ＬＡＡ社 Order Intake Plan Shortfall and Underperformance

「Consolidated revenue was ¥8,665 million, down 17.0% year on year, mainly because revenue in the United States and Europe declined substantially from the previous fiscal year as they were unable to offset the decline in revenue following the completion of major projects.」

「The United States was unable to offset the decline in revenue following the completion of a large-scale project by securing new projects and consequently reported an operating loss. Europe also recorded a larger operating loss, resulting in an operating loss of ¥511 million, compared with an operating loss of ¥192 million in the same period of the previous year.」

「In the United States, contracted work progressed as expected and revenue was steadily recognized. Contract changes resulting from additional work also contributed to substantial year-on-year increases in revenue and operating income. We steadily acquired new projects from U.S. biotech companies and others, and will continue to focus on deepening our presence in the U.S. CRO market to achieve sustained growth.」

「In the United States, while the previous period was affected by delays in starting large international joint clinical trials in Europe and the United States, the current period saw substantial year-on-year increases in revenue and operating income, driven in part by the acquisition of new projects and better-than-expected progress on existing projects.」

「In the United States, while the previous period was affected by delays in starting large international joint clinical trials in Europe and the United States, existing projects progressed better than expected in the current period. Together with the yen’s depreciation against foreign currencies, this resulted in substantial year-on-year increases in revenue and operating income.」

「In the United States, while the previous year’s corresponding period was affected by delays in starting large international joint clinical trials in Europe and the United States, existing projects progressed better than expected in the current period. Together with the yen’s depreciation against foreign currencies, this resulted in substantial year-on-year increases in revenue and operating income.」

「Although operating loss was recorded in the first quarter due to delays in starting large-scale international joint trials in the US and Europe as a result of the Russia-Ukraine war and other factors, as well as a temporary decline in personnel utilization, both the European and US operations improved in the second quarter, bringing cumulative operating profit to ¥373 million, down 26.4% year on year.」

「In the United States, revenue was below the level assumed and declined year on year due to delays in starting the major projects mentioned above. In addition to the resulting temporary decline in personnel utilization, the business posted an operating loss because it could not absorb the increase in personnel expenses from hiring to support the start of new projects and additional work scheduled from the second quarter onward.」

「In our U.S. business, existing orders were steadily executed, and revenue and operating income reached record highs for the first nine months of the fiscal year.」

「In our U.S. business, the impact of the COVID-19 pandemic declined substantially as initially expected. We steadily worked through existing contracted projects, recorded additional revenue from contract amendments, and benefited from revenue contributions from multiple projects won during the fiscal year. As a result, revenue and operating profit reached record highs for a cumulative second quarter, and the recovery trend that began after the second quarter of the previous fiscal year continued, resulting in substantial year-on-year increases in revenue and operating profit.」

「In the United States, economic activity improved as vaccination progressed. Despite the continuing impact of the COVID-19 pandemic on our U.S. business, the steady execution of existing orders and additional revenue recognized from contract changes, among other factors, extended the recovery trend that had continued since the second quarter of the previous fiscal year, ending March 2021. Revenue and operating income increased substantially year on year, and the business returned to operating profitability.」

「In the CRO industry, regulatory measures were introduced to enable clinical trials to be conducted remotely. The U.S. subsidiary responded promptly, steadily worked through the orders accumulated substantially through the strengthening of its sales organization since the previous period, and, together with the benefits of more efficient organizational and operating structures, maintained stable operating profitability from August 2020 onward.」

「The company steadily worked through the scheduled hours for orders accumulated substantially through the strengthening of its sales organization in the previous period, and remained operating-profit positive from August onward.」

「In the United States, the benefits of strengthening management and the sales structure and reducing costs through restructuring emerged steadily, and operating profit excluding goodwill amortization and the legal fees described above became positive. The backlog of contracted projects, which will contribute to revenue from the next fiscal year onward, also increased substantially from the end of the previous fiscal year.」

「Against this backdrop, at Linical Accelovance America, Inc. in the United States (hereinafter, LAA), the effects of strengthened management, expanded sales capabilities and restructuring initiatives carried over from the previous fiscal year began to emerge. The company achieved operating profitability on a monthly basis, creating a situation that offered promise for the future.」

「During the first quarter of the current fiscal year, operating performance remained strong at the European, Korean, and Taiwanese subsidiaries, while the U.S. subsidiary also began to improve its performance.」

「However, at LAA, orders were put on hold immediately before contracts were signed at the time of the acquisition, and development for several contracted projects was cancelled. New contracts subsequently continued to fall below plan, and during the first nine months of the current fiscal year, revenue was substantially below forecast.」

「However, during the first six months of the current fiscal year, LAA experienced cases in which orders were put on hold immediately before contracts were signed after the acquisition, as well as the cancellation of development for several contracted projects. New contracts also fell short of plan, and revenue was substantially below forecast.」