Otsuka Q3 FY2026: Profit forecast raised as business profit jumps 19%

Otsuka Holdings reported revenue of ¥2.0424 trillion for January-September 2026, up 12.3% from a year earlier. Operating profit rose 4.0% to ¥423.7 billion, while quarterly profit attributable to owners of the parent increased 8.2% to ¥322.1 billion. Revenue grew by ¥223.6 billion, with all business segments posting gains.

• Business profit: Rose 19.2% to ¥436.8 billion, driven by growth in key pharmaceutical products and royalty income.
• Earnings per share: Increased to ¥612.03 from ¥560.81 a year earlier. Changes in the number of shares outstanding following share buybacks also had an impact.
• Research and development costs: Rose 4.7% to ¥260.3 billion as Otsuka continued to invest amid progress in clinical development.

Revenue growth outpaced business profit growth as sales of Rexulti, Lonsurf and long-acting injectable drugs expanded, alongside higher royalty income and contributions from the U.S. infusion business. Operating profit grew less than business profit partly because other income had been higher in the year-earlier period. The company-defined business profit measure, which indicates underlying earning power, rose more sharply, reflecting higher gross profit and cost controls.

The pharmaceuticals business led overall growth, while the nutraceuticals, consumer products and other businesses also reported higher revenue. Year-on-year changes in revenue and business profit by segment were as follows.

• Pharmaceuticals: Revenue rose 14.2% and business profit increased 21.4%. Rexulti prescriptions grew in the U.S. and Japan, lifting revenue 21.4% to ¥296.4 billion. Abilify Asimtufii revenue rose 66.6% to ¥42.9 billion as patients switched from one-month formulations and other treatments. By contrast, Samsca/Jinarc revenue fell 31.1% to ¥125.1 billion as generic drugs gained ground in the U.S.
• Nutraceuticals: Revenue rose 6.9% and business profit increased 3.9%. Nature Made and other products sold well in the U.S., while Equelle grew in the women's health category as its base of new and regular customers expanded. POCARI SWEAT was affected by unfavorable weather in Japan, but overseas sales increased.
• Consumer products: Revenue rose 4.5% and business profit increased 15.8%. Sales volumes of Crystal Geyser and MATCH fell below the year-earlier levels due to weather in Japan, while higher equity-method investment income and other factors supported profit.
• Other businesses: Revenue rose 12.8% and business profit increased 9.9%. Shipments of functional chemicals for automobiles and electronics, along with growth in joint pharmaceutical distribution, contributed to the gains.

In pharmaceuticals, growth products offset the impact of generics on Samsca/Jinarc. Nutraceuticals continued to grow through overseas brands, women's health products and offerings that support general health, despite weather-related risks to domestic beverage sales.

Otsuka raised its operating profit forecast for FY2026 to ¥488 billion from ¥469 billion. It kept its revenue forecast at ¥2.725 trillion while also lifting its forecasts for business profit and net income attributable to owners of the parent.

The company expects Rexulti, Voyzact and other products to perform well in pharmaceuticals, while functional beverages in nutraceuticals are expected to fall short of its previous assumptions. Otsuka plans to keep overall revenue within its previous forecast range while adding to profit through tighter selling, general and administrative expenses and changes to R&D plans. Its full-year R&D forecast is ¥373 billion, down ¥12 billion from the previous forecast.

Total assets stood at ¥4.3233 trillion at the end of September, up ¥125.7 billion from the end of 2025. The equity ratio attributable to owners of the parent, a measure comparable to shareholders' equity, rose 2.1 percentage points from the previous year-end to 74.4%.

Cash and cash equivalents fell by ¥62.2 billion from the start of the year to ¥472.5 billion at period-end, as operating cash flow was not enough to cover investment and shareholder returns. Higher investing cash outflows were partly due to the recognition of intangible assets related to the acquisition of TSND-201.

Otsuka plans an annual dividend of ¥200, comprising an interim dividend of ¥100 and a forecast year-end dividend of ¥100, up from ¥140 for the previous year. It repurchased about ¥50 billion of treasury shares through market purchases and announced on Oct. 30 a decision to cancel 4,537,700 shares already acquired in December. The policy points to continued investment for growth alongside efforts to improve capital efficiency and return value to shareholders.

Otsuka Pharmaceutical completed its acquisition of U.S.-based Transcend Therapeutics in June 2026, adding the PTSD drug candidate TSND-201 to its development pipeline. The upfront consideration was $700 million, with the potential for additional payments of up to $525 million depending on sales of the candidate.

TSND-201 is a fast-acting drug candidate containing methylone as its active ingredient. A Phase 3 trial began in the U.S. in April 2026. In connection with the acquisition, Otsuka recorded about ¥114.3 billion as an intangible asset for in-process research and development.

Otsuka is prioritizing areas including psychiatry and neurology, cancer, autoimmune diseases and rare diseases, and is pursuing drug development to address unmet medical needs. The acquisition is an investment in future growth through new treatment options, as well as an effort to expand sales of existing products.

R&D costs for January-September rose 4.7% year on year to ¥260.3 billion. Otsuka invested about ¥246.3 billion in pharmaceuticals, advancing the Phase 3 trial of PTSD candidate TSND-201, clinical trials for futibatinib, a candidate treatment for bile duct cancer, and development of the antibody-drug conjugate ARC-02.

• Pharmaceuticals: The company said clinical development costs increased, while R&D costs were broadly flat from a year earlier excluding foreign-exchange effects.
• Nutraceuticals: R&D costs were about ¥9.1 billion. The segment is developing products that support health maintenance and improvement and address social challenges.
• Changes to development plans: The full-year R&D cost forecast was cut by ¥12 billion from the previous forecast, reflecting the discontinuation of some projects and other changes.

Rather than making across-the-board cuts, Otsuka is continuing clinical development in growth areas while choosing which programs to pursue. Investors will need to track trial results and regulatory progress to assess whether R&D advances translate into future products and revenue.

Otsuka raised its full-year profit outlook, but uncertainties remain across its businesses, including pharmaceutical competition, weather and policy changes. The company currently assumes that the impact of the Middle East situation, U.S. drug pricing systems and tariff policies on its results will be limited.

• Generic competition: Samsca/Jinarc revenue fell 31.1% year on year as generics gained ground in the U.S. after the end of its exclusive sales period. The duration of exclusivity for key drugs and the competitive landscape will affect future sales.
• Weather and sales volumes: Domestic POCARI SWEAT sales volumes fell below the year-earlier level amid unfavorable weather, including during July-September. Full-year sales of functional beverages are expected to miss the previous forecast, leaving demand exposed to weather conditions.
• Uncertainty in drug development: Clinical trial results and approval timing are not guaranteed, and discontinued or delayed programs could affect future growth opportunities. Otsuka has announced the strategic discontinuation of some development projects.
• Policy and geopolitical risks: Changes in U.S. drug pricing systems, tariff policies or the Middle East situation could affect costs, revenue and asset valuations.

Otsuka's broad product portfolio and high equity ratio provide support, but sales trends for major drugs and development outcomes can drive swings in pharmaceutical earnings. Investors should watch for any change in the external conditions underpinning the company's full-year forecast and the resulting gap between its outlook and actual results.