I would like to express my deepest gratitude to our shareholders. On behalf of the entire company, I would also like to extend my condolences to everyone who suffered due to the Kumamoto earthquakes, and wish for their recovery as soon as possible.
To promote the greater wellbeing of all our stakeholders — patients, business partners, shareholders, and employees — we strive constantly to offer professional, high-quality services to support all aspects of new drug development.
Points during this period
Synergistic effects are beginning to appear between the three regions.
chievement of significant increases in revenue and earnings due to an increase in the number of contracts undertaken.
Q & A
What is your summary of performance in the company's 11th fiscal year ended March 31, 2016?
In our CRO business, we saw significant increases in orders received in domestic business, overseas business and global clinical trials due to the creation of an organization for accepting global outsourcing in Japan/ Asia, the United States and Europe. In particular, there have been synergies such as conducting joint clinical trials in Japan, South Korea and Taiwan outsourced by major Japanese pharmaceutical companies, and conducting clinical trials in Asia and the United States for projects undertaken in Europe. As a result, we have been able to generate enough profit to cover the amortization cost of goodwill and intangible assets associated with acquisition in European subsidiaries, and also achieve profitability excluding the amortization cost of goodwill associated with acquisition even in the South Korean subsidiary on a non-consolidated basis that was expected to make a loss. Meanwhile, in contract medical affairs (CMA), receiving contracts focused on clinical research following the launch of new drugs has improved the operating rate of personnel and contributed to both sales and profits. As a result, both revenue and profit increased significantly throughout the Group as a whole.
Please explain the objective of relocating the head office of your American subsidiary.
The location was moved from the west coast to New Jersey on the east coast, where there is a concentration of major Japanese pharmaceutical companies’ branch offices and subsidiaries. A major objective was to gain a foothold for entry into the enormous CRO market in the United States by receiving global contracts including the United States from these customers. However, it is still only a small office with five staff members, so first we would like to establish a track record of global clinical trials for European pharmaceutical companies through our European subsidiaries, and quickly increase the number of personnel in the American subsidiary to 20. Once the number of staff reaches 20, customers will feel secure outsourcing projects to us, and by accumulating such confidence, we will be able to participate in large-scale projects. At the same time, we will adopt a positive approach if presented with any good M&A opportunities. In this way, we believe that we will be able to operate as a global CRO and fully utilize the synergies between Japan/Asia, the United States and Europe if we are able to establish such an organization in the United States.
What are the specific initiatives and targets for the company's 12th fiscal year?
We believe that we will be able to enjoy even greater synergies than in the 11th fiscal year by having established a solid business organization in Japan and Europe. Furthermore, LINICAL Europe Holding GmbH established a subsidiary in the United Kingdom this March, creating an organization for strengthening outsourcing of global clinical trials in the large U.K. market as in the United States. We have already been approached by major pharmaceutical companies and expect an increase in orders in the future. Meanwhile, in Asia (especially South Korea and Taiwan), we will actively promote initiatives aimed at receiving orders for global clinical trials from major Japanese pharmaceutical companies, and also focus on strengthening activities aimed at receiving orders from local pharmaceutical companies in South Korea and Taiwan.
We anticipate increases in both revenue and profits in Japan and Europe through such activities, and we would like to invest the profit obtained here in the United States and utilize it to further promote our global organization. Through these efforts, we aim to achieve growth in both sales and income year-on-year for the Group as a whole in the 12th fiscal year.
Please explain the situation in Japan.
Linical is conducting clinical trials specializing in the development of new drugs in oncology and for the central nervous system (CNS) such as those for treating schizophrenia, depression and Alzheimer’s disease. We have established a brand image of “Linical is the choice for difficult clinical trials” among major Japanese pharmaceutical companies, and now receive many inquiries about development in such areas. We believe that the fact we receive continuous repeat orders from existing customers despite not having a sales force is a reflection of the recognition of our high level of expertise. The major Japanese pharmaceutical companies that are our clients have budgeted for global clinical trials originating in Japan in the oncology and CNS areas from this year. Accordingly, Linical has assigned personnel familiar with the circumstances surrounding the development of medical products in each country to serve as the contact point at our head office, offering one-stop support for all development tasks centered on monitoring.
What issues will you face in the process of globalization?
One major issue is human resource development. Since listing on the first section of the Tokyo Stock Exchange, we have continued to hire 30 to 40 new graduates every year, but we would like to increase this number to 50 to 60 new hires considering our intentions to expand the business. This will require strengthening of our systems for both hiring and training. Another pressing issue is the need to train project leaders able to work globally in order to provide support for continuously increasing global clinical trials. We would like to develop personnel able to manage global clinical trials from Japan by assigning Japanese subleader-class personnel as project manager candidates in Europe and the United States. Furthermore, in the medium- to long-term, we aim to increase the number of personnel from the current level of around 600 to a total of 1,600 throughout the entire Group, with 400 personnel employed in Japan, Asia, the United States and Europe, respectively. Clearly, size is not the only factor, and we believe it is the Group’s mission to focus on specialized training and provide high-quality service.
Please provide a message for shareholders.
The global CRO market is growing every year. In particular, outsourcing in the oncology and CNS areas where we excel is expected to continue to grow at a pace in excess of 200 percent every year. Backed by this tailwind, we will clear the medium-term target of 10 billion yen in sales as early as possible. We will also continue to pay stable dividends to provide returns to shareholders. We sincerely ask for your continued support and encouragement for the Group’s business in the future.
Forecast for Next Fiscal Year
|Net sales||Operating income||Ordinary income||Profit attributable to owners of parent|
|13,100 million yen||2,031 million yen||1,993 million yen||1,329 million yen|
Operating income and operating margin
Ordinary income and profit attrbutable to owners of parent
Earings per share
The Group's main businesses
Features of the Group