Operating profit rose despite lower revenue; the focus is on whether pricing and cost improvements are sustainable

FY2027-Q1 revenue was ¥1,269 million, down 26.2% from approximately ¥1,720 million in the same quarter of the previous year. Operating profit, however, rose 17.3% to ¥216 million from approximately ¥185 million. Ordinary profit was ¥204 million and profit attributable to owners of the parent was ¥198 million, keeping the company profitable at the operating, ordinary and net profit levels. As operating profit increased despite lower revenue, the results indicate that the focus has shifted from volume growth to improvements in pricing and the cost structure.

The operating margin rose from approximately 10.7% in the same quarter of the previous year to approximately 17.1% in the current quarter. The company attributed the improvement in profit to the optimization of supply prices, the shift to products with lower manufacturing costs and lower selling, general and administrative expenses, including R&D expenses. However, it has not disclosed the contribution from price revisions, the percentage of products switched to lower-cost products or gross margins by product. Q1 net profit also included ¥33 million in extraordinary gains, including gains on the sale of fixed assets, reversal gains on stock acquisition rights and reversal gains on cancellation losses related to lease contracts. Accordingly, the priority for H1 is to confirm whether the improvement on an operating-profit basis is continuing.

For FY2026, revenue expanded to ¥6,590 million, but the company recorded an operating loss of ¥138 million, an ordinary loss of ¥375 million and a loss attributable to owners of the parent of ¥413 million. Q1’s operating profit therefore represents an improvement from the full-year loss, but it is still too early to say that the annual earnings structure has been transformed. The shift to lower-cost products began in the fourth quarter of FY2026, and the company expects the resulting margin improvement to be realized over the full year in FY2027. The next earnings release should clarify whether the Q1 improvement reflects temporary delivery or expense-recognition timing, or whether it can be reproduced over the full year.

The company has a single reporting segment, pharmaceutical development, and revenue and profit by product, including GBS-007 and GBS-010, cannot be confirmed. In H1, a key point will be whether the company can disclose, at least by product or factor, the respective effects on profit of supply-price revisions, payments to overseas CDMOs, the weaker yen and the shift to lower-cost products, in addition to gross profit and gross margin.