Revenue declined, while operating profit progressed ahead of plan

Revenue in the first quarter of the fiscal year ending March 2027 was ¥116.16 billion, down ¥11.38 billion, or 8.9%, from ¥127.54 billion in the same quarter of the previous year. Operating profit, meanwhile, rose 39.4% to ¥30.65 billion from ¥22.00 billion. The operating margin increased 9.1 percentage points from approximately 17.2% to approximately 26.4%, representing a significant margin improvement despite lower revenue. The full-year forecasts remain unchanged at revenue of ¥455 billion and operating profit of ¥94 billion.

The first-quarter profit improvement depended more on a change in the cost structure than on sales growth. The company explained that lower cost of sales and co-promotion expenses following the end of the co-promotion agreement for Forxiga tablets, the absence of one-time partnership and development expenses recorded in the same quarter of the previous year, and greater expense efficiency pushed up operating profit. On the cost side, the company said that cost of sales fell by approximately ¥7.5 billion, research and development expenses by approximately ¥3.8 billion, and selling, general and administrative expenses by approximately ¥7.2 billion year on year. It is necessary to distinguish whether the same effects continue into the first half or whether the benefit from the reversal of one-time expenses fades.

First-quarter progress against the full-year forecast was approximately 25.5% for revenue and 32.6% for operating profit. Although quarterly seasonality must be considered, operating profit exceeded the ¥23.5 billion implied by simple quarterly allocation by ¥7.15 billion. For the first half, revenue of ¥227.5 billion and operating profit of ¥47 billion represent 50% of the full-year forecasts. These levels should be used to determine whether the profit lead is temporary or whether profitability above the full-year operating margin of 20.7% has become established.

The company operates a single pharmaceutical segment, and segment-level revenue and profit breakdowns are not disclosed in its earnings releases. The next results should therefore be reviewed for product-level sales changes, actual cost of sales, research and development expenses, selling, general and administrative expenses and their year-on-year changes, as well as any revisions to the full-year forecast. Even if operating profit increases, a cautious assessment of profit levels in the latter half of the first half will be necessary if the decline in domestic product sales is being absorbed only by lower one-time expenses.