A Message from our CEO

AN INTERVIEW WITH KAZUHIRO HATANO

Your US business is doing well. How do you evaluate it?

We aimed to become a global CRO headquartered in Japan from the initial stages after the company’s foundation so we thought it was essential to develop business in the United States, the world’s largest pharmaceutical market. To that end, we established our first overseas base in California of the United States in 2008, three years after founding the company. After that, we expanded overseas in Asia and Europe, and then in April 2018 in the United States, we acquired a local CRO called Accelovance, and were able to expand our sales all at once to 1.5 billion yen.

Having said that, in the first year, the company had an operating loss of 450 million yen. We started on management reform right away and returned to profitability the following year. Since then, the company has continued to grow steadily. I feel that management has stabilized by communicating our philosophy and culture persistently. In the fiscal year ended March 31, 2024, the sixth since the acquisition, sales have tripled to 4.5 billion yen and operating profit has grown to a positive 650 million yen, making a great contribution to consolidated results.

I expect the United States to continue being the largest pharmaceutical market and the center of new drug development for the foreseeable future. For Linical too, United States business is a growth driver for the group as a whole. Consequently, I think we will invest there for growth as a strategic market. M&A, in particular, is a chance to expand our business base in a single leap so we are always on the lookout for opportunities.

What are your plans for the future? 

There are statistics that the global CRO market is currently at around 5 trillion yen and I assume that it will grow year-by-year in association with the expansion of the global pharmaceutical market. New drug development is very active in the United States in particular so it will be very important for Linical’s future growth to gain market share here. To reiterate, we will continue to recruit and develop human resources and expand our business base while also keeping future M&A in the United States in view.

Globalization of our management base will be essential to expand our overseas business continuously. Under our newly introduced CXO structure, a CXO is responsible for the execution of business in their area across the group, including overseas subsidiaries. This will raise the overall level globally in all aspects of QCD (quality, cost and delivery times), and solidify our base as a truly global CRO.

Over the medium to long-term, we will aim to double our current workforce to about 1,500 people globally, and to expand into about 60 countries.

It has been pointed out that "drug loss" is growing in Japan. There was also news of another Japanese company in the same industry delisting. How will you work on Japanese business?

The situation surrounding drug development in Japan has changed greatly. The Ministry of Health, Labour and Welfare (MHLW) and others are considering ways to eliminate drug loss, the situation whereby drugs that have been approved overseas are not available in Japan, and have started to review regulations. The main players in drug discovery today are emerging biotechnology companies in Europe and the United States. Even large pharmaceutical companies tend to rely on venture companies for drug discovery seeds. The key is how to attract these kinds of companies to Japan, because unlike the major companies, start-ups rarely develop in Japan at the same time as they do in Europe and the United States.

First of all, we have bases in Europe and the United States so we are building relationships of trust with emerging biotech companies through local business. There are also cases where customers that were initially ventures have now grown in scale into medium-sized pharmaceutical companies in Japan. We are using this customer network to work on attracting trials to Japan.

In addition, Linical also provides consulting services to Japanese and non-Japanese companies that are trying to enter the Japanese pharmaceutical market as part of its drug discovery support business. Since its launch in 2017, it has accumulated results steadily and recorded its highest ever sales in the current fiscal year. Currently, we are strengthening activities to attract emerging overseas biotech companies to the Japanese market by collaborating with our subsidiaries in Europe and the United States from the sales stage.
As a global CRO originating from Japan, Linical will work continuously to prevent drug loss in Japan.

Lastly, Could you Give us a Message for Shareholders, please?

We acquired a CRO in Europe in 2013 and a CRO in the United States in 2018 and have grown both businesses. There are not many Japanese companies that have succeeded in M&A with foreign companies. We have worked through things thoroughly with each site without just leaving them as we bought them. I think that M&A will be essential for Linical to accelerate growth in the United States from now on. With our track record of successful acquisitions to date, I am confident that we can grow even larger. 

We will continue to strive to strengthen our earning power while executing investments for growth, and we will continue to handle the return of profits through stable dividends.

I hope that shareholders will continue to support Linical from a long-term perspective.