■Future Outlook LeTech <3497> expects an increase in sales and ordinary income of more than 20%, with sales of 2.14 billion yen (+33.8% YoY), operating income of 150 million yen (+7.7% YoY), ordinary income of 100 million yen (+21.7% YoY), and net income of 1.03 billion yen (-11.4% YoY) for the July 2024 term, and has maintained its initial forecast (announced in September 2023).

1. Performance outlook for fiscal year ending December 2024.

For Shionogi & Co., Ltd.<4582>, its consolidated revenue for the fiscal year ending in December 2024 is expected to decrease by 53.1% compared to the previous year to 26.23 billion yen, operating loss is expected to be 370.2 million yen (compared to a loss of 81.1 million yen in the previous year), ordinary loss is expected to be 352.4 million yen (compared to a loss of 73.6 million yen in the previous year), and net loss attributable to shareholders of the parent is expected to be 362.8 million yen (compared to a loss of 196.2 million yen in the previous year). This is a downward revision from the initial plan (announced on May 7, 2024).

With regard to revenue, it had expected a double-digit decline from the initial stage due to the impact of drug price reductions and the penetration of generic drugs, but sales in the first quarter fell well below the initial plan of 597 million yen, down 61.3% year-on-year due to the impact of inventory adjustments before the new drug price was applied, and it judged that it would be difficult to recover due to factors such as drug price decline and decrease in market share from the second quarter onwards, prompting a downward revision. The drug prices were lowered significantly by around 18% compared to the previous year due to the revised price in April 2024, as a result of the disappearance of the new drug creation addition for RTD formulations/RI administration, which was applicable until then. It is anticipated that it will return to a modestly declining pace of several percentage points per year after 2025. The drug prices for generic drugs were also reduced by about 15%, and it is assumed that the market share will gradually decrease from around 60% at the end of the previous period.

*The new drug creation addition (promotion addition for new drug creation and development of non-approved drugs) is an addition given to new drugs that meet certain conditions when drug prices are revised. The purpose of the system is to promote the creation of innovative new drugs and the development of non-approved drugs by maintaining or reducing drug prices until the patent expires. When generic drugs are released, the target items are excluded from the next revision year and the drug prices are significantly reduced.

The gross profit margin is expected to decline from the previous year's 78.9% due to the impact of drug price reductions and the fact that the exchange rate is trending weaker against the yen. In the revised plan, the assumed exchange rate has been revised from the previous year's rate of 141.8 yen/dollar to 151.4 yen/dollar, which is the same as the previous year. This is because it will be a factor in higher purchasing costs. Of the sales and administrative expenses, the research and development expenses were initially expected to increase by 568 million yen compared to the previous year to 3,207 million yen, but due to the weakening yen, it has been revised to 3,409 million yen. Research and development expenses will mainly cover clinical trial costs for BCV and joint research expenses with overseas academic institutions, so it will be affected by the weaker yen. However, by reviewing other expenses, the entire sales and administrative expenses plan is expected to be in line with the initial plan, with an expected increase of 401 million yen to 5,624 million yen. In addition, the number of employees on a consolidated basis is planned to be maintained at the same level as the end of the previous year, which was 109 (103 on a non-consolidated basis).

The company is currently negotiating new license agreements for pharmaceutical products that are expected to be profitable early on, in addition to TREAKISYM(R), with multiple companies and is aiming to conclude the agreements in the third quarter. The partner negotiations for BCV are also scheduled to begin in earnest after the third quarter. With multiple pipelines expected to enter clinical trials after 2025, it is possible that multiple partner contracts will be concluded for each pipeline, with attention being paid to future trends.

(Written by FISCO guest analyst, Jo Sato)