Japan Tissue Engineering Co.,Ltd. Q4 FY2025 earnings call

Overall Full-Year 2025 Performance

• Full fiscal year 2025 (ending March 2025) total revenue was 2.455 billion yen, with an operating loss of 238 million yen. The full-year loss was primarily driven by the absence of a large METI subsidy that was recorded in the prior fiscal year, plus the delayed Teijin payment. Q4 operating profit hit 95 million yen, a sharp increase quarter-over-quarter.
• The company is refreshing its management structure: effective after the June 2025 shareholder meeting, Kazuto Yamada will become incoming President, with new board and executive team appointments to strengthen the operating foundation.

Regenerative Medicine Product Business Highlights

• ジャスミン launched sales in January 2025, with over 50 waiting patients already accumulated for the 2026 fiscal year.
• The new allogeneic cultured epidermal pipeline Allo-JaCE03 is on track to submit for approval during the 2026 March fiscal year.
• ジャック (autologous cultured cartilage) received approval for expanded indication to osteoarthritis (OA) of the knee from the Japanese Ministry of Health, Labour and Welfare's panel, with formal approval expected by May 2025. The company targets national insurance listing in Q3 FY2026. This expansion has long-term potential to grow annual cases from under 200 currently to over 1,000, making it the company's most important growth driver for hitting 5 billion yen in total revenue.
• Autologous CAR-T cell therapy development advanced: investigator-initiated trials for acute lymphoblastic leukemia have started, adding to the existing trial for malignant lymphoma at Nagoya University.

Regenerative Medicine Contract Business Highlights

• The business is expanding into new technical and therapeutic areas beyond its current scope, with ongoing collaborations in iPS cells (VC Cell Therapy), circulatory system (Metcela), and corneas (Actualize). The company aims to leverage its end-to-end support capabilities to win more domestic and international clients.

R&D Support Business Highlights

• EpiSensA, the skin sensitization test method, is now included in the OECD test guideline, and the company has built out expansion preparations for full-scale overseas growth centered on Europe, through a collaboration with Teijin's Structural Analysis Center for contract testing services.
• The company acquired development rights for a research-use intestinal epithelial model from Takara Bio, targeting a 1Q FY2027 launch to tap into the growing demand for animal testing alternatives in the large global drug discovery market.

Foundation Building Highlights

• Joint development with Sysmex for production rationalization and automation of manufacturing/quality control processes is progressing well, to support scaled growth.
• The company is strengthening talent development through partnerships with local academic institutions, including Toyohashi University of Technology.

1. Regenerative Medicine Product Business: Delivered an 86 million yen increase in profit for the full 2025 March fiscal year, driven by the launch of ジャスミン, strong sales of ジェイス for nevus treatments, and an increase in the insurance reimbursement price for ジャック. In Q4, the business saw a large jump in operating profit to 95 million yen, supported by increased ジェイス severe burn cases and the newly launched ジャスミン. The segment had 6 total ジャスミン cases in the full 2025 fiscal year, with over 50 waiting patients already accumulated for the 2026 fiscal year. Revenue contribution percentage was not explicitly disclosed in the provided transcript.
2. Regenerative Medicine Contract Business: Resulted in a profit decrease for the full 2025 March fiscal year, caused by negative impacts from specific client development delays and a delayed payment from Teijin that shifted to the current fiscal year. The business has expanded into new areas including iPS cell collaboration with VC Cell Therapy, a new circulatory system contract with Metcela, and corneal area collaboration with Actualize, with multiple ongoing negotiations with prospective clients. Revenue contribution percentage was not explicitly disclosed in the provided transcript.
3. R&D Support Business: Experienced a revenue decrease from the end of a large domestic client's research project, but maintained slight overall revenue growth for the full 2025 March fiscal year, driven by expanding sales of EpiSensA following its addition to the OECD test guideline. The business recently acquired development rights for a research-use intestinal epithelial model using human iPS cells and organoid technology, expanding into the larger drug discovery market. Current annual revenue for the segment is in the 300 million yen range. Revenue contribution percentage was not explicitly disclosed in the provided transcript.

• For the 2026 March fiscal year, management introduced a range-based guidance due to high uncertainty around the timing of ジャック's OA indication insurance listing. The guidance is 2.9 billion yen to 3.1 billion yen in total revenue, and 100 million yen to 200 million yen in operating profit, representing the first full-year operating profit after years of losses. The upper bound assumes insurance listing is completed within FY2026, while the lower bound assumes it is delayed beyond FY2026. All segments are expected to deliver revenue growth.
• The original mid-term target of 5 billion yen in total revenue and 10% operating profit margin by FY2026 is revised to a two-year delay, with the target now set for FY2028 (ending March 2028): 5 billion yen in total revenue and 500 million yen in operating profit. The delay is driven by slower-than-expected insurance listing timing for ジャスミン and ジャック's OA indication.
• The company expects all three existing business segments to grow, with no major change to the overall revenue composition relative to current levels. Growth will be primarily driven by product sales expansion from ジャスミン, ジャック's OA indication, and Allo-JaCE03 launch, plus contributions from global expansion of R&D support services and the new intestinal epithelial model launch.

• The timing of national insurance listing for newly approved indications (ジャック's OA expansion) carries high uncertainty, which can materially impact near-term financial results.
• For overseas expansion of regenerative medicine products, cell-based products have low storage stability, require large independent development investment per market, and face potential policy shifts in major markets like the U.S. under the second Trump administration that could create headwinds for cell and gene therapy access and approval.
• Global distribution of live cell-based R&D products (such as EpiSensA) faces logistical challenges, including customs clearance and maintaining viability during delivery to international clients, which can complicate market expansion.

Q: How does FDA's new policy on animal testing alternatives affect J-TEC's existing and planned businesses, and is the company adjusting its operating model to capture expected new demand?

A: Management expects the direct near-term impact on the company's existing skin product portfolio to be limited. The company is already conducting proactive sales preparation for EpiSensA and building market familiarity globally, to enable rapid expansion when alternative methods become widely established in drug development. J-TEC leverages its prior experience getting EpiSensA listed in the OECD guideline to pursue FDA acceptance for its safety assessment models, focusing first on publicly accepted safety testing models which have clear market demand from pharmaceutical companies. The newly acquired intestinal epithelial model is part of the company's strategic preparation for this growing industry shift.

Q: What is the specific plan for building EpiSensA's global sales expansion infrastructure?

A: As the only OECD-listed cell-based allergy sensitization test model, EpiSensA has already received strong inbound inquiry from global firms. The biggest near-term priority is building a reliable cross-border delivery network for the live cell product, which has unique logistics and customs clearance challenges. J-TEC has already established initial partnerships and delivery systems across Europe, India, and other parts of Asia, and is building out channel partnerships with global CROs to expand reach. The company will prioritize European expansion first, then pursue entry to the U.S. market, and will apply this infrastructure to future models like the new intestinal epithelial product.

Q: What is the size of the target patient population for ジャック's new knee OA indication, and what share of total OA patients is eligible for treatment?

A: There are approximately 10 million people in Japan with symptomatic knee OA. Eligible patients are those who do not respond to conservative treatment, have a cartilage defect of 2cm² or larger, and still have sufficient tissue for surgical fixation — severe end-stage OA with full cartilage wear is not eligible at this time. Management estimates eligible patients account for roughly 10% of total symptomatic OA patients, a large pool that gives ジャック potential to grow to over 1,000 annual cases, which would represent over 2.5 billion yen in annual revenue for the product alone. The company will carefully educate physicians and patients to grow adoption gradually after insurance listing.

Q: What will the revenue composition look like when J-TEC hits its 5 billion yen FY2028 target, and what is the company's strategic priority?

A: Management expects the general revenue share across the three core segments will not change drastically from current levels, with all three segments growing. The top strategic priority continues to be scaling product sales, particularly driving growth of ジャスミン and ジャック's new OA indication, which requires concentrated resource allocation. While the company will grow its CDMO contract business, product commercialization remains the core focus to deliver long-term value, with ジャック alone expected to contribute over 2.5 billion yen in annual revenue at peak penetration of the OA indication.