Cellsource Co., Ltd. · TSE:4880
Cellsource — FY2024 Earnings Presentation
71 slides from Cellsource's earnings presentation, Dec 12, 2024
Slide 1: FY10/2024 Earnings Presentation and CellSource Vision
FY10/2024 Earnings Presentation and CellSource Vision CellSource Co., Ltd (TSE Prime: 4880) December 12, 2024
Slide 2: Agenda
Agenda Part 1 Financial Results for FY10/2024 Part 2 CellSource Vision “Year 0” Commitment and Earnings Forecast for Part 3 FY10/2025
Slide 3: Part 1 Financial Results for FY10/2024
Part 1 Financial Results for FY10/2024
Slide 4: Overview of Financial Results for FY10/2024
Overview of Financial Results for FY10/2024 Sales were largely as expected in full-year FY10/24, but operating profit missed forecast l Sales at the mainstay business of contract processing services fell 12.8% YoY. Thus, although cosmetics sales rose 126.1% YoY and medical device sales grew 30.3% Yo
Slide 5: Impact of contract loss provisions for synovial stem cell processing service
Impact of contract loss provisions for synovial stem cell processing service Having determined that the synovial stem cell processing service would prove difficult to monetize, we recorded an amount equivalent to license fee payments through March 2032 as provisions for contract losses [Millions of
Slide 6: Looking back over year since change in CEO
Looking back over year since change in CEO Fundamental issues and inadequacies Resources have become scattered over nine years of gradually expanding the scope of operations, reducing consideration given to client needs at each business • Absence of a patient-centric business strategy at contract Ma
Slide 7: Performance Highlights for FY10/2024
Performance Highlights for FY10/2024 Net Sales Operating Profit Profit JPY 4.35 billion JPY 129 million JPY 237 million ( - 3.4 % YoY) ( - 89.4 % YoY) ( - 74.2 % YoY) Blood-derived product Operating Profit ASC contract contract processing Margin processing orders orders 3.0% 21,345 1,599 (-24.1 pt Y
Slide 8: Performance Summary
Performance Summary Achievement FY10/2024 FY10/2024 Achievement FY10/2024 [Millions of yen] QoQ FY10/2023 FY10/2024 YoY Forecast*1 rate*1 rate Q3 Q4 Reference*2 Reference*2 Net sales 1,113 1,013 -9.0% 4,510 4,355 -3.4% 4,374 99.5% 4,374 99.5% Gross profit 694 297 -57.2% 3,185 2,417 -24.1% - - - - Gr
Slide 9: Despite growth in sales of medical devices and cosmetics, overall sales fell 3.4% YoY
Despite growth in sales of medical devices and cosmetics, overall sales fell 3.4% YoY due to a slowdown in contract processing services and expiration of some consulting service contracts Cosmetic sales and other [Millions of yen] Medical devic e sales FY10/2023 FY10/2024 YoY Consulting serv ices To
Slide 10: Monthly Contract Processing Orders for Blood-derived Products by Department
Monthly Contract Processing Orders for Blood-derived Products by Department (No. of The recovery in orders from medical institutions specializing self-funded care was sluggish. orders) Orders from hybrid clinics were weak in August due in large part to summer holidays, but have Cosmetics rebounded s
Slide 11: Gross Profit and Operating Profit
Gross Profit and Operating Profit Gross profit declined YoY owing to falls in sales and gross profit margin Although SG&A expenses were kept within expected range, operating profit fell YoY [Millions of yen] Gross profit [Millions of yen] Operating profit 1,200 Gross prof it Gross prof it m argin Op
Slide 12: Analysis of Gross Profit Margin
Analysis of Gross Profit Margin GPM decreased due to cost increase associated with start of operations at new production facility for contract processing services, and impact of contract loss provisions for synovial stem cell processing Gross profit margin Overview Change in sales mix • Lower sales
Slide 13: SG&A Expenses
SG&A Expenses SG&A expenses were largely flat YoY as expected, thanks to decrease in strategic spending on new [Millions of yen] production facilities and expanding work force. Cost cutting proceeded apace. Other FY10/2023 FY10/2024 YoY Advertising expenses + sales promotion expenses Total Millions
Slide 14: Rent Expenses
Rent Expenses Transfer to new blood-derived product contract processing manufacturing facility was completed in FY10/2024. Exit from former office and manufacturing facility should be completed in Q1 FY10/25, resulting in decrease from Q2 in inefficiencies associated with doubling up of facilities C
Slide 15: Balance Sheet
Balance Sheet Fixed assets increased due to capital investment in a new production facility. Fixed liabilities increased due to the booking of contract loss provisions for the synovial stem cell processing service. Net assets [Millions of yen] decreased with the start of dividend payments. 7,000 Cas
Slide 16: KPIs Appendix
KPIs Appendix
Slide 17: Business KPI Highlights for FY10/2024
Business KPI Highlights for FY10/2024 Blood-derived product Adipose-derived stem cell Number of partner contract processing orders contract processing orders medical institutions (full year) (full year) 1,955 21,345 1,599 ( + 206 YoY) (-13.1% YoY) (-23.2% YoY) As of FY10/2024, the number of contract
Slide 18: Number of Partner Medical Institutions
Number of Partner Medical Institutions*1 2,000 No. of partner medical institutions 1,923 1,955 1,865 1,802 1,800 1,749 1,654 1,600 1,557 1,455 1,378 1,400 1,301 1,204 1,200 1,109 End FY10/2024 1,000 800 1,955 600 (+ 206 YoY) 400 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY10/ 2022 FY10/ 2023 FY10/ 2
Slide 19: Number of Contract Processing Orders for Blood-derived Products
Number of Contract Processing Orders for Blood-derived Products Quarterly o rders 7,000 6,440 6,527 6,569 6,363 6,000 6,000 5,832 5,618 5,314 5,202 4,997 5,000 4,406 4,135 4,000 Q4 FY10/2024 3,000 4,997 orders (-11.1% YoY) 2,000 Cumulative: 95,015 orders 1,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 F
Slide 20: Number of Contract Processing Orders for Adipose-derived Stem Cells (ASC)
Number of Contract Processing Orders for Adipose-derived Stem Cells (ASC) 700 Quarterly o rders 617 600 544 520 515 500 452 439 431 421 Q4 FY10/2024 371 421 400 368 353 305 orders 300 (-2.3% YoY) 9,219 orders 200 Cumulative: 100 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY10/ 2022 FY10/ 2023 FY10/ 2024
Slide 21: Daily Average Number of Contract Processing Orders
Daily Average Number of Contract Processing Orders 100 80 60 40 20 0 Nov Dec Jan Feb Ma r Apr Ma y Jun Jul Aug Sep Oct Nov Dec Jan Feb Ma r Apr Ma y Jun Jul Aug Sep Oct Nov 2022 2023 2024 Daily average number of contract processing orders is calculated based on preliminary number of processing order
Slide 22: KPIs Comprising the No. of Blood-derived Product Processing Orders
KPIs Comprising the No. of Blood-derived Product Processing Orders Latest twelve Latest twelve months (LTM) months (LTM) Number of partner medical institutions (quarter-end) Active ratio *3 Specializing in self-funded No. of orders per *1 treatment active medical institution No. of orders Number of
Slide 23: Quarterly financial data FY10/2022-FY10/2024
FY10/2022 FY10/2023 FY10/2024 [Millions of yen] Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net Sales 820 876 1,175 1,400 1,059 1,111 1,235 1,104 1,173 1,054 1,113 1,013 Contract processing services 549 581 757 887 743 735 873 793 664 671 712 694 Consulting services 59 59 111 125 113 109 134 77 56 62 42 24
Slide 24: Part 2 CellSource Vision
Part 2 CellSource Vision
Slide 25: First things first
First things first This year, we visited medical institutions across the country and listened to the voices of doctors, staff, and patients. We were struck anew by the importance of our business, getting a tangible sense of the challenges involved, particularly our lack of understanding of the on-si
Slide 26: Eliminating knee pain
CellSource Vision Eliminating knee pain
Slide 27: "Knee health" is a major issue for Japan's aging society
"Knee health" is a major issue for Japan's aging society • In Japan, joint disease affects 55% of people aged 40 and over, and the risk of needing nursing care is six times higher than for the general population*1 • Joint disease is a major factor in the need for support and nursing care, and in sho
Slide 28: Healthy life expectancy is another issue of growing importance in Japan
Healthy life expectancy is another issue of growing importance in Japan • The aging rate in Japan (percentage of people aged 65 and over) has already risen to about 30% • Healthy life expectancy has increased due to increased health awareness and advances in medical care, but the gap versus average
Slide 29: CellSource has provided regenerative medicine contract processing services
To address this issue, CellSource has provided regenerative medicine and other contract processing services • Promoting regenerative medicine uptake by acting as a “central kitchen” for medical institutions • Creating an environment that supports delivery of regenerative medicine to patients Progres
Slide 30: Fundamental issues surrounding knee health
The fundamental issues surrounding “knee health” have become apparent over CellSource’s nine years in operation The below two points are extremely important in treating knee pain , but in reality... Early Early × detection treatment Difficult to access Difficult to detect appropriate treatment
Slide 31: Patients are still not receiving adequate treatment
Patients are still not receiving adequate treatment • Less than 10% of people with "knee pain" are attending medical institutions • More than 60% of people are not satisfied with their current treatment Not satisfied 61.5% Adapted from 2023 survey on knee pain conducted by CellSource over July 14–19
Slide 32: Knee treatment issues from the patient's perspective
Knee treatment issues from the patient's perspective and CellSource's activities to date • A more multifaceted approach is needed to address patient concerns Before attending hospital Starts attending hospital Pain becomes chronic I have never I have the feeling At what point I’m afraid of Patient W
Slide 33: Role expected of CellSource in the future
Role expected of CellSource in the future Before attending hospital Starts attending hospital Pain becomes chronic I have never I have the feeling At what point I’m afraid of Patient What Regenerative concerns something is particularly should I treatments medicine is surgery; are wrong. What is care
Slide 34: From implementation in medical institutions to implementation in society
From ”implementation in medical institutions" to full-scale "implementation in society" PHASE 1 Implementation PHASE 2 Implementation in society in medical institutions Expanding innovative Collaborating with partners treatment options through to deliver personalized regenerative medicine at medical
Slide 35: The future of CellSource
The future of CellSource CellSource aims to transition from a company that eliminates knee “pain” to a company that eliminates knee “concerns”
Slide 36: Future initiatives video
Future initiatives Please watch this video to get an idea of CellSource’s future initiatives (in Japanese)
Slide 37: Future initiatives (from Video)
Future initiatives (from Video) • Creating an ecosystem running the gamut from detection to treatment, allowing people to remain in optimal health without even noticing Mild pain, Chronic Normal discomfort Strong pain pain Improving lifestyles and Seamless delivery of treatment experience understand
Slide 38: Overview of CellSource Vision
Overview of CellSource Vision Until now In future Toward a world in which people Toward a world in which no one Our vision can choose their own knee pain need to be concerned with knee treatment pain What needs to Enabling early detection and be done to Making regenerative medicine the early treatme
Slide 39: Part 3 Year 0 Commitments and Earnings Forecast for FY10/2025
Part 3 “Year 0” Commitments and Earnings Forecast for FY10/2025
Slide 40: FY10/2025 initiatives: Three commitments in Year 0
FY10/2025 initiatives: Three commitments in “Year 0” Three commitments in CellSource Vision “Year 0” 1 Optimize management resource allocation ● Clarify focus areas and concentrate management resources ● Conduct a thorough cost review in other areas including back-office departments 2 Expand existin
Slide 41: Scaling out
Targeting next fiscal year as "Year 1" and focusing on creating “templates” this fiscal year Build reproducible business model “template” in “Year 0,” with view to scaling out and generating synergies in “Year 1” onward Ties with medical institutions Ties with partner companies Sales to Previously m
Slide 42: Earnings Forecast for FY10/2025: Overview
Earnings Forecast for FY10/2025: Overview We expect 3.4% increase in net sales and sharp improvement in profits in FY10/2025 Earnings forecast (JPY million) Net sales Operating profit Ordinary profit Profit Full-year FY10/2025 consolidated 4,501 370 372 255 earnings forecast % YoY +3.4% +186.9% +57.
Slide 43: Earnings Forecast for FY10/2025: Net sales
Earnings Forecast for FY10/2025: Net sales Growth in contract processing services for hybrid orthopedic clinics and contribution from new medical institution support services business FY10/2024 FY10/2025 YoY change at each [Millions of yen] Net sales Net sales business forecast 5,0 00 +3.4% 4,501 4,
Slide 44: Earnings Forecast for FY10/2025: Operating profit
Earnings Forecast for FY10/2025: Operating profit Impact on operating profit of “Year 0” commitments [Millions of yen] 159 561 -193 273 402 370 Operating profit 129 1 2 3 Contract loss Optimization of Upfront provisions at management investment in synovial stem cell resource allocation/ realizing pr
Slide 45: Optimize management resource allocation
Optimize management resource allocation Expand existing business targeting orthopedic clinics Upfront investment to realize CellSource Vision
Slide 46: Optimize management resource allocation
Optimize management resource allocation Expand existing business targeting orthopedic clinics Upfront investment to realize CellSource Vision
Slide 47: Optimization of management resource allocation
Optimization of management resource allocation Practice selection and concentration of businesses in line with CellSource Vision Situation until now Changes ● Concentrating management resources with focus on ● Offering services in a variety of medical orthopedics as a key area Existing business ● Fo
Slide 48: Selectively investing management resources in core businesses
Optimization of management resource allocation Selectively investing management resources in core businesses YoY change in SG&A expenses including Business FY10/2025 plan personnel costs Concentrate management resources here, as business at - + Orthopedic core of CellSource Vision Contract OB&GYN Co
Slide 49: Expand existing business targeting orthopedic clinics
Optimize management resource allocation Expand existing business targeting orthopedic clinics Upfront investment to realize CellSource Vision
Slide 50: From CellSource Vision: Strengthening ties with medical institutions
From CellSource Vision: Strengthening ties with medical institutions Until now In future Toward a world in which people Toward a world in which no one Our vision can choose their own knee pain need to be concerned with knee treatment pain What needs to Enabling early detection and be done to Making
Slide 51: Strengthening ties with medical institutions
Strengthening ties with medical institutions Drawing on existing ties with medical institutions to help realize CellSource Vision and further grow orders for contract processing services Strengthen support Clinics specializing offerings to in self-funded Hybrid clinics reach more treatment Contract
Slide 52: Strengthening ties with medical institutions
Strengthening ties with medical institutions Drawing on existing ties with medical institutions to help realize CellSource Vision and further grow orders for contract processing services Strengthen support Clinics specializing offerings to in self-funded Hybrid clinics reach more treatment Contract
Slide 53: Target medical institutions
Target medical institutions Classified active partner medical institutions into three categories based on the annual order count. About 80% of orders from hybrid medical institutions are from those in categories A and B. Active medical institution categories A: Hybrid medical institutions with 60+ a
Slide 54: Target medical institutions
Target medical institutions Designating target medical institutions and advancing understanding of individual circumstances and issue identification We aim to further grow orders by proactively applying our new sales strategies to medical institutions already placing orders on a certain scale (A and
Slide 55: New sales strategies for growing orders
New sales strategies for growing orders Implement sales strategies that go beyond the existing framework of contract processing services to address the specific challenges faced by each target medical institution Explained on Slide 59 onward Focus of new sales strategies Early × Early detection trea
Slide 56: Strengthening ties with medical institutions
Strengthening ties with medical institutions Drawing on existing ties with medical institutions to help realize CellSource Vision and further grow orders for contract processing services Strengthen support Clinics specializing offerings to in self-funded Hybrid clinics reach more treatment Contract
Slide 57: Medical institution support services
Strengthening ties with medical institutions: Medical institution support services Redefining consulting services business as medical institution support services business, launching initiatives aimed at realizing CellSource Vision and growing contract processing orders Orthopedic clinics specializi
Slide 58: Outlook for contract processing orders for Blood-derived Products
Outlook for contract processing orders for Blood-derived Products Our outlook for contract processing orders for blood-derived products from medical institutions specializing in self- funded treatment is conservative, but we expect orders from hybrid clinics to grow. While we expect only a slight Yo
Slide 59: Upfront investment to realize CellSource Vision
Optimize management resource allocation Expand existing business targeting orthopedic clinics Upfront investment to realize CellSource Vision
Slide 60: From CellSource Vision: Strengthening ties with partner companies
From CellSource Vision: Strengthening ties with partner companies Until now In future Toward a world in which people Toward a world in which no one Our vision can choose their own knee pain need to be concerned with knee treatment pain What needs to Enabling early detection and be done to Making reg
Slide 61: Orthopedic patient journey
Orthopedic patient journey ● Building an ecosystem through diversification into areas promising synergies with existing businesses Basic policy ● Partnering with companies that can aid in realizing that vision, with focus on trial runs and creating “templates” for each area Disease phase No pain Mil
Slide 62: Establishing early contact with patients
Strengthening ties with partner companies: Establishing early contact with patients Establishing contact with patients before they visit a medical institution, and raising awareness of knee disorders online ● Establishing contact with patients online before they visit a medical institution Aim ● Cre
Slide 63: Alliance with NTT DOCOMO
Alliance with NTT DOCOMO Building medical platform fusing online and offline services One of Japan’s largest member bases d Point Club members1: Roughly 100 million1 Wealth of data concerning each member2 l Offline contact points (real medical settings) l Connection with doctors l 1,900 + partner me
Slide 64: New initiative leveraging companies' respective assets
New initiative leveraging companies’ respective assets Building system for ensuring that “knee pain” is noticed, providing solutions to those in need Amassing and utilizing valuable big data Digitization of public lectures Collecting information on people with knee problems via Creating real-world c
Slide 65: Holding online public seminars throughout the country
Online public seminars Plan is to hold community-based online public seminars in collaboration with medical institutions nationwide Knee pain d Healthcare x local medical institutions Holding online public seminars throughout the country
Slide 66: Establishing points of contact offline
Strengthening ties with partner companies: Establishing points of contact offline Establishing contact with patients before they visit a medical institution, and raising awareness of knee disorders offline ● Establishing offline contact with patients before they visit a medical institution Aim ● Sup
Slide 67: Exploring collaboration with Japan Post
Exploring collaboration with Japan Post Japan Post CellSource Use of co-creation platform to create community- Nationwide network of more than based delivery network with post offices as 1,900 medical institutions face of the community Huge customer base Network of orthopedic clinics Advertising cap
Slide 68: Unique exercise (therapy) facilities with Japan Post
New initiative leveraging companies’ respective assets Looking at offering unique exercise (therapy) facilities in a format that could only be provided by Japan Post, with its social infrastructure in the form of post offices, and CellSource, with its specialty in orthopedics Tra i n i n g m e t h o
Slide 69: Building nationwide health infrastructure
Building nationwide health infrastructure Agreement to commence joint exploration of trial run in post offices from 2025 Contributing to Japan Post building healthy local communities Medical institutions Post offices Local medical institutions
Slide 70: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements The materials and information provided in this presentation contain so-called "forward-looking statements." These statements are based on current expectations, forecasts, and assumptions accompanying risks, and they may involve uncertainties that
Slide 71: CellSource
CellSource