Kringle Pharma (4884) FY2026 Q1 Earnings Report

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Executive Summary

The Company is a development-stage business with very limited revenue. Although the operating loss and net loss narrowed year on year, the Company has not yet achieved monetization. Revenue was ¥0.18B (+2.2% YoY), the operating loss was ¥1.99B (improved from ¥2.12B in the previous year), the ordinary loss was ¥2.00B (improved from ¥2.12B in the previous year), and the net loss was ¥2.01B (improved from ¥2.12B in the previous year). The primary factor behind the narrowing losses was a 5.2% decrease in SG&A expenses from ¥2.30B to ¥2.18B. Together with the slight increase in revenue, operating leverage is trending toward improvement.

Factors Affecting Performance

【Revenue】Revenue was ¥0.18B, a slight increase of +2.2% year on year. Progress against the full-year plan of ¥0.72B was 25.0%, in line with standard quarterly progress. The business itself remains small in scale, and the absolute increase in revenue is limited.

【Profit and Loss】The primary factor behind the narrowing operating loss was a ¥0.12B (-5.2%) decrease in SG&A expenses from ¥2.30B to ¥2.18B. The operating loss was ¥1.99B (¥2.12B in the previous year), the ordinary loss was ¥2.00B (¥2.12B in the previous year), and the net loss was ¥2.01B (¥2.12B in the previous year), representing improvements in all cases. However, the operating margin remained substantially negative at -1105.6%, and progress against the full-year operating loss plan of ¥11.72B was only 17.0% in Q1. The Company has a cost structure with SG&A expenses at a fixed-cost level despite limited revenue. Accordingly, the situation should be characterized not as increased revenue and decreased profit, but as a reduction in losses resulting from increased revenue. In conclusion, the Company is in a phase of increased revenue accompanied by narrowing losses, rather than increased revenue and decreased profit.

Key Financial Indicators

【Profitability】The operating margin was -1105.6% (previous year: -1177.8%), and the net profit margin was -1116.7% (previous year: -1177.8%). Both improved from the previous year, but the structure of an extremely heavy SG&A burden relative to the scale of revenue continues. The gross margin was 103.2%; profitability should therefore be assessed based on operating income after SG&A expenses rather than gross profit.【Cash Quality】Cash and deposits were ¥15.12B, accounting for 76.0% of total assets, meaning that most funds consist of cash and deposits.【Investment Efficiency】Annualized ROE was -65.9%, and the total asset turnover ratio was 0.036x, indicating that revenue monetization has not progressed relative to the asset base.【Financial Soundness】The equity ratio remained high at 61.3% (61.5% in the previous year), but retained earnings deteriorated to -¥18.75B, indicating that accumulated quarterly losses are putting pressure on net assets.

Cash Flow Analysis

Cash and deposits decreased by ¥1.07B (-6.6%) from ¥16.19B in the same period of the previous year to ¥15.12B. Although cash flow statement items are not included in the disclosed data, the recognition of a quarterly net loss of ¥2.01B and the decrease in the cash balance indicate that cash consumption associated with business operations is continuing. Cash and deposits accounted for 76.9% of current assets of ¥19.66B, indicating that the asset base itself remains highly liquid. Advances increased from ¥1.01B to ¥1.13B, suggesting an increase in advance payments related to development and procurement. The cash balance remains at a certain level of ¥15.12B, and no significant concerns are apparent regarding short-term liquidity; however, the trend in the balance should be monitored continuously while losses persist.

Quality of Earnings

Both non-operating income and expenses were immaterial (non-operating income of less than ¥0.04B and foreign exchange losses of less than ¥0.02B). The difference between ordinary income and operating income was limited, and most of the loss can be explained by the operating loss from the core business. An extraordinary loss of ¥0.14B was recorded, but the amount was small and its impact on profit before tax was immaterial. Income taxes and other taxes were ¥0.04B and were largely unchanged, so fluctuations in the tax burden had little impact on earnings. Gross profit was ¥0.19B and the gross margin was high at 103.2%, reflecting the very small cost of sales; however, gross profit was insufficient to absorb SG&A expenses of ¥2.18B. Overall, the quality of earnings was affected only minimally by temporary factors, confirming that the recurring cost structure—namely the SG&A burden—is the central driver of losses.

Earnings Forecast and Guidance

The full-year plan calls for revenue of ¥0.72B (-0.3% YoY), an operating loss of ¥11.72B, an ordinary loss of ¥11.72B, and a net loss of ¥11.73B. While Q1 revenue progress was 25.0%, a standard level, progress for the operating loss was only 17.0% and progress for the net loss was only 17.1%. This difference suggests that the plan anticipates a greater amount of expenses being recognized from Q2 onward, and losses may expand toward the second half of the fiscal year in order to meet the full-year plan. The EPS forecast is -¥162.18, and the comparison with Q1 actual EPS of -¥28.20 also indicates that an expansion of losses toward the second half of the fiscal year is incorporated into the plan.

Shareholder Returns

The full-year dividend forecast is ¥0, and the Company intends to continue paying no dividends in the current period. Since the full-year net loss plan is ¥11.73B, the payout ratio is not applicable. The Company’s capital allocation policy is to make no dividend payments and allocate its limited cash and deposits to development and working capital.

Risk Factors

1. Risk of Delayed Monetization: The Company recorded an operating loss of ¥1.99B against revenue of ¥0.18B, and the substantial cost burden relative to business scale continues. Progress against the full-year operating loss plan of ¥11.72B was 17.0% in Q1, creating a risk that losses will expand toward the second half of the fiscal year.

2. Risk of Capital Depletion: Retained earnings deteriorated by ¥2.02B from -¥16.73B in the same period of the previous year to -¥18.75B. The equity ratio also declined from 61.5% to 61.3%, as net assets continue to decrease due to recurring losses.

3. Financing and Dilution Risk: Cash and deposits remained at a certain level of ¥15.12B, but decreased by ¥1.07B year on year. If losses continue, additional financing may become necessary, potentially resulting in dilution through the issuance of new shares.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (pharma)

Profitability and Returns

Although comparative data within the industry is limited, the Company is confirmed to be at a substantially loss-making level as a development-stage pharmaceutical company.

Growth and Capital Efficiency

The revenue growth rate was slightly positive, indicating gradual expansion in business scale.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The narrowing of the operating loss and net loss year on year, primarily due to a 5.2% reduction in SG&A expenses, represents a notable change from the perspective of cost discipline.

2. Revenue progress for the full year was 25.0%, a standard level, while loss progress remained in the 17% range, suggesting that increased expense recognition from Q2 onward may be incorporated into the plan.

3. Retained earnings deteriorated to -¥18.75B, and the equity ratio is also trending downward. The trend in cash and deposits of ¥15.12B and the rate of cash consumption will be key points in evaluating the Company’s financial foundation going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥0 to ¥0 at cost of equity ±1%, and ¥0 to ¥0 at ω±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value will be below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

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

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