7096.T

Core Growth Strategy Pillars

• Domestic business: Grow annual umbilical cord blood storage volume to 20,000 specimens, targeting 3% storage penetration of total domestic births. The company currently has just under 9,000 annual specimens, leaving more than double current volume in growth runway. It holds nearly 100% domestic market share, and hitting the 20,000 specimen target would drive 7 billion yen in annual domestic revenue.
• Southeast Asia (SEA) expansion: Build out a new growth market centered on Singapore, targeting a total population of ~700 million with over 10 million annual births, with future expansion into the Middle East and India also under consideration. The company also continues to evaluate investments in adjacent perinatal care business areas.

Domestic Marketing Update for HOPECELL

• A 3-month limited campaign (January-March 2026) offering 5 years of free storage for new contracts was launched one year after the HOPECELL new plan rollout. The W Hope Plan, which stores both umbilical cord and cord blood, makes up ~70% of new contracts, with the promotion offering up to 66,000 yen (tax included) in free storage, equal to a maximum 6,000 yen per-specimen revenue reduction amortized over the contract term.
• The campaign has driven a more than 25% increase in informational requests, reaching 2,878 requests in January 2026 (92.8 per day), with average daily requests remaining over 90 in February, near the peak levels of the old plan. The company notes there is still room for further growth, and is pushing for stronger momentum into March.
• The projected total revenue impact from the promotion is limited to ~3 million yen for 700 new specimens, which can be fully absorbed by gross profit if volume grows.

R&D Progress

• Clinical research for autism spectrum disorder using cord blood has completed Phase 1, with several doses already administered.
• Phase 1 clinical research for pediatric cerebral palsy (autologous and sibling donor transplants) is complete, and the company is now working with Kochi University to advance to Advanced Medical Therapy B designation. Clinical research is also ongoing for hypoxic-ischemic encephalopathy (HIE).
• Collaborations with academia are advancing umbilical cord-based basic research: Tokyo University is researching cartilage regeneration for congenital abnormalities and defects, while Osaka University is researching cartilage regeneration for knee meniscus damage.
• A new basic research initiative this fiscal year focuses on umbilical cord-derived culture supernatants and exosomes to suppress inflammation in ocular inflammatory diseases. The company plans to integrate this into free clinical practice, with a business model that allows general ophthalmologists to prescribe the resulting eye drops, with commercialization expected in the near term.
• A world-first collaboration with iPS Portal Inc. is developing a service to create and store patient iPS cells from stored cord blood, which is ideal for iPS generation due to the immature, low-environmental-impact nature of cord blood cells. The company has confirmed high-efficiency generation of high-quality iPS cells from cord blood stored for more than 20 years, results will be presented as a poster at the March 2026 Japanese Society for Regenerative Medicine, with service launch targeted for the 2027 March fiscal year.

SEA Business Progress

• Construction of the Singapore CPC (cell processing center) and CCC (cell storage center) is ongoing, with partitions nearly complete, and internal construction expected to finish between March and April 2026. Licensing application preparation (including facility completion and SOP documentation) is ongoing, with application submission planned immediately after construction completion, a 2-month review period, and a target opening in June 2026. Staff hiring is nearly fully completed.
• The timing of entry is favorable: Singapore's largest existing cord blood bank (which held ~60% market share) suffered a storage accident and has been suspended from operation for all of 2026, creating a large gap in the market. Multiple senior sales staff from the suspended bank have joined Stemcell Institute, providing strong local sales expertise.
• The company's Singapore entry is an approved project for the 60th anniversary of Japan-Singapore diplomatic relations, and the company will host expert seminars and events tied to the anniversary and opening.
• Singapore's location provides 1.5-hour flight access to Jakarta (Indonesia) and good connectivity across SEA, allowing it to serve the entire regional affluent consumer market. The company projects that it can capture 3,000 annual storage specimens (half of the available 6,000 annual market size after the exit of the largest incumbent), with prices double Japan's, leading to over 2 billion yen in annual revenue within a few years. For the Jakarta metro area (Indonesia), the company projects 1 billion yen in annual revenue based on 1% penetration and 50% market share. Combined with the 7 billion yen domestic target, the company is targeting total annual revenue exceeding 10 billion yen.

• Singapore is on track to open in June 2026, and will not contribute meaningful revenue or profit in the next fiscal year (only less than six months of operation), with full-scale profitable operations expected starting in the fiscal year after next. Singapore is projected to turn profitable starting from the 2028 March fiscal year, after which the company will enter a phase of steady revenue and profit growth.
• The iPS cell storage service is on track to launch in the 2027 March fiscal year. Research results will be presented at the Japanese Regenerative Medicine Society in March 2026.
• The full-year 2026 March fiscal year revenue is projected to reach the upper 2.8 billion yen to 2.9 billion yen range, just short of the original 3 billion yen target. The company does not plan to revise the full-year guidance, as the shortfall is narrow and the negative profit impact from Singapore startup costs was already factored into the original outlook, so results are not sufficiently far off to require a formal revision.
• A full updated medium-term management plan that includes quantified projections for the Singapore business will be released alongside the full-year 2026 March fiscal year results, after the company confirms the final launch timeline for Singapore. The long-term consolidated revenue target exceeds 10 billion yen, combining domestic, Singapore, and Indonesia operations.

The full breakdown of absolute financials for individual product segments is not provided in the transcript. Overall, the company reported that revenue hit a new all-time high for the third consecutive quarter on a quarterly basis. Operating profit decreased year-over-year due to upfront investments for the Singapore SEA expansion (including staffing and facility construction), with the Singapore business expected to turn profitable starting from the 2028 March fiscal year. New specimen volume growth improved sequentially this quarter after marketing difficulties following the 2024 launch of the new HOPECELL plan, returning to quarter-on-quarter growth.

• As Singapore's cord blood storage business operates under a national licensing regime, unforeseen delays in licensing review could push back the opening timeline, even though construction and preparation are currently on track for a June 2026 opening.
• The 2026 full-year profit target is at high risk of not being met, though the shortfall is not large enough to require a formal guidance revision at this time.
• The large storage accident by Singapore's incumbent market leader has shaken overall consumer trust in cord blood storage in the country, which could create near-term headwinds for market recovery even as it opens up market share for Stemcell Institute.
• The success of the current HOPECELL promotion depends on converting increased informational requests into closed contracts, and the final volume impact is still uncertain as of the third quarter.

Q: What is the purpose of the 5-year free storage promotion, is it a fourth-quarter push to hit full-year targets, and will it create negative earnings impacts in future fiscal years?

A: After the rollout of the new HOPECELL plan, prices increased by ~25%, and we spent one year allowing the new plan to penetrate the market without additional promotional activity. Now that contract volumes have stabilized and the higher average price creates margin headroom, we launched the promotion to lower barriers to entry and drive new contract growth. This is not a push to hit current fiscal year targets: informational requests take an average of two months to convert to closed contracts, so the growth from this promotion will mostly flow to revenue starting in March 2026 and into the next fiscal year, creating a net positive impact next year. The total revenue impact is limited to ~3.5 million yen even if 700 new specimens take the promotion, which can be fully absorbed by gross profit from higher volume. If the promotion drives 100+ additional new specimens from January's increased request volume alone, this would add 20-30 million yen in monthly revenue, enough to offset the promotional discount and deliver a net gain. We do not expect a net negative impact, and we expect a net positive impact from the campaign. Now that the new plan is fully penetrated, we will be able to implement additional promotional initiatives going forward as needed.

Q: Has the accident by Singapore's largest incumbent cord blood bank eroded overall consumer trust in cord blood storage, and when will you share a medium-term plan for the Singapore business?

A: We are currently preparing to release an updated medium-term management plan with quantified projections for Singapore alongside our full-year results this cycle. We wanted to wait to confirm the Singapore launch timeline before sharing formal projections, so we delayed the plan from an earlier release. If we open in June 2026, Singapore will have less than six months of operation in the next fiscal year, so it will not create a large financial impact next year, with full-scale operations and profit generation starting the following fiscal year. It is correct that the accident has shaken consumer trust in cord blood storage in Singapore, but this is a net opportunity for us. We hold 100% market share in Japan with 26 years of trouble-free operation, and Japanese medical technology has a strong global reputation for reliability. Our storage system is more robust than the incumbents' systems in Singapore, and we believe we can rebuild trust, recover the pre-accident 20% storage penetration rate, and capture a majority of the market. This matches historical precedent in Japan, where after a competitor accident, the market ultimately resumes growth once a trusted operator enters. We are also evaluating expansion to Vietnam and Malaysia, and expect regional consumers will prefer to use our trusted Singapore facility rather than local storage, creating a regional market centered on Singapore. Higher prices in Singapore mean higher gross margins, and we expect to deliver higher profit margins than our domestic Japanese business.

Q: What is the planned use case for the iPS cell service developed with iPS Portal, and what is the global outlook for this offering?

A: The service follows the "my iPS cell" concept: customers store their own iPS cells derived from their stored cord blood for ready-to-use future application. We expect iPS cells will be used for future disease treatment and free clinical practice, so we are building the storage service ahead of widespread clinical adoption. This offering can also be rolled out globally: if a customer stores cord blood in Singapore, they can request iPS cell generation and storage through our service, and we are currently the only provider in the world offering this end-to-end service. This offering expands our total addressable market beyond core cord and cord blood storage, culture supernatant, and exosome products.

Q: Why haven't you revised your full-year earnings guidance, does that mean results are not far enough off the original target to require a revision?

A: Fourth quarter revenue is tracking better than expected, and we project full-year revenue will reach the upper 2.8 billion yen to 2.9 billion yen range, just short of the original 3 billion yen target. Singapore startup costs are already factored into the original guidance as a negative profit driver, and the gap between actual results and the original target is small enough that we do not need to formally revise guidance at this time. We do acknowledge that hitting the original profit target is a high bar at this point in time.