Earnings Call: Q3 2026

Jan 30, 2026

Summary

9M sales set a record at JPY 44.40bn, up 3.7%, while operating and net profit declined amid margin pressure and one-time costs. Guidance was unchanged, with strong neurovascular and GI growth offset by PFA and CRM headwinds.

Hello, everyone. Thank you for joining Japan Lifeline's nine months and third quarter financial results briefing for the period ended December 31st, 2025. I'm Takeyoshi Egawa, Director and CFO. Prior to reviewing our performance figures, I want to formally recognize the outstanding contributions of our entire staff. The resilience shown by our team has been instrumental in achieving the growth we see today, and their unwavering dedication remains the essential foundation upon which our success is built. Now, let's turn to the financials. Please turn to page 4. Our nine-month results achieve record high net sales for the period. On the other hand, operating profit and net profit declined. While sales and growth investments progressed according to plan, profit below the operating line decreased due to the occurrence of one-time costs, which I will explain later. Net sales reached JPY 44.40 billion, up 3.7% year-over-year. Operating profit was JPY 9.82 billion, down 0.8%. Net profit was JPY 6.82 billion, down 3.5%. We have organized the contributing factors into external and internal components on the right. As for external factors, we cite two key items. The first, which is a positive factor, is that atrial fibrillation or AF case volume increased by approximately 10% year-over-year. This was in line with our initial guidance and contributed to the sales growth of our proprietary EP ablation products. The second, which is a negative factor, is the impact of pulsed field ablation or PFA. PFA is a new treatment method being promoted by competitors, and its pace of adoption was faster than anticipated. This mainly affected the sales of esophageal temperature monitoring catheters and some EP catheters. Let's turn to the internal factors. We cite three items. The first is that sales in both our core product group in existing areas and our new therapeutic areas, consisting of neurovascular and gastrointestinal segments, remain solid. The second item relates to one-time costs incurred in Q3. We recorded inventory disposal costs as non-operating expenses related to our withdrawal from select products that have lost competitiveness. Additionally, we recorded a portion of the relocation expenses for our headquarters move, planned for March 2027, as extraordinary losses. Please turn to page 5. As mentioned in the highlights, we achieved sales growth, but profit decline. Let me provide some supplementary explanations. Gross profit was JPY 26.51 billion, an increase of 2.3%. The gross profit margin decreased from 60.5% in the prior year period to 59.7% this period, a decline of 80 basis points. This was mainly due to a product mix shift, specifically the decrease in high-margin proprietary products and the significant growth of procured products such as neurovascular and hemostasis devices. Our proprietary sales mix declined from 57.6% to 55.5%, a decrease of 210 basis points. SG&A expenses increased by JPY 684 million, up 4.3% year-over-year. As a result, operating profit declined by 0.8%. I will explain the details of operating profit on the next page. Regarding items below operating profit, there were two negative factors. First, from the perspective of portfolio review, we decided to withdraw from select products that have lost competitiveness, specifically cholangioscopes in the GI field and endoscopic laser ablation catheters in the EP ablation segment. Related to this decision, we recorded JPY 295 million in inventory disposal costs as non-operating expenses. Furthermore, regarding the headquarters relocation announced last December, we recorded JPY 108 million as extraordinary losses in this third quarter for a portion of the relocation cost plan for March 2027. As a result, net profit was JPY 6.82 billion, a decrease of 3.5%, and earnings per share was JPY 97.25, a decrease of 2.1%. The international sales mix increased from 2% to 2.5%, an increase of 50 basis points, reflecting the steady progress of our global expansion strategy. Please turn to page six. Operating profit for the period was JPY 9.82 billion, representing a year-over-year decrease of JPY 82 million, or 0.8%. As a highlight, sales-related factors remain strong and covered the negative impact of PFA, while SG&A expenses increased primarily due to forward investments in R&D. The total variance can be broken down into sales factors, which contributed a JPY 602 million increase, and SG&A factors, which resulted in a JPY 684 million decrease. As for sales factors, we further divide them into quantity variance and price variance. Regarding quantity variance, core products contributed a robust JPY 1.25 billion increase. Hemostasis devices contributed JPY 554 million, and defibrillation catheters contributed JPY 495 million, accounting for the majority of this growth. New therapeutic areas contributed a JPY 496 million increase, with neurovascular contributing JPY 262 million and gastrointestinal contributing JPY 233 million. Other products resulted in a negative contribution of JPY 860 million. This was primarily due to the PFA impact of JPY 962 million decrease, although this was partially covered by a positive contribution from exports of JPY 147 million. In terms of price variance, the net impact was a JPY 290 million decrease. This figure includes the impact of the reimbursement price revision for two months, amounting to approximately JPY 380 million decrease, as well as pricing adjustments for select products to maintain market share. On the other hand, there were positive factors such as discounts due to increased procurement volume. Turning to SG&A factors, the impact of SG&A excluding one-time factors was a negative JPY 1.07 billion. Key increases included R&D expenses of JPY 562 million, sales-related expenses of JPY 216 million, and personnel costs of JPY 211 million. Finally, regarding one-time factors, a positive variance of JPY 388 million was recorded. This primarily relates to bad debt collection amounting to JPY 399 million. Specifically, we recorded a provision for doubtful accounts of JPY 199 million in the previous period and recorded a reversal of the same amount this period as we were able to collect a portion of it. Please turn to page seven. This slide shows our progress against the initial guidance. Sales achieved 74.9% of the full year guidance, which is in line with expectations. Operating profit achieved 76.2%, which is also roughly in line with expectations. On the other hand, net profit is slightly below plan due to the occurrence of the one-time costs I mentioned earlier. Regarding the outlook for Q4, we expect to progress generally in line with our initial forecast, so we have not made any revisions to our guidance. While progress on net profit may be slightly challenging, we plan to maintain the year-end dividend at JPY 54 per share as initially guided, which is a JPY 1 increase compared to the previous year. Please turn to page 10. Net sales increased by JPY 1.59 billion, representing 3.7% growth year-over-year. All segments except cardiac rhythm management achieved sales growth. The increase was particularly significant in the EP ablation business and the neurovascular business. Please turn to page 11. CRM sales for the nine-month period were JPY 9.99 billion, resulting in a slight decline of 1.2% year-over-year. While it is positive that our core product, S-ICD, performed well, pacemaker-related products remain soft. We cite three highlights for this segment. The first is S-ICD. It achieved a 4.6% increase in sales. The driver was the expansion of preventive implantation cases, which our internal data suggests grew in the high single digits. Preventive implantation refers to implanting the device to prevent sudden cardiac death before a lethal arrhythmia occurs, and active educational campaigns by all companies in this field, including ourselves, are yielding results. Replacement cases also increased more than anticipated. However, we saw some impact from new competitor products in the de novo implant market. The second point is pacemaker-related products. These products experienced a significant 17% decline. The penetration of competitor leadless pacemakers remains a headwind, estimated to have penetrated approximately 30%-35% of the de novo implant market. The segment also includes the impact of unit price decline due to the reimbursement price revision in Q1 of the previous fiscal year. The third item is lead extraction products. These products contributed as an incremental growth since sales began in Q1 of this fiscal year. We launched additional models in Q3, allowing us to handle a wider variety of cases, and we will continue aiming to expand our market share. Please turn to page 12. EP ablation sales reached JPY 21.90 billion, an increase of 2.6% year-over-year. Despite the penetration of PFA, our core products grew, leading to a solid performance. First, as for sales highlights, we estimate that the number of AF cases increased by approximately 10% year-over-year. Looking at the quarterly breakdown, we estimate growth was 6% in Q1, 13% in Q2, and 9% in Q3. The timing of major academic conferences differed from the previous year, causing some quarterly fluctuation. But on a nine-month cumulative basis, the growth is in line with our initial forecast of 10%. In Q3, the largest domestic arrhythmia conference was held in Yokohama near the Tokyo metropolitan area, co-hosted with an Asia-Pacific congress. The event was exceptionally active compared to previous years, and as a result, the impact on case volume was larger than anticipated. Considering there were about two fewer business days compared to the same period last year, we recognize that 9% growth is a strong figure. Under these circumstances, our core intracardiac defibrillation catheter saw sales growth of 5.7%, progressing almost exactly in line with our initial assumptions. There is a variance between the sales growth rate and the case volume growth rate due to slight impacts on both volume and unit price. Regarding volume, while we maintain a high estimated market share of 96%, we believe it has declined by slightly less than one percentage point compared to the previous period due to new competitor entry. Regarding unit price, we implemented pricing measures for select distributors to respond to competitor discounts. Our core hemostasis devices exceeded expectations, growing significantly by 77.9% year-over-year. Sales channels are expanding from high-volume facilities to small and medium-sized facilities, and our penetration rate has reached 40%-45% of all ablation cases. Furthermore, we added a larger size model in Q3. Since PFA cases often use large-diameter sheaths that conventional products cannot cover, we believe introducing a large size will allow us to capture these cases and further expand sales. The fourth point is the PFA impact. As of December, we estimate PFA penetration has reached over 60% of total AF cases, representing a slight increase from the second quarter and indicating that the rapid pace of adoption has started to moderate. Esophageal temperature monitoring catheters, which are unnecessary in PFA procedures, declined almost by half. EP catheters declined by 6.4% as fewer units are required in PFA procedures. Regarding the outlook, we believe the negative impact of PFA on our performance largely peaked in Q3. Full-scale PFA penetration began in November 2024, so nearly a year has passed, and we expect the year-over-year impact to diminish from Q4 onwards. PFA shortens procedure time to about two-thirds of conventional RF procedures, so we expect it to act as a driver for increased case volume in the future. Please turn to page 13. Cardiovascular sales were JPY 9.34 billion, achieving 3.8% growth year-over-year. Frozen Elephant Trunk, or FET, drove this growth. Overall FET sales increased by 5.2%. Since case volume increased by about 3% year-over-year, our sales growth outperformed the market. This was due to maintaining a market share of nearly 90% while shifting sales toward the higher-priced four-branched integrated model. Strategically, we are actively conducting seminars and hands-on sessions to increase FET adoption, though we view the results as still being a work in progress and will continue these initiatives. Vascular graft sales increased by 5.4%. In this oligopolistic market, our share increased due to a competitor's withdrawal from select product lines. Abdominal stent graft sales declined by 3.8%, affected by intensified competition. Regarding other products, we note two positive factors continuing from Q2. First, the TAVI dedicated Sensitip guidewire from Haemonetics, introduced in Q2, continues to grow. Second is our collaboration with Heartseed. We will supply our jointly developed delivery catheter system for their clinical trials and plan to continue deliveries in accordance with their trial schedule. Please turn to page 14. Neurovascular sales reached JPY 1.91 billion, achieving substantial growth of 48.1% year-over-year. High growth continues, led primarily by aspiration catheters and embolic coils. Aspiration catheters grew significantly to 1.9 times the prior year sales. The new distal vessel model launched in Q1 is strongly driving growth. Marketing initiatives highlighting product characteristics have been successful, and our estimated market share reached 20% as of the end of December. Embolic coils maintained strong performance with a 17% increase. By continuously introducing new models, our market presence has steadily improved, and the range of cases acquired has broadened. The expansion of new sales channels beyond the neurovascular segment, such as the new model for interventional radiology departments introduced in Q1, also supported this growth. Stent retrievers are also growing steadily. While sales are currently centered on the older model without fluoroscopic markers, adoption facilities are steadily increasing. We plan to fully release a new model with markers soon, which we expect to be the main driver for future sales growth. Please turn to page 15. GI sales were JPY 1.21 billion, an increase of 27.6% year-over-year. The growth of bile-duct tube stents contributed significantly, achieving a significant 40.3% increase. The new pigtail-type model launched in Q1 was received better than expected and became a sales driver. We are planning an early production ramp-up to prevent opportunity loss. ERCP guide wires grew 2.6 times. While growing steadily, sales are slightly behind expectations due to the presence of many competitor products. GI stents increased by 10.8%. This positive growth is partly due to a rebound from the low base in the prior year caused by a voluntary recall. Liver cancer ablation needles declined by 24.2%. The main reason for the decline is the decrease in selling price due to the transfer of sales to Terumo starting this period. Please turn to page 16. We have two more slides for business updates. I would like to introduce our newly developed proprietary product in the EP ablation field, the radiofrequency transseptal wire, XEROstar. Currently, in the treatment of atrial fibrillation, the transseptal puncture procedure, which involves creating a small hole in the heart wall to approach the left atrium, is a critical step required in almost all cases. XEROstar is a device designed to make this procedure safer and more efficient. As shown in the image on the bottom right of the slide, the tip features a unique half-pigtail shape designed to further enhance safety within the heart chamber. Regarding efficiency, the product name XEROstar comes from the concept of a zero exchange workflow. This means the transseptal wire can be used for the subsequent steps without exchange, eliminating the device exchange steps required conventionally and contributing to procedural efficiency. The market for this product is estimated at JPY 6 billion-JPY 7 billion annually with five competitors. However, we have the experience and track record of spreading this technique nationwide through our past handling of the RF needle, a procured product from Baylis Medical. With this new proprietary product, we aim to regain high market share and profitability. XEROstar is expected to receive insurance reimbursement soon, with a release planned for March 2026 or later. Please turn to page 17. This is the final slide. On March 1, 2027, we plan to relocate our headquarters to the OIMACHI TRACKS Business Tower, a newly constructed building directly connected to Oimachi Station in Shinagawa Ward. The first purpose is to establish an optimal office environment to accommodate staff increases associated with our global strategy. By leveraging the convenience of a location directly connected to Oimachi Station, which is served by three train lines, we aim to strengthen talent acquisition and further improve corporate value. The second purpose is to strengthen coordination between organizations and maximize productivity. We will consolidate our headquarters functions currently dispersed across two sites and four floors onto a single floor. By removing physical barriers, we aim to achieve these goals and speed up decision-making. Regarding the impact on financial results, the impact for FY 2026 is minor. In FY 2027, when the relocation takes place, we will temporarily incur double rent and relocation expenses, but we view these as necessary investments for future growth. This concludes the presentation of the financial results for the third quarter of FY 2026. Thank you for listening.