2183.T

• Company Overview & Core Business

• Linical is a Japan-originated global CRO with operations across ~30 countries, holding ISO/IEC 27001 information security certification across all headquarters and subsidiaries, with no reported data breaches at present.
• The firm runs three core businesses: 1) CRO for clinical trial development of new drugs; 2) Post-approval ikuyaku services including periodic adverse event reporting, supplemental clinical research, and promotional studies; 3) End-to-end drug discovery support including market analysis, regulatory strategy, and partnership negotiation for foreign firms entering the Japanese market.
• 55% of total employees are based overseas; Japan has a higher employee share relative to its revenue contribution due to its role as global headquarters and its more labor-intensive operating model.

• High-Growth Advanced Therapy Pipeline Focus

• Linical is the full-service CRO for Heartseed's iPS cell-derived cardiomyocyte regeneration therapy for post-myocardial infarction, covering all services from development strategy to trial product logistics and data management, with the trial currently ongoing.
• The firm is prioritizing business development for gene delivery/vector-based therapy platform companies, which are seeing rapid growth, with initial inbound inquiries from multiple firms already received at the exploratory stage.

• Growth Strategy & Digital Transformation

• Organizational: Build a scalable structure that expands service coverage while improving profitability; differentiate from large global CROs through customized client service.
• Governance: Improve cross-regional communication to mitigate time zone-related operational gaps; prioritize recruitment and training of AI/IT talent; promote cross-service collaboration across CRO, post-approval, and discovery support segments.
• Sales: Strengthen global sales capability, with a focus on the large US market; prioritize gene therapy and DDS platform companies as target clients; dispatch Japanese employees to the US to train local sales talent.
• AI/Digital Investment: The US subsidiary already uses AI to automate site startup processes and AI-based risk-based source data verification (SDV) to identify high-risk sites for review. AI is being rolled out across all operational areas: it supports trial design by synthesizing data from trial documents and academic literature, speeds up patient enrollment by predicting site case volume, analyzes trial data to forecast adverse event patterns, provides real-time safety risk monitoring alerts, and detects errors in regulatory submissions to ensure compliance. The firm is actively searching for talent with both technology and clinical development expertise to lead this transformation, and is strengthening partnerships with DCT and AI technology providers.

• Management has downward revised full-year FY2026 revenue guidance to 9.3 billion yen, and expects performance to remain challenging unless US FDA operations resume. • If FDA regulatory operations begin recovering gradually starting January (as currently expected), dozens of millions of USD of delayed projects will restart, and revenue recognition could begin as early as Q4 FY2026 or the next fiscal year. • A full regional recovery across China and Taiwan is expected once US FDA operations resume. • South Korea's performance is expected to improve following the launch of the new regional data center, which will better serve APAC clients. • The firm expects the pipeline of approved gene and cell therapies to grow in coming years, despite past high-profile failures in the sector.

Linical operates three core business segments and has global regional revenue breakdown as follows:

1. Product Segments: No explicit absolute financial figures are provided for the three business segments (CRO Business, Ikuyaku (Post-Approval) Business, and Drug Discovery Support Business).
2. Regional Revenue: Japan accounts for 33% of total revenue; overseas (North America, Europe, Asia-Pacific) accounts for 67% of total revenue.

• Japan: achieved revenue growth, actively cutting costs to reduce net deficit. Order backlog saw a slight increase.
• United States: tens of millions of USD of business operations are currently halted, with no active progress, making it the most severely impacted region. Around 20 million USD of project cancellations occur monthly, with only 5-6 million USD of prospective orders held at the verbal award stage.
• Europe: slight revenue growth, but progress is heavily dependent on US FDA regulatory movement. Project delays are occurring, but the deficit is expected to shrink gradually if FDA operations resume.
• Asia-Pacific (ex-Japan): South Korea remains challenged, but the new regional data center in South Korea is expected to drive incremental order growth; China and Taiwan have emerged from the most severe slowdown, with trial volume growing steadily; Taiwan subsidiary has achieved stable profitability, though large-scale growth has not yet occurred.

• The largest near-term risk is prolonged delays to US FDA clinical trial plan reviews caused by staff shortages and turnover linked to US immigration policy, which has left thousands of millions of USD of projects paused at the verbal award stage, with no visible timeline for resolution. An average of 20 million USD of project cancellations occur monthly, leading to an annualized 240 million USD of lost revenue. • Japan's unresolved drug loss (delayed new drug entry) issues, including mandatory translation of tens of thousands of pages of global regulatory documents to Japanese and complex drug pricing rules, discourage foreign firms from conducting clinical trials in Japan and limit domestic revenue growth. • Soft venture capital funding for biotech startups, including paused government subsidies, has delayed project start-ups and bid processes, creating additional revenue headwinds. • Goodwill impairment risk remains, as material goodwill balances are still outstanding for European and US acquisitions, although all acquisition-related debt for European purchases has been fully repaid.

Q: The Tokyo Exchange requires listed firms to focus on capital cost and share price performance. Linical's share price is depressed, and there is no public mid-term strategy. How will management improve transparency and give shareholders confidence? / A: Management is currently reviewing disclosure of a mid-term plan and capital cost-focused governance, but has not reached a final conclusion. The firm's top priority to restore shareholder confidence is a recovery in the US market, and it is strengthening its sales structure and expanding partnerships to grow inbound outsourced trial business from global biotech firms. Management also highlighted that improving operational efficiency via digital transformation and moving away from labor-intensive models is a core priority.

Q: Some large pharma firms have paused or canceled cell and gene therapy development projects. What is the outlook for this segment for Linical? / A: While there have been past failures in vector-based therapy, several companies have already achieved regulatory approval in Japan and the US for vector-based treatments for ultra-rare diseases, and successful cases will continue to increase. Linical's iPS cell therapy project with Heartseed is progressing well, unlike other high-profile cardiac regeneration projects that have failed, showing that the right technical approach can succeed. By working with multiple clients across the sector, Linical mitigates the risk of single-project failure, and the era of widespread failure in gene therapy is over.

Q: What is Linical's strategy for the Chinese market, where biotech development is accelerating? / A: Linical hired a new local sales director in China one to two months ago, who is already visiting domestic biotech firms and generating early pipeline. The firm is targeting Chinese biotech companies that aim to conduct global trials including US FDA approval, because FDA approval is a prerequisite for successful global market access, so Chinese biotechs need CRO support for US trials. This is the core focus of the firm's Chinese growth strategy.

Q: Given current depressed performance, can Linical maintain its current dividend level next fiscal year? / A: Management cannot rule out a dividend cut completely, but the firm's core principle of stable, performance-aligned dividend payouts remains unchanged.