Solasia Pharma K.K. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥91M
• Operating Income: ¥-713M
• Net Income: ¥-726M
• EPS: ¥-3.16

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

Solasia Pharma (45970) reported FY2025 Q3 (IFRS, consolidated) with revenue of 0.91 and a gross profit of 0.05, implying a thin gross margin of 5.5% and indicating weak pricing power and/or inventory-related costs. SG&A expenses of 5.80 dwarfed revenue, driving an operating loss of -7.13 and a net loss of -7.26. Revenue grew 12.6% YoY off a very small base, which is positive directionally but insufficient to cover fixed costs or meaningfully improve operating leverage. The DuPont decomposition shows an extremely negative net margin (-797.8%) combined with a very low asset turnover (0.039) and modest leverage (1.30x), yielding an ROE of -40.4%. Asset turnover and margin deterioration reflect a business still in a build-out/commercial ramp stage rather than a mature revenue generator. Operating cash flow was -8.65, which is larger than the net loss, indicating cash burn consistent with loss-making operations and working capital needs. Financing cash inflow of 11.82 supported period-end cash and equivalents of 8.86, highlighting reliance on external funding to sustain operations. The balance sheet remains relatively unlevered with total liabilities of 2.06 and an equity ratio of 76.8%, indicating solvency is currently supported by equity capital rather than debt. Capital surplus is sizable at 22.55, while retained earnings are deeply negative at -32.77, evidencing cumulative losses. Accounts receivable of 2.32 and inventories of 1.28 represent a meaningful portion of current assets (12.66), suggesting some working capital tied up in the commercial footprint despite small revenue. The OCF/Net Income ratio of 1.19x indicates operating cash burn aligns with the scale of reported losses, neither unusually better nor worse from an earnings quality standpoint given the stage of the business. Interest-bearing debt details are unreported, but the reported debt-to-equity ratio of 0.11x and low total liabilities suggest limited balance sheet gearing. EPS (basic) was -3.16 JPY, and book value per share stood at about 6.91–6.92 JPY, with average shares (229.9m) below period-end outstanding (260.2m), consistent with equity financing during the period. Dividend metrics are unreported; given losses and negative FCF, distributions appear unlikely at this stage. Overall, the quarter underscores ongoing commercialization challenges, heavy SG&A relative to revenue, and dependence on equity financing, with balance sheet solvency adequate but profitability and cash flow under pressure. Data limitations (notably current liabilities, D&A, R&D, debt breakdown, and non-operating items) constrain deeper ratio and trend analysis, so conclusions focus on the disclosed non-zero items.

Profitability Analysis

roe_decomposition: DuPont indicates ROE of -40.4% = Net profit margin (-797.8%) x Asset turnover (0.039) x Financial leverage (1.30x). The negative ROE is driven mainly by extraordinary weakness in margins on a very small revenue base; asset turnover is also very low, and leverage is modest. margin_quality: Gross margin is 5.5% (gross profit 0.05 on revenue 0.91), implying limited contribution after cost of sales. Operating margin is deeply negative (operating loss -7.13) due to SG&A 5.80 that far exceeds revenue, consistent with a company investing ahead of scale. Effective tax rate shows a small tax benefit of 2.9% (income tax -0.21 on pre-tax loss -7.25), offering minimal cushioning. operating_leverage: Revenue increased 12.6% YoY but did not translate into margin improvement, as fixed costs (SG&A) dominate the P&L. With such a low revenue base, each incremental yen of sales currently has limited ability to absorb operating expenses; material operating leverage would require a step-change in top line or significant cost rationalization.

Growth Assessment

revenue_sustainability: Revenue of 0.91 is small but grew 12.6% YoY. The sustainability depends on product uptake and geographic breadth; current AR of 2.32 and inventories of 1.28 suggest active commercial operations, but scale remains limited. profit_quality: Gross profit of only 0.05 indicates low contribution margin, which, combined with SG&A 5.80, yields continued losses. Non-operating items are unreported, so bottom-line volatility from financial or one-offs cannot be assessed; reported equity-method loss (-0.03) is immaterial but negative. outlook: Without evidence of a near-term revenue inflection or margin uplift, losses are likely to persist. The company’s ability to accelerate commercial traction and improve gross margin will determine the path to break-even. Given reliance on financing cash flows, funding availability will be a key determinant of execution pace.

Financial Health

liquidity: Cash and equivalents were 8.86; current assets total 12.66. Current liabilities are unreported, so current and quick ratios are not calculable. Working capital is listed at 12.66, but this likely reflects the absence of reported current liabilities rather than true zero; therefore, interpret with caution. solvency: Total liabilities are 2.06 against total assets of 23.40, yielding an equity ratio of 76.8%, indicative of low balance sheet leverage. Debt-to-equity is reported at 0.11x, consistent with a lightly levered capital structure, though specific interest-bearing debt amounts are unreported. capital_structure: Equity is 17.96, supported by capital surplus of 22.55 and offset by retained losses of -32.77. The increase in outstanding shares versus average shares signals equity issuance in the period, reinforcing an equity-funded model.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.19x (OCF -8.65 vs NI -7.26), indicating cash burn is broadly consistent with accounting losses; no evidence of unusually aggressive working capital or accrual-driven earnings distortion based on available data. fcf_analysis: Free cash flow is -8.65 (capex unreported), pointing to negative internal funding capacity. Financing inflow of 11.82 bridged the cash shortfall and lifted period-end cash to 8.86. working_capital: Accounts receivable of 2.32 and inventories of 1.28 comprise a significant share of current assets, implying some cash tied in the commercial cycle. Current liabilities are unreported, preventing assessment of payables leverage beyond accounts payable of 1.21.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratios are unreported and not calculable. Given a net loss (-7.26) and negative FCF (-8.65), internally funded dividends are not supported by current earnings. fcf_coverage: FCF is negative; thus, any hypothetical dividend would lack FCF coverage. policy_outlook: With the business in an investment and commercialization phase and reliant on external financing, distributions are unlikely to be a priority until profitability and positive FCF are attained. No explicit policy data were disclosed.

Risk Assessment

Business Risks:

• Commercialization risk given very low revenue base and thin gross margin
• Product uptake and market access uncertainties in targeted indications/regions
• R&D and pipeline execution risk (R&D spend unreported, but inherent to the model)
• Pricing and reimbursement pressure affecting already low gross margin
• Supply chain and inventory management risk given inventories 1.28 vs small sales
• Key partner or distributor dependence where applicable
• Regulatory and compliance risks typical for specialty pharma

Financial Risks:

• Funding risk and dependence on external financing (financing CF 11.82 supporting cash 8.86)
• Dilution risk (increase in outstanding shares vs average shares)
• Sustained negative OCF (-8.65) requiring repeated capital raises if revenue scale-up is slow
• Limited visibility on debt profile and interest costs due to unreported items
• FX risk if revenues or costs have foreign currency exposure (not disclosed)

Key Concerns:

• Severely negative profitability: ROE -40.4%, operating loss -7.13 on revenue 0.91
• Low asset turnover (0.039) and minimal gross margin (5.5%)
• Negative FCF (-8.65) and reliance on financing inflows (11.82)
• Data gaps on current liabilities, R&D, D&A, and interest-bearing debt hinder deeper analysis

Investment Implications

Key Takeaways:

• Revenue grew 12.6% YoY but remains too small to absorb fixed costs
• Gross margin is very low at 5.5%, pressuring contribution to SG&A
• Operating and net losses are sizable; ROE at -40.4% underscores value erosion
• Cash burn is significant (OCF -8.65) and funded by equity financing (FCF negative)
• Balance sheet leverage is low (equity ratio 76.8%), but solvency depends on ongoing access to capital
• Share count increased during the period, evidencing dilution
• Working capital is tied up in AR (2.32) and inventories (1.28) despite small sales

Metrics to Watch:

• Quarterly revenue trajectory and product uptake indicators
• Gross margin improvement and cost of sales trends
• SG&A run-rate and operating leverage milestones
• Operating cash flow burn and cash runway (vs cash 8.86)
• Equity financing activity and share count changes
• Any disclosures on R&D expenses and pipeline milestones
• Updates on current liabilities and debt/interest coverage once reported

Relative Positioning: Relative to Japan-listed specialty pharma/biotech peers, Solasia appears earlier-stage on commercialization with smaller revenue scale, heavier reliance on equity financing, lower leverage, and weaker margins; near-term results hinge on accelerating sales and improving unit economics.

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