Pharma Foods International Co.,Ltd. Q4 FY2025 earnings call

• Core Existing Business Updates
  • BtoB: Added a third sales channel (daily food manufacturers) to existing channels (in-house brand wholesale, material sales to beverage/food manufacturers). GABA and catechin were adopted for onigiri sold at 7,000 convenience stores in the Kanto region, and in-house brands Sleep Lab and Blood Pressure Lab were adopted by Costco and drug store chains. In North America, PharmaGABA-containing AVRO functional powdered beverage won the top brand award at the Beverage Digest Awards, and the company is prioritizing US GRAS certification for GABA to unlock 60 tons of annual new demand.
  • BtoC: Total recurring subscription customers increased 3.5% year-over-year to 773,000. New products after Nu-Mo are growing steadily, with Nyusu and DRcula each exceeding 3 million units sold cumulatively, and Tamagosamin becoming a long seller with 8.27 million bags sold cumulatively. Meiji Pharmaceutical's recurring customer count increased 2.7x year-over-year following upfront investment, with profit recovery expected within 2 years.
  • Biomedical: Antibody drug candidate MT-3534 out-licensed to Mitsubishi Tanabe Pharma completed Phase I single-dose clinical trial, and a patent rights transfer for an antibody sequence to Takeda Pharmaceutical was completed, strengthening credibility of the company's ALAgene drug discovery technology.
• New Business Progress
  • Agri Business: The company developed biostimulants to address climate change and yield/quality declines in agriculture. Two product candidates have completed efficacy testing: GABA-based biostimulant (upcycled GABA fermentation by-product) received organic JAS certification and is already used by organic farmers, while plant endophytic yeast biostimulant increased rice yield by 14%+ and reduced poor-quality white immature grains from 20% to 3.4% with consistent results across multiple years. The project was selected for Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF) open innovation subsidy program, with a consortium including the University of Tokyo and Itochu Food advancing toward commercialization.
  • Textile Business: The upcycling project for unused egg shell membrane was selected for METI NEDO's Bio-Manufacturing Revolution Promotion Project, with three development projects totaling over 5 billion yen. The egg shell membrane-derived sustainable fiber ovoveil has been launched, exhibited at Paris Collection for two consecutive years, and displayed at Osaka-Kansai Expo, where the company held business discussions with apparel brands from multiple European countries, and over 80% of Expo visitors reported purchase intent. The company launched its in-house lifestyle brand ovonir to test consumer demand, and ovoveil has received widespread industry attention as an eco-friendly alternative to synthetic fiber.
• Mid-Term Strategic Framework
  • The company is executing the "New Value Creation 1K Project", a mid-term plan to reach 100 billion yen in total sales by the 2026 July fiscal year. The plan targets 70 billion yen from organic growth of existing businesses, with the remaining 30 billion yen to come from M&A and new businesses.

For the 2025 July fiscal year, total consolidated sales reached 65.26 billion yen, with a total operating profit of 2.367 billion yen (after corporate expenses and R&D deductions), resulting in an overall operating margin of 3.6%. BtoB Business: Achieved approximately 1.2 billion yen in operating profit. Functional material sales grew 120% year-over-year, driven by strong performance of core GABA material domestically and internationally, but the segment saw a year-over-year decrease in profit due to a 30% drop in revenue from pharmaceutical contract manufacturing. BtoC Business: Achieved approximately 3.7 billion yen in operating profit. Direct-to-consumer sales grew 108% year-over-year, with the core Nu-Mo hair growth brand growing 10% year-over-year, but the segment saw a year-over-year decrease in profit due to upfront investment in new products. Biomedical Business: Continued aggressive R&D investment, with all R&D costs deducted from BtoC operating profit, leading to negative operating profit for the segment.

• For the 2026 July fiscal year, the company is targeting total sales of 68 billion yen, which represents consecutive year-over-year sales growth, but expects a year-over-year decrease in profit due to continued aggressive investment in drug discovery, agri business, textile business, and M&A activities. Management stated that upside to the 68 billion yen sales target is possible.
• The company maintains its mid-term target of reaching 100 billion yen in total sales by the end of the 2026 July fiscal year, as the final year of the current mid-term plan.
• For R&D pipeline: In the biomedical segment, the company plans to add two new pipelines in the oncology space in 2026 July fiscal year, with a goal of out-licensing these candidates by 2029, and targets 2030 approval for a new caducil cerebral circulation improvement drug. Meiji Pharmaceutical targets 23 billion yen in sales by 2030.

• Acquiring target companies at high valuations carries significant risk, so the company is proceeding cautiously with M&A negotiations despite targeting a 20 billion yen-scale acquisition in the 2026 July fiscal year.
• M&A is a required core component to hit the 100 billion yen sales target, so failure to complete planned M&A will prevent the company from achieving its mid-term goal.
• New businesses (agri and textile) still face remaining challenges to achieve profitable scale, despite solid progress in commercialization.
• Management has openly acknowledged uncertainty around achieving the 100 billion yen mid-term sales target, noting that it will not be an easy outcome to deliver.

No Q&A section was included in the provided transcript.