HEALIOS K.K. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥79M
• Operating Income: ¥-2.33B
• Net Income: ¥-4.15B
• EPS: ¥-39.49

Income Statement

Balance Sheet

Cash Flow Statement

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 results indicate severe operating weakness and continued cash burn, with high leverage and very low capital efficiency, typical of an early-stage biotech in a trough period without revenue-driving milestones. Revenue was 0.79 (100M JPY), down 85.5% YoY, while operating loss widened to -23.33 and net loss to -41.46, highlighting a challenging earnings profile. Gross profit printed at 4.44 despite revenue of 0.79 and cost of sales of 0.98, producing a mathematically high gross margin of 562%, likely reflecting IFRS biotech presentation effects (e.g., other operating income or contract/grant accounting) rather than underlying commercialization traction. Operating margin was -2,954% and net margin was -5,248%, underscoring a cost base far outpacing minimal revenues. With total assets of 173.27 and equity of 29.55, financial leverage rose to 5.86x; the equity ratio is a low 16.9%, signaling limited balance sheet buffer. Cash and equivalents ended at 64.98, while operating CF was -12.39 and free cash flow was -18.19 for the period, implying sustained cash burn. The OCF/Net Income ratio of 0.30 signals low earnings quality—cash conversion is weak relative to accounting losses. Depreciation and amortization were 2.17, implying EBITDA of -21.16, still deeply negative. ROE calculated via DuPont is -140.3% driven by an extraordinarily negative net margin and minimal asset turnover (0.005), compounded by high leverage (5.86x). ROIC is -78.4%, well below the 5% warning threshold, reflecting lack of commercial returns on invested capital. The company reports retained earnings of -9.29 and book value per share of about 25.59 JPY, while EPS (basic) is -39.49 JPY, indicating ongoing equity erosion. Equity-method income was negligible at -0.02 and non-operating items were largely unreported, suggesting results are dominated by operating losses. On margins, the data does not provide prior-period operating or net margin for precise basis-point comparison; however, the 85.5% revenue contraction and current margins imply substantial YoY margin deterioration. The financing CF was -3.61, indicating limited net new capital raised in the period; without additional funding or milestone inflows, cash runway will shrink. Forward-looking, the company must secure partnering income, grants, or capital to sustain R&D and preserve going-concern posture; absent commercialization milestones, dilution risk is elevated.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-5,248.1%) × 0.005 × 5.86 ≈ -140.3%. The dominant driver of the negative ROE is the extremely negative net profit margin, followed by ultra-low asset turnover; leverage amplifies the loss into equity. Given revenue fell 85.5% YoY, the margin component likely deteriorated most YoY, as fixed operating costs (notably SG&A of 10.02) did not flex with revenue. Business reasons include the absence of revenue milestones/licensing inflows and continued operating spend to advance pipeline and maintain intangible assets (44.17 on the balance sheet). The situation appears structural in the near term (pre-revenue biotech), not a one-time item, unless significant partnering/licensing or regulatory milestones materialize. Concerning trend: cost base persistence vs. revenue collapse—SG&A of 10.02 against revenue of 0.79 implies negative operating leverage; although an SG&A YoY figure is unreported, the mismatch suggests risk to runway without cost actions.

Growth Assessment

Top-line sustainability is weak, with revenue at 0.79 (-85.5% YoY), indicating lumpy or absent milestone income and no recurring commercial base. Profit quality is dominated by loss-making operations, as evidenced by operating income -23.33 and EBITDA -21.16. Gross profit of 4.44 alongside revenue of 0.79 suggests IFRS classification effects (e.g., other operating income recognized above operating line) rather than genuine product gross margin strength; thus current gross margin is not a reliable indicator of scalable unit economics. Equity-method contributions are negligible (-0.02), offering no diversification of earnings. Outlook depends on binary catalysts: partnership deals, grant inflows, clinical/regulatory milestones, or asset monetization; without these, expect continued losses. Expense discipline and pipeline prioritization will determine burn rate; capex is minimal (0.13), so OPEX and working capital drive FCF. Near-term growth visibility is low; any rebound would likely come from episodic milestone/licensing revenue rather than recurring sales.

Financial Health

Liquidity: Current ratio is not calculable due to missing current liabilities; we cannot definitively assess short-term coverage. However, cash and equivalents of 64.98 and current assets of 71.71 compare against total liabilities of 143.71, suggesting limited balance-sheet flexibility. Solvency: Debt-to-equity is high at 4.86x (warning threshold >2.0), and equity ratio is 16.9%, indicating high leverage and vulnerability to further losses. Maturity mismatch: Current liabilities are unreported; thus, we cannot quantify short-term obligations vs. liquid assets—this is a key disclosure gap. Intangibles are sizable at 44.17, reducing tangible buffer. Off-balance sheet obligations: none disclosed in the provided data. Overall, balance-sheet resilience is weak; additional capitalization may be required if losses persist.

Cash Flow Quality

OCF/Net Income is 0.30 (<0.8), indicating poor cash conversion and a potential earnings quality concern (losses not fully reflected in cash outflows this period). Free cash flow was -18.19, driven by OPEX/R&D (R&D unreported) with negligible capex (-0.13), so burn is operating in nature. Investing CF was -5.80, likely related to intangible development or investments (details unreported), adding to cash outflows. Financing CF was -3.61, implying limited net inflows; thus, cash decreased on a net basis during the period. With ending cash of 64.98 and FCF of -18.19 over the period, implied runway is roughly 10–11 quarters if this burn rate persisted (simplistic estimate, excluding additional investing/financing changes). Working capital manipulation signs are not evident: accounts receivable are modest at 1.89, inventories unreported, and revenue minimal; the primary driver is ongoing OPEX rather than WC swings.

Dividend Sustainability

No dividends are reported; with net loss of -41.46 and FCF of -18.19, any distribution would be unsustainable. Payout ratios are not calculable but would be non-meaningful given losses. Policy-wise, a development-stage biotech is expected to prioritize R&D funding and liquidity over shareholder returns. Future distributions would require a sustained pivot to positive operating cash flow or significant milestone inflows; neither is visible in current results.

Risk Assessment

Business Risks:

• Pipeline execution risk: clinical, regulatory, and development timelines may slip, delaying revenue.
• Commercialization risk: absence of recurring product revenue; dependence on milestones/licensing.
• Partner concentration risk: reliance on third parties for funding and development progress.
• Intangible asset impairment risk given 44.17 in intangibles and ongoing losses.

Financial Risks:

• High leverage: D/E 4.86x and equity ratio 16.9% raise solvency concerns.
• Cash burn risk: OCF -12.39 and FCF -18.19 threaten runway absent new capital.
• Dilution risk: likely need for equity financing if losses persist.
• Refinancing/maturity risk cannot be assessed due to unreported current liabilities.

Key Concerns:

• Earnings quality: OCF/NI at 0.30 indicates poor cash conversion.
• Extremely low asset turnover (0.005) and negative ROIC (-78.4%) signal value erosion.
• Margin profile deeply negative (operating margin -2,954%; net margin -5,248%).
• Data gaps: lack of detail on current liabilities, R&D, and non-operating items constrains analysis.

Investment Implications

Key Takeaways:

• Severe top-line decline (-85.5% YoY) with minimal revenue base.
• Operating and net losses widened, with deeply negative margins.
• Leverage is high (D/E 4.86x); equity cushion is thin (equity ratio 16.9%).
• Cash burn persists (FCF -18.19); OCF/NI of 0.30 flags low earnings quality.
• ROE -140.3% and ROIC -78.4% reflect significant capital inefficiency.
• Near-term outlook hinges on milestone/licensing inflows or cost controls.

Metrics to Watch:

• Quarterly cash burn (OCF and FCF) and cash runway versus catalysts.
• Disclosure of current liabilities to assess liquidity and maturity mismatch.
• R&D spending trajectory and SG&A discipline.
• Pipeline milestone timing and any licensing/partnering income.
• Equity ratio and any new equity/debt financing activity.
• Impairment testing outcomes for intangibles.

Relative Positioning: Within Japan’s biotech peer set, Helios appears in the higher-risk quadrant: very low revenues, high operating losses, weak cash conversion, and elevated leverage. Compared to profitable or milestone-rich peers, earnings visibility and balance sheet resilience are weaker, making outcomes more dependent on binary pipeline events and external funding.

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