AN INTERVIEW WITH KAZUHIRO HATANO
Please give us a summary of the fiscal year ending March 31, 2025.
Business in the United States, which is positioned as our most important market, has generally been growing steadily since we acquired a local CRO in April 2018, and sales also increased year-over-year during the current term. However, in other regions including Japan, sales did not grow as expected due to various factors such as project cancellations and delays to large-scale tests, resulting in a decline in consolidated revenue and the first operating loss since the company’s founding in 2005.
We were impacted severely by the increasing seriousness of the drug loss problem in Japan, delays in clinical trials due to political and medical turmoil in South Korea, and the ongoing conflict in Europe. We are very disappointed because even during the difficult period of the COVID-19 pandemic, we maintained a consolidated profit. However, there is hope in sight, and we continue to build an organization in line with the concept of “a global CRO headquartered in Japan,” which we have refined as one of the company’s strengths. In terms of sales in particular, we are taking advantage of having bases in Europe, the United States and Asia, and our results for acquiring global trials from pharmaceutical and biopharmaceutical companies are increasing.
In July 2024, we established our first base in the southern hemisphere in Australia. The country has a preferential tax regime for bio-startup companies and is positive about attracting early-phase clinical trials. Inquiries from customers are increasing, and we have already received orders from Japanese companies among others. There are many cases where large-scale Phase II and Phase III trials are conducted in Europe and the United States after implementing Phase I trials in Australia, and we also expect the potential for the latter to connect to the acquisition of orders for large-scale projects.
Through these efforts, we will further strengthen our capability as a global CRO capable of proposing and executing optimal development strategies for our clients. In terms of management structure, while ensuring we have experienced staff across key positions in each region, we have built a system that allows us to consolidate information and make appropriate management decisions quickly by dispatching management from Japan. By further strengthening our global management base, we expect to bottom out in the current fiscal year and recover in the next fiscal year and beyond.
The global economy is in chaos. How do you grasp trends in the industry?
The situation is very uncertain currently, but looked at in the long run, the global pharmaceutical market is expected to expand and the CRO market will continue to grow year over year in association with that. The United States, the world's largest pharmaceutical market, in particular, is becoming increasingly important as a center for new drug development, partly due to the change in drug discovery from pharmaceutical companies and biotech companies, and scaling expansion here will be essential for the future growth of the company.
We will expand our business base by realizing a second M&A at an early date while continuing to recruit and train human resources in the United States. On the other hand, drug loss, or being unable to obtain drugs developed overseas in Japan, is a serious problem, and the Ministry of Health, Labour and Welfare (MHLW) and others have begun reviewing regulations to resolve this matter, but it is expected that will take some time. The company also provides consulting services to Japanese and non-Japanese biopharmaceutical companies that are trying to enter the Japanese pharmaceutical market with Lincial’s drug discovery support business. We are using this as value-add to attract overseas companies to the Japanese market by collaborating with our subsidiaries in Europe and the United States from the sales stage.
Please tell us about the outlook for the fiscal year ending March 31, 2026.
The market environment continues to be difficult in Japan, South Korea, and Europe, and in the United States, we need to monitor the impacts of drug price reductions and reductions in personnel at the licensing authority (FDA), but the group will make a concerted effort and work towards the recovery of results. In terms of sales, we are demonstrating our strength at expanding globally without being biased toward any specific region, as evidenced by the fact that we are receiving inquiries from European and United States companies for trials in Asia and from Asian companies for trials in Europe and the United States while we successfully conduct globally coordinated trials. Because the industry as a whole is in a difficult environment, a CRO’s ability to serve as a true partner and propose innovative, flexible solutions to clients is critical to successful trial outcomes.
I feel that Linical has amassed a track record of taking on many new and highly difficult drug development cases while skillfully navigating our customers’ unique needs.
In addition, we will make the investments required to refine our strengths. AI in particular is becoming widely used in the drug discovery phase of pharmaceuticals, but it is also beginning to be used across many facets of clinical development, and there is no doubt that it will change the way future clinical trials are conducted significantly. I think that the CROs that can master such technologies and provide the best choices for their customers will be the ones that are chosen and survive. Europe and the United States are the leaders in such technologies, so we will use our business in Europe and the United States as antennas to expand our business partners and develop teams to support medium to long-term growth.
Lastly, can you give us a message for shareholders, please?
On behalf of Linical, I am proud to share we are celebrating our organization’s 20th Anniversary on June 7, 2025. Founded by nine people from the pharmaceutical industry, we have now expanded globally to more than 30 countries, and we are contributing to the development of numerous new drugs as a CRO.
This would not have been possible without your support and the dedicated efforts of the people who have worked alongside us. We would like to express our sincere gratitude to our employees, shareholders, clients, and partners in clinical research. Guided by the philosophy of pursuing the wellbeing of patients around the world, we have made it our mission to focus on developing new drugs in areas where there are many unmet medical needs, such as oncology, central nervous system disorders, and immunology.
As revolutionary new treatments, such as regenerative medicine, are born one after another, we are constantly evolving and will continue to take on challenges as a partner in pioneering new medical treatments. Going forward, we will continue to hone the knowledge and technology we have cultivated, leverage digital enablement for greater efficiency, and strive to help bring hope to patients and their families around the world.
I hope that shareholders will continue to support Linical from a long-term perspective.