Expanding the CRO Customer Base and Strengthening Contract Research Capabilities

「Orders for high-value-added new nonclinical services, such as medium-term carcinogenicity studies, increased, but many studies were scheduled for completion in the following fiscal year, causing revenue to decline from the previous fiscal year. Orders for clinical studies also remained strong, but many were scheduled for completion in the following fiscal year, and revenue declined from the previous fiscal year.」

「During the first six months of the fiscal year, the company focused on securing orders for high-value-added, differentiated nonclinical and clinical studies. Although orders received increased from the previous fiscal year, many of these newly won studies were scheduled for completion in the second half of the fiscal year or later, limiting their impact on revenue during the period.」

「At 安評センター, the number of contract testing projects increased on the back of strong orders for genotoxicity studies from overseas. However, the impact on revenue during the first nine months of the fiscal year was limited because many studies were still in progress.」

「At 安評センター, the number of contract testing projects increased through the sharing of its customer network with 新薬リサーチセンター and integrated sales activities. However, the impact on revenue during the first six months of the fiscal year was limited because many studies were still in progress.」

「In April 2023, the company decided to consolidate the contract nonclinical testing business at the Central Research Institute of 株式会社新薬リサーチセンター in Eniwa, Hokkaido, by reallocating personnel to 株式会社安評センター. As the business remains in the process of being consolidated, revenue at 新薬リサーチセンター declined year on year. Meanwhile, during the consolidation process, 安評センター increased the number of contract testing projects by sharing its customer network with 新薬リサーチセンター and conducting integrated sales activities.」

「Orders for large-animal studies, including monkeys and pigs, remained solid at subsidiary 株式会社新薬リサーチセンター. At 安評センター, orders for overseas genotoxicity studies and large-animal studies also became more active, indicating steady progress from the investments.」

「During the first six months of the fiscal year, revenue from contract PCR testing declined following the transfer of all shares in 株式会社ジェネティックラボ in January 2022. Meanwhile, revenue in the core nonclinical testing field progressed steadily, supported by the business's strong track record of orders.」

「Contract nonclinical and clinical testing had declined in the same period of the previous year because the pandemic restricted the conduct of studies and order-taking activities. During the first nine months of the fiscal year, however, initiatives suited to the era of living with COVID-19 proved effective, with revenue recovering and orders received increasing, particularly for clinical studies. In addition, the increase in orders enabled the business to maintain high utilization, improving the cost ratio.」

「As a result, during the first six months of the fiscal year, revenue increased substantially by ¥1,860.051 million, or 151.8%, year on year, while operating income was ¥1,582.507 million, an increase of ¥1,579.342 million, or 49,904.7%, from the same period of the previous year.」

「Contract nonclinical and clinical testing had declined in the same period of the previous year because the pandemic restricted the conduct of studies and order-taking activities. During the first six months of the fiscal year, however, initiatives suited to the era of living with COVID-19 proved effective, with revenue recovering and orders received increasing, particularly for clinical studies. In addition, the increase in orders enabled the business to maintain high utilization, improving the cost ratio.」

「Sales activities suited to the era of living with COVID-19 helped new orders recover, particularly for clinical studies, while the increase in orders and high utilization also improved the cost ratio. As a result, during the first nine months of the fiscal year, revenue increased substantially by ¥1,155.766 million, or 255.7%, year on year, and operating income was ¥953.003 million, an increase of ¥1,044.536 million from the same period of the previous year, which had recorded an operating loss of ¥91.533 million.」

「Contract clinical and nonclinical testing, for which order-taking activities had declined due to the impact of COVID-19, also saw new orders recover steadily as sales activities during the pandemic, centered on web meetings and similar measures, became established.」

「Contract clinical and nonclinical testing, for which order-taking activities had declined due to the impact of COVID-19, also saw new orders recover steadily as sales activities during the pandemic, centered on web meetings and similar measures, became established.」

「In the second quarter, postponed studies resumed, and new orders also gradually began to recover.」

「For contract nonclinical testing, 安評センター focused on securing new orders for nonclinical studies involving large animals in addition to its established strength in safety testing of agrochemicals and other substances, following the completion of improvements to its large-animal housing and management facilities in the previous fiscal year. However, the spread of COVID-19 restricted imports of animals for contract nonclinical testing, affecting the progress of nonclinical studies as planned. In the clinical business, it also became difficult to recruit subjects and conduct studies.」

「After the coronavirus issue became apparent, sales in the CRO business lost momentum, and revenue declined by ¥295.581 million, or 13.2%, from the previous fiscal year. As a result, the recovery of fixed costs, which had increased because 株式会社安評センター had made upfront investments in facilities and personnel to strengthen its order-taking structure, did not progress, and the business recorded an operating loss of ¥36.170 million, compared with operating income of ¥315.010 million in the previous fiscal year.」

「During the first nine months of the fiscal year, orders received remained at about the previous year's level, but many of the orders were scheduled to generate revenue from the fourth quarter onward. Revenue therefore declined 15.5% year on year. In addition, fixed costs increased as 株式会社安評センター made upfront investments in facilities and personnel to strengthen its order-taking structure, resulting in an operating loss of ¥35.012 million, compared with operating income of ¥167.317 million in the same period of the previous year.」

「The business provides contract clinical trials for pharmaceuticals and food products, as well as contract nonclinical studies, including pharmacological efficacy, safety pharmacology, pharmacokinetic, and safety testing of agrochemicals and food-related substances. ... Revenue during the first six months of the fiscal year declined 17.4% year on year compared with the same period of the previous year, which included the second quarter when revenue from testing projects transferred through the acquisition of a business by 株式会社安評センター was concentrated. Operating results also fell into the red because sales were concentrated in relatively low-margin tests and fixed costs increased as 株式会社安評センター made upfront investments in facilities and personnel to further strengthen its order-taking structure.」

「The CRO business worked to strengthen orders by expanding and deepening transactions with existing customers while focusing on developing new customers. In particular, 安評センター completed the repair and improvement of its large-animal housing and management facilities, established an order-taking structure, and focused on securing new orders for nonclinical studies involving large animals in addition to its existing studies involving medium-sized and small animals. As a result, orders received by the CRO business during the first quarter were ¥529.215 million, up 7.6% year on year.」

「The business benefited from the acquisition of a business by 株式会社安評センター in April 2018, which substantially increased revenue from safety testing and other services. Revenue therefore increased 72.7% year on year. Operating income also rose substantially, increasing ¥188.124 million, or 148.3%, from the previous fiscal year.」

「In this business, revenue from safety testing and other services acquired by 株式会社安評センター in the previous April made a significant contribution, resulting in a substantial 94.1% year-on-year increase in revenue. Operating income also improved significantly, with the business recording a profit of ¥167.317 million, an improvement of ¥109.006 million from the same period of the previous year.」

「In addition, on 1 April of this year, consolidated subsidiary 株式会社安評センター acquired the business of 公益財団法人食品農医薬品安全性評価センター. As a result, the CRO business's order backlog at the end of the second quarter increased sharply to ¥1,127.929 million, up 163.4% year on year, while its capacity to accept nonclinical safety testing projects across a broad range of fields also expanded substantially.」

「On 1 April of the current year, the Company's consolidated subsidiary 株式会社安評センター acquired the business of 公益財団法人食品農医薬品安全性評価センター. As a result, CRO business order backlog at the end of the first quarter of the current consolidated fiscal year increased substantially to ¥1,209 million, up 182.4% year on year, and its capacity to accept orders for nonclinical safety studies across a broad range of fields also expanded significantly.」

「The business posted lower revenue and operating income year on year because the order backlog at the beginning of the fiscal year had declined from the previous year, partly due to the timing of orders from pharmaceutical companies. The order backlog at the end of the third quarter, which is expected to generate revenue from the fourth quarter onward, was progressing steadily toward further expanding operating income.」

「During the first six months of the fiscal year, revenue and operating income declined year on year because the order backlog at the beginning of the fiscal year was lower than in the previous year. The order backlog at the end of the second quarter, which is expected to generate revenue from the third quarter onward, was progressing steadily toward expanding the full-year profit.」

「In the CRO business, we worked to expand and deepen transactions with existing customers, while focusing on developing new customers and strengthening orders. To further expand orders for preclinical studies, we worked on research and development of new disease models to meet the diverse needs of customers, primarily pharmaceutical companies.」

「The CRO business benefited from a substantial order backlog at the beginning of the fiscal year, as well as active sales and order-taking activities. Revenue increased year on year, while operating income rose significantly as revenue from nonclinical testing, which has a high fixed-cost ratio, substantially exceeded the break-even point.」

「In the CRO business, we worked to expand and deepen transactions with existing customers, while focusing on developing new customers and strengthening orders. To further expand orders for preclinical studies, we worked on research and development of new disease models to meet the diverse needs of customers, primarily pharmaceutical companies.」

「Supported by a substantial order backlog at the beginning of the period and proactive sales and order-taking activities, results for the first six months of the current fiscal year were sales of ¥485.576 million, up 81.1% year on year. As revenue exceeded the break-even point for preclinical studies, which have a high fixed-cost component, operating profit was ¥82.156 million, compared with an operating loss of ¥25.764 million in the same period of the previous year, resulting in a substantial increase in sales and a return to profitability. The order backlog for revenue from the third quarter onward also remained steady, standing at ¥448.059 million at the end of the current second quarter, compared with ¥448.385 million in the same period of the previous year. We will continue working to strengthen orders and aim to expand full-year profitability.」

「Supported by a substantial order backlog at the beginning of the period and proactive sales and order-taking activities, results for the first quarter of the current fiscal year were sales of ¥157.003 million (¥85.354 million in the same period of the previous year). As revenue exceeded the break-even point for preclinical studies, which have a high fixed-cost component, operating profit was ¥12.346 million, compared with an operating loss of ¥39.464 million in the same period of the previous year, resulting in a substantial increase in sales and significant improvement in profitability. The order backlog for revenue from the second quarter onward also remained on an upward trend, standing at ¥509.379 million at the end of the current first quarter, compared with ¥337.429 million in the same period of the previous year. We will continue working to strengthen orders and aim to expand full-year profitability.」

「Going forward, we will seek to expand transactions with existing customers while focusing on developing new customers. We will also seek to expand into contract preclinical studies using disease-model mice held by our genomics business, strengthen collaboration with Group company 医化学創薬㈱, and expand the business by creating synergies within the Group.」