RaQualia Pharma Inc. Q2 FY2025 earnings call

• Financial Performance: Total consolidated business revenue for the half-year period reached 1.535 billion yen, an 8.9% year-over-year increase. Operating loss was 190 million yen, ordinary loss was 291 million yen, and net loss attributable to parent company shareholders was 354 million yen, due to lower other revenue (upfront payments, milestones) compared to Q1 and upfront business expenditures. EBITDA, the company's core focus metric, was 46 million yen, a 920% year-over-year increase and remained positive. Total business expenses were 1.726 billion yen, a 10.3% year-over-year increase, consisting of 389 million yen in cost of sales, 782 million yen in R&D expenses, and 554 million yen in SG&A expenses. Progress against the full-year revenue target of 3.888 billion yen is 39.4%.
• Tegoprazan Key Milestones:
  • In South Korea, sales of K-CAB (local brand name for tegoprazan) grew 14.3% year-over-year to 11.5 billion yen (prescription value basis) in the first half of 2025, maintaining the leading market share and expanding the overall South Korean peptic ulcer drug market from 8 billion yen in 2021 to 15.1 billion yen in 2024. The company won all cases in the second instance of the South Korean patent dispute, strengthening exclusive marketing rights until 2031, though a small number of cases remain pending in the third instance.
  • Globally, tegoprazan is currently sold in 17 countries across 54 entered markets, with new launches in Panama and Malaysia since Q1, and marketing approval obtained in Ecuador and India during Q2. In China, sales penetration has grown to over 2,000 hospitals, and sub-licensee Luoxin has turned profitable. A world-first injectable tegoprazan is in Phase I clinical trials in China, and the sub-license agreement with Tabuk was expanded to cover 6 additional North African countries. The U.S. Phase III TRIUMpH trial completed with positive results: all primary and secondary endpoints for erosive (EE) and non-erosive (NERD) gastroesophageal reflux disease were met, including superiority over lansoprazole (a standard PPI) in healing rates, with safety and tolerability comparable to controls. NDA submission is expected in Q4 2025.
• R&D Pipeline: Positive pharmacological effects were confirmed in retinal disease animal models from a collaboration with DWTI. A collaboration with Veritas In Silico on mRNA-targeting small molecule cancer drugs expanded the research scope and obtained multiple lead compounds. The license agreement for tamibarotene with Syros Pharmaceuticals was terminated in April 2025. Subsidiary PhaimEx held the 3rd Targeted Protein Degradation Conference in Japan, the largest of its kind in the country, attracting over 200 attendees and creating potential new collaboration opportunities. Joint research with Astellas Pharma continues to progress steadily.
• Capital and Business Alliance with HK inno.N: The new share issuance and payment procedures were completed as scheduled in April 2025, raising 1.017 billion yen. Negotiations are ongoing to launch a joint research program in H2 2025, with both parties combining strengths to develop new drugs following the successful tegoprazan model.
• Balance Sheet and Cash Position: Total assets increased 2.9% quarter-over-quarter to 9.935 billion yen, total liabilities decreased 10.7% to 3.649 billion yen, and total net assets increased 12.9% to 6.286 billion yen. Equity ratio improved 5.5 percentage points to 62.9%. Cash and cash equivalents increased 280 million yen to 3.422 billion yen, with operating cash outflow of 242 million yen, investment cash outflow of 52 million yen, and financing cash inflow of 672 million yen.

1. Human Pharmaceuticals (Tegoprazan): Royalty revenue for the half-year period was 1.073 billion yen, accounting for 70% of total business revenue, with a 7.6% year-over-year increase. This marks the first time since the company's founding that half-year royalty revenue has exceeded 1 billion yen. 2. Pet Pharmaceuticals: Three approved products (GALLIPRANT, ENTYCE, ELURA) performed steadily, with GALLIPRANT growing into a blockbuster pet drug and ELURA (approved in 2024 in Europe and Japan) continuing to expand its market presence. There is no separate breakdown of absolute revenue or revenue contribution percentage disclosed for this segment in the transcript.

• The full-year 2025 consolidated performance guidance announced on February 14, 2025 remains unchanged, with no upward or downward revision.
• Full-year royalty revenue is expected to exceed the 2024 full-year result of 1.944 billion yen, but royalty alone will not reach the full-year revenue target; hitting the full-year target will depend on securing new other revenue (upfront payments, milestones, research collaboration fees), which historically tends to be concentrated in the second half. The full-year target remains within reach if the company replicates its past second-half performance.
• The 3-year total business revenue forecast of 11.1 billion yen remains unchanged. The company expects total available cash of over 16 billion yen for the next 3 years, and operating working capital is sufficiently secured.
• Key upcoming catalysts include: U.S. NDA submission for tegoprazen by end-2025, with approval expected between 2026 and 2027; the company maintains its target to out-license tegoprazan in Japan by end-2025, with HK inno.N actively pursuing out-licensing in Europe following the positive U.S. Phase III result; preclinical development preparation and out-licensing activities for ghrelin receptor agonists and IRAK-M degradation inducers are ongoing, with a goal to complete out-licensing as early as possible; P2X7 receptor antagonist remains in Lilly's pipeline, with Lilly currently re-evaluating development plans; TRPM8 blocker is in Phase I testing by Xgene.

• The current 39.4% progress against full-year revenue means the company needs to achieve over 60% of annual revenue in the second half, which carries uncertainty as new contract negotiations cannot guarantee a closing timeline.
• Some remaining cases from the South Korean tegoprazan patent dispute are still pending in the third instance (Supreme Court) in South Korea.
• Out-licensing of tegoprazan in Japan still faces uncertainties regarding potential partner interest, drug pricing and business viability.
• The 5-HT4 agonist out-licensed to Vetbiolix for veterinary use is currently behind schedule, with the PoC trial still ongoing as of Q2 end.

Q: What are the benefits of the capital and business alliance with HK inno.N beyond capital infusion? Is there technical and strategic synergy? / A: Raquia acknowledges it has less experience in late-stage development and global commercialization compared to HK inno.N, which specializes in those areas. The alliance follows the successful tegoprazan model: Raquia contributes early-stage discovery capabilities, while HK inno.N leads late development and global expansion. This partnership creates new viable pathways for Raquia's pipeline, as early-stage out-licensing is very challenging without a partner that can deliver late-stage development.

Q: Given the CEO's comments that a domestic Japanese partner for tegoprazan has not been identified, and granting rights to HK inno.N is not off the table, is an out-licensing by end-2025 still possible, and when will the company make a formal judgment if the target is missed? / A: Any out-licensing deal will be disclosed in a timely manner per disclosure rules when completed. As of Q2 end, the company does not believe a revision to the full-year guidance is required, and declines to provide a specific timeline for a potential downward revision to avoid misinterpretation of the current status.

Q: Is M&A a possible option for growth, will the company pursue new modalities, and would a new equity issuance be used to fund M&A? / A: M&A is on the table as an option if it aligns with the company's business plan of driving growth via new modalities. If M&A requires additional capital, a new equity issuance will be considered as an option, but the company only pursues capital increases for opportunities that can deliver clear strong growth. The earlier interview mentioning this topic was conducted in April, before the HK inno.N alliance closed, which has led to some misinterpretation of timing.

Q: What is the status of the 5-HT4 agonist out-licensed to Vetbiolix, which was expected to deliver PoC trial results by Q2 2025? / A: The trial is currently slightly behind the original schedule and still ongoing with patient recruitment as of Q2 end. The company's overall expectation that pilot regulatory trials will start by 2026 remains unchanged, and Raquia will continue to monitor progress.