net Income attributable to owners of the parent of ¥-2.00B, with no significant divergence attributable to other comprehensive income, such as foreign currency translation adjustments. The fact that Operating Cash Flow of ¥-1.82B was close to the Net Loss of ¥-2.00B indicates that earnings and cash flow remain consistent. However, changes in working capital items such as inventories and trade payables should be monitored, as they may affect future cash-generation capacity.

Earnings Forecast and Guidance

The Full-Year forecast is revenue of ¥32.00B and Operating Income of ¥4.60B. Revenue for the cumulative Q2 period was ¥9.23B, representing a progress rate of 28.8%, below the simple midyear progress benchmark of 50%. While Operating Income was negative at ¥-2.53B in the current quarter, the Company forecasts positive Full-Year Operating Income of ¥4.60B, which presupposes a substantial improvement in profitability during the second half. Both the earnings forecast and the dividend forecast are stated as “None” for revisions, indicating that management is maintaining its initial forecasts at this time. The accumulation of revenue and realization of highly profitable milestone income and other items during the second half will be key to achieving the Full-Year plan.

Shareholder Returns

The dividend forecast is ¥0, and no interim dividend was paid for the current quarter. Given the recognition of a Net Loss, the Payout Ratio is mathematically zero, and the no-dividend policy is consistent with the earnings situation. On the other hand, the Company conducted share repurchases of ¥1.00B, positioning this as a capital policy initiative supported by ample cash and deposits of ¥23.60B. However, as both Operating Cash Flow and Free Cash Flow are negative, it should be noted that this does not represent a return based on the cash-generation capacity of the business itself, but rather a response utilizing existing cash buffers.

Risk Factors

1. Segment Concentration Risk: Radiopharmaceuticals accounts for 87.0% of revenue, while Operating Income in this segment declined by 44.4% year on year and the operating margin fell to 3.0%. This creates a structure in which deterioration in the profitability of the core business directly affects Company-wide performance.

2. Monetization Delay Risk: Drug Discovery and Development achieved revenue growth of +57.9%, while its Operating Loss expanded to ¥2.73B (+9.4% year on year), creating uncertainty regarding the timing of monetization of upfront investments.

3. Cash Flow and Working Capital Risk: Free Cash Flow was ¥-2.43B, with increased inventories (¥-0.49B) and decreased trade payables (¥-0.74B) constraining cash generation. If working capital continues to deteriorate while operating losses persist, the rate of cash consumption could accelerate.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (pharma)

Profitability and Returns

Both the Company’s Operating Margin and Net Profit Margin are negative, and the Company’s relative position within the industry cannot be evaluated because median data is not available.

Growth and Capital Efficiency

Revenue growth remained positive at 8.0%; however, relative evaluation is deferred because industry median data is unavailable.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Although revenue continues to increase, Operating Income in the core Radiopharmaceuticals segment declined by 44.4% year on year, and the operating margin fell to 3.0%. This indicates a structure in which top-line growth alone has not translated directly into improved profitability.

2. Against Full-Year guidance of Operating Income of ¥4.60B, cumulative Q2 results showed a significant divergence, with an Operating Loss of ¥2.53B. The extent to which profitability can improve during the second half will therefore be the key focus going forward.

3. The solid financial foundation, comprising an Equity Ratio of 67.2% and cash and deposits of ¥23.60B, provides a certain degree of resilience despite continuing Operating Losses and negative Free Cash Flow. At the same time, the deterioration in working capital efficiency, particularly involving inventories and trade payables, is structurally constraining cash-generation capacity.

Theoretical Share Price (Reference Value)

Sensitivity: ¥339–¥360 at Cost of Equity ±1%; ¥348–¥350 at ω ±0.1.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing difference relative to the Full-Year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / These figures are mechanically calculated solely from publicly disclosed data and are not forecasts of market share prices or recommendations for specific investment actions, nor do they predict or guarantee future share prices.)

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This report is an automatically generated earnings analysis document produced by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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