7777.T

Leadership Transition

• Outgoing CEO Okada will step down at the end of the current month, and thanked stakeholders for their past support.
• Toshihiko Amnuma, current Director overseeing North American operations, will succeed Okada as CEO.

Core Operational Results

• The company achieved both revenue and profit growth in Q3 FY2025, and 3-year strategic plans are progressing on track.

United States Operational Highlights

• GI segment: While Q3 typically experiences seasonal growth slowdown, strong new customer acquisition and expanded usage among existing customers maintained growth momentum, with Q3 results exceeding Q2 results. Management continues to upskill sales teams, expand clinical evidence, and focus on the pediatric segment, with significant remaining room for new customer acquisition and future growth.
• ENT segment: Performance exceeded budget, with full-year annual target already achieved as of the end of Q3. Growth continues with maintained sales efficiency via focus on large markets and key accounts.

Europe Operational Highlights

• GI segment: Results from the completed large-scale POPS registry trial have been published in peer-reviewed literature. In the UK and Ireland, dissemination of these results in partnership with distributors has driven increased hospital usage and accelerated growth. Growth in Germany remains modest despite partial progress with improvement initiatives.
• ENT segment: Initiatives to expand usage in the head and neck area have succeeded, driving accelerated growth.
• Urology segment: Usage expanded to benign prostatic hyperplasia and partial kidney resection cases, spurred by adoption for radiation cystitis.
• Neurosurgery: Product briefing sessions have started following new product approval, with preparations for commercial launch ongoing.

Japan Operational Highlights

• Market penetration of the company's products is already high, leading to slower growth from new customer acquisition and smaller average new account sizes.
• Some insurance claims for PureStat have been denied by prefectural authorities, leading to purchasing delays by hospitals and an expected sales decline in the second half of the fiscal year, resulting in a full-year year-over-year revenue decline.

Balance Sheet and Financing Status

• All units of the 9th convertible bond (CB) were converted by the end of February 2025, leaving the CB balance and fixed liabilities at zero. Fixed liabilities decreased to 0.3 billion yen by the end of Q3 due to ongoing CB conversion.
• Partial exercises of the 36th share subscription rights resulted in cash inflows of 0.12 billion yen in December 2024 and 0.25 billion yen in March 2025.
• Accounts receivable increased alongside revenue growth, and net assets increased 2.5 billion yen year-over-year to 5.1 billion yen.

Product Development Pipeline Progress

• Next-generation hemostatic agent for neurosurgery: Received European approval in December 2024. The product has broad indications for intraoperative hemostasis across multiple fields (gastrointestinal tract, cardiovascular, parenchymal organs, in addition to neurosurgery) enabling near-full body use. Post-market clinical follow-up (PMCF) to gather approval application data is planned for the US and Japan.
• Hemostasis treatment for Hereditary Hemorrhagic Telangiectasia (HHT): Small case dataset has been collected. A randomized controlled trial is under consideration in the US to gather higher-quality data for a formal HHT treatment indication application.
• Radiation cystitis treatment: European clinical study data has been published. Approval application is planned in the US alongside prostatic hemostasis indication.
• Inflammatory bowel disease mucosal healing: Clinical research is ongoing at Gunma University, with patient enrollment in progress and 6 cases completed to date.
• Mucosal wound healing: US application preparation is ongoing with a change from 510(k) to De Novo 510(k) classification; approval application was completed in Europe in March 2025.
• Esophageal stricture prevention: Registry trial clinical research at Hiroshima University completed enrollment of 20 patients, and manuscript submission is complete.

• Full-year FY2025 guidance was upwardly revised: projected total revenue increased from 9.283 billion yen to 9.944 billion yen, representing a 43% year-over-year increase, driven by continued high growth in the US segment.
• Full-year projected operating profit was upwardly revised from 0.4 billion yen to 0.96 billion yen, representing a 560 million yen increase over the original plan, with an expected operating profit margin of 9.7%. This will deliver large profit growth for the full year.
• Cumulative full-year revenue is projected to come in 7% above the original plan, 660 million yen above plan driven by US performance. Q4 revenue guidance is set at almost the original planned level, which reflects a conservative estimate rather than an expectation of slowing growth.
• Cumulative full-year operating profit is projected to be 0.6 billion yen above plan, with total cumulative operating profit reaching 0.56 billion yen, 2.4 times the original plan, resulting in a large profit upside. Q4 operating profit guidance is set below the original budget, which reflects conservative cost forecasting rather than underlying weakness.

Geographic segment performance for full-year FY2025 (ending April 2026):

1. United States: Projected 76% year-over-year revenue growth, outperforming the original 55% growth target. Full-year projected revenue is approximately 4.9 billion yen, contributing ~49% of total projected full-year revenue. Growth is driven by strong performance across both Gastroenterology (GI) and Ear, Nose, and Throat (ENT) segments.
2. Europe: Projected 24% year-over-year revenue growth, outperforming the original 21% growth target. Full-year projected revenue exceeds 2.5 billion yen, contributing ~25% of total projected full-year revenue. Growth is driven by GI, ENT head and neck, and urology segments.
3. Japan: Projected full-year revenue will be slightly lower year-over-year, contributing ~26% of total projected full-year revenue.

Cumulative Q1-Q3 FY2025 performance:

• Total revenue: ~7.3 billion yen, a 45% increase year-over-year.
• Gross profit: a 57% increase year-over-year.
• Operating profit: ~0.7 billion yen, a 1.3 billion yen improvement year-over-year. Net profit below operating income is in the black due to foreign exchange gains from yen depreciation.

• Foreign exchange fluctuations: The company records foreign exchange gains/losses from foreign currency-denominated loans to its subsidiaries, which can cause operating profit below operating income to swing by hundreds of millions of yen based on exchange rate moves. These are accounting gains/losses that do not reflect actual changes in business costs or cash flow.
• In Japan, a growing number of insurance claim denials for the company's product PureStat have caused purchasing pullbacks from hospitals, leading to an expected full-year year-over-year revenue decline in Japan.
• Sales difficulty is gradually increasing overall as the company pursues new customer acquisition, requiring ongoing investments in sales capability and clinical evidence.

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