Shin Nippon Biomedical Laboratories (SNBL) Q1 FY2027 Earnings: Record-High Q1 Sales Driven by Overseas Non-Clinical CRO Orders; Upward Revision to First-Half Forecast

Shin Nippon Biomedical Laboratories, Ltd. (Securities Code: 2395) announced its financial results for the first quarter of the fiscal year ending March 31, 2027 , on August 5, 2026. Driven by robust order trends from Western clients in its core non-clinical CRO business and the recognition of revenue from projects that had "slipped" from the previous fiscal year, the company achieved record-highs in both sales and new orders for a first quarter. Against this backdrop, the company also announced an upward revision to its consolidated earnings forecast for the first half (cumulative) of the fiscal year ending March 31, 2027 .

This report provides a neutral summary and analysis of the earnings, based on the company's financial presentation materials, covering performance highlights, revenue structure, segment-specific details, order status, capital expenditure, and future management strategy.

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1. Q1 FY2027 Performance Highlights

The consolidated results for the first quarter (April 1, 2026, to June 30, 2026) showed a significant increase in revenue and a return to profitability compared to the same period last year. The summary is as follows:

• Net Sales : ¥7.86 billion (up 21.5% YoY / +¥1.39 billion)
• Operating Profit : ¥0.52 billion (compared to a loss of ¥0.34 billion in the same period last year → Turned profitable / +¥0.86 billion)
• Ordinary Profit : ¥1.43 billion (up 177.9% YoY / +¥0.92 billion)
• Net Profit Attributable to Owners of Parent : ¥1.06 billion (up 308.6% YoY / +¥0.80 billion)

Factors and Background of Earnings Highlights

As shown in the slide above, Q1 sales reached ¥7.86 billion , marking a record high for a first quarter. Operating profit also saw a sharp recovery from the previous year's loss to ¥0.52 billion .

The three primary factors contributing to the significant year-on-year improvement in profitability are:

1. Recognition of "Slipped" Projects : Several CRO projects originally scheduled for completion and revenue recognition in the previous fiscal year (FY2026) were delayed into this first quarter, boosting current-period sales and profit.
2. Increased Facility Utilization : As the core non-clinical CRO business expanded, the utilization rate of testing facilities improved, leading to enhanced profitability.
3. Shift of Translational Research (TR) Expenses to H2 : The timing of R&D and operational expenses in the TR business was deferred to the second quarter and beyond.

Regarding ordinary profit, the figure expanded significantly to ¥1.43 billion (approximately 2.8 times the previous year), bolstered by equity-method investment gains (¥0.83 billion from SNBL PPD, etc.) and an improvement in foreign exchange gains/losses (a gain of ¥0.17 billion).

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2. Revenue Structure and Business Segment Performance

An analysis of the segment-specific profit and loss, which supports the overall consolidated growth, highlights the resilience of the CRO business as the company's growth foundation.

① CRO Business (Non-clinical and Clinical)

• Net Sales : ¥7.537 billion (up 21.9% YoY)
• Operating Profit : ¥1.538 billion (up 100.0% YoY)
• Operating Profit Margin : 20.4% (up 8.0 percentage points from 12.4% in the same period last year)
• Equity-Method Investment Gain (Clinical) : ¥0.830 billion (of which ¥0.718 billion is from SNBL PPD)
• Business Profit (Operating Profit + Equity-Method Gain) : ¥2.368 billion (up 58.5% YoY)

In the non-clinical business, the increase in sales reduced the burden of fixed costs, leading to a significant improvement in the operating profit margin to 20.4% . The clinical CRO business, centered on the joint venture SNBL PPD, Inc. , is also expanding steadily, with equity-method investment gains reaching ¥0.718 billion in Q1, a record high for a first quarter. The number of clinical staff has reached 1,130, establishing one of the top-tier structures in Japan.

② Translational Research (TR) Business

• Net Sales : ¥59 million (up +25.5% YoY)
• Operating Profit : -¥966 million (compared to -¥1.101 billion in the same period last year)

In the TR business, the company is advancing efforts to launch the nasal migraine drug "Atzumi™" in the U.S. market through its subsidiary, Satsuma Pharmaceuticals. In the U.S., the company is simultaneously conducting partnership negotiations and preparing its own sales structure. The loss narrowed slightly compared to the previous year as the manufacturing costs related to FDA approval incurred in the previous fiscal year have passed.

③ Medipolis Business, U.S. Real Estate Business, and Others

• Medipolis Business : Sales of ¥237 million, Operating Profit of ¥16 million (Operating profit decreased YoY due to increased depreciation in the power generation business)
• U.S. Real Estate Business : Sales of ¥49 million, Operating Profit of -¥28 million

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3. Order Trends and Global Expansion in Non-Clinical CRO

The most critical indicator for the company's future performance— order and inquiry trends in the non-clinical business —shows very strong momentum.

Trends in New Orders and Order Backlog

• Q1 New Orders : ¥9.96 billion (up 23% YoY / +¥1.86 billion) *Record high for a first quarter
• Order Backlog : ¥44.06 billion (up ¥3.14 billion from the end of the previous fiscal year) *Record high
• Overseas Order Ratio : 53.2% (Significant increase from 38.8% in the same period last year)

Background and Significance of the Order Status Slide

The slide above shows the long-term transition of quarterly new orders and order backlog (in JPY) for the non-clinical business from Q1 FY2022 to Q1 FY2027. As the graph indicates, the company has maintained a high growth rate with a 5-year CAGR of 26% in overseas orders.

Key points of note include:

• Overseas Expansion Driving Growth : Of the ¥9.96 billion in new orders for Q1, over half (53.2%) came from overseas . According to the factor analysis (see Slide 23), while domestic orders decreased by ¥0.3 billion YoY due to cancellations before the start of tests, the U.S./European market grew by ¥1.22 billion and the Asian market by ¥0.94 billion , more than offsetting the domestic decline.
• Accumulation of Order Backlog : The order backlog increased by ¥7.95 billion from ¥36.11 billion at the end of the same period last year to ¥44.06 billion . This substantial backlog provides a solid foundation for stable revenue recognition for the current and future fiscal years.

Quality of Western Client Base and High Repeat Rate

Regarding the qualitative background of order expansion in the Western market, the strength of the company's client base is notable (the 5-year CAGR of orders in USD is 21% ).

• Client Profile : 76% of Western orders are from listed companies (5% global mega-pharma, 71% listed biotech), and the company has contracts or concrete inquiries with 15 of the world's top 25 pharmaceutical companies .
• Repeat Rate : 99% of Western orders are from repeat clients . This demonstrates that the high-quality data provided by the company's non-clinical tests, along with its high technical standards and stable supply system for NHP (non-human primate) studies, are highly valued by global clients.

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4. Revision of FY2027 Earnings Forecast and Strategic Investment

Following the strong progress in the first quarter, the company announced an upward revision to its first-half (cumulative) earnings forecast .

Details of the First-Half Earnings Forecast Revision

Explanation of the Earnings Forecast Revision Slide

As shown in the slide above, the first-half forecast has been revised upward across all items compared to the initial forecast disclosed on May 11, 2026.

• Net Sales : ¥16.59 billion → ¥17.15 billion (+¥0.55 billion upward revision / up 16.1% YoY)
• Operating Profit : ¥0.46 billion → ¥1.24 billion (+¥0.77 billion upward revision / 25.1x YoY)
• Ordinary Profit : ¥1.94 billion → ¥2.98 billion (+¥1.04 billion upward revision / up 83.6% YoY)
• Net Profit Attributable to Owners of Parent : ¥1.16 billion → ¥1.91 billion (+¥0.75 billion upward revision / up 80.6% YoY)

The upward revision is attributed to the core CRO business performing better than planned, expected profit margin improvements due to higher facility utilization, and the shift of TR business expenses to the second half.

Full-Year Earnings Forecast and FX Assumptions

Meanwhile, the full-year consolidated earnings forecast (Net Sales of ¥38.0 billion, Operating Profit of ¥3.0 billion) remains unchanged . This is likely due to a cautious approach regarding the timing of TR business expenses in the second half and potential risks from overseas conditions and exchange rate fluctuations.

• Assumed Exchange Rate : 1 USD = ¥150.00
• FX Sensitivity (Annual) : A ¥1 depreciation against the USD has a positive impact of +¥100 million on sales and +¥70 million on operating profit .

Strategic Investment for Capacity Expansion (EU Building, etc.)

To meet the rapidly increasing demand from overseas, particularly from Western clients, the company continues to make active strategic investments .

• Significant Strengthening of Human Resources : The number of consolidated employees is increasing gradually from 1,208 at the end of FY3/23 to a projected 1,676 by the end of FY3/27 (1,337 in the CRO business). New graduate hires as of the end of June 2026 reached 150, further strengthening the talent base.
• Capital Expenditure Plan : The annual capital expenditure for FY3/27 is planned at ¥11.08 billion (¥7.84 billion excluding NHP breeding in the CRO business, and ¥2.14 billion for NHP breeding).
• Construction of the "EU Building" : The company has begun construction of the "EU Building," which will be a world-class NHP testing facility, with a groundbreaking ceremony held on June 30, 2026. It is scheduled for completion around the autumn of 2027 , after which testing capacity for overseas clients is expected to expand dramatically.

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5. Summary and Future Focus

Shin Nippon Biomedical Laboratories' Q1 FY2027 results were strong, with the core non-clinical CRO business successfully capturing demand from Western biotech and global pharmaceutical companies, resulting in record-high sales and orders for a first quarter .

Key points and focus areas moving forward include:

1. Sustainability of Overseas Orders : The pace of future order acquisition, supported by a 99% repeat rate in Western and Asian markets and record-high levels of inquiries and quote submissions.
2. Progress of Capital Investment such as the "EU Building" : Construction progress toward the autumn 2027 completion and the resulting future capacity expansion and profit contribution.
3. U.S. Expansion of "Atzumi™" in the TR Business : The progress of partnership agreements and the speed of building an in-house sales structure.
4. Full-Year Performance Landing : Whether the full-year forecast will be revised based on the first-half upward revision, considering the timing of second-half expenses and exchange rate trends.

Under its new management structure (Chairman & CEO Nagata and President & COO Hirama), Shin Nippon Biomedical Laboratories is promoting the expansion of its world-class CRO service foundation, and its future business development remains a key point of interest.