Financial Strategy

Ono is now undergoing a major shift from a business model centered on the domestic market to a growth model built on global markets. As the executive responsible for Finance & Accounting, I believe my most important role is to ensure that the financial conditions are in place to reliably execute the growth strategies envisioned by the CEO and COO.

The role of Finance & Accounting is not limited to managing funds and compiling business results. We consider where capital should be allocated and over what time horizon to drive growth, what risks an investment entails, and what financial structure is optimal, and present options while sharing the same goals as the business divisions. I believe Finance & Accounting must serve as a business partner that participates in management decision-making.

My career in finance has been with manufacturing companies that operate globally and actively pursue M&A. In the pharmaceutical industry, continued investment in R&D—which requires a long time and entails uncertainty—is essential to future growth. As globalization advances, the issues that need to be addressed become increasingly complex, including compliance with country-specific tax systems and regulations, as well as foreign exchange fluctuations and geopolitical risks. Drawing on my experience in global cash management and M&A, I will enhance the quality of decision-making through strategic planning and execution as well as risk management. Our mission is to support, from a financial standpoint, Ono’s challenge of delivering new treatment options to patients while placing a strong emphasis on R&D. I will build a Finance & Accounting organization in which every member deepens their understanding of the business and works toward the same goals as management and the business divisions.

The shift in our business model is beginning to be reflected in our revenue structure. In FY2025, revenue totaled 515.8 billion yen, comprising 342.6 billion yen in product sales and 173.2 billion yen in royalty revenue. By bringing Deciphera into the Group and gaining a direct sales platform in the U.S. and Europe, we are beginning to establish a path toward expanding revenue from direct sales and strengthening our global earnings base.

Ono has traditionally operated with a strong emphasis on financial soundness, using cash generated from its domestic business and other sources. However, to take direct responsibility for everything from R&D through commercialization in the U.S. and Europe and to roll out multiple products globally, our approach to finance must also evolve. We also utilized external borrowings in the acquisition of Deciphera. This marked a shift from simply accumulating cash to raising funds with an eye to our future cash flow generation capacity and accelerating investment for growth. Maintaining financial soundness and a clear outlook for repayment remains a prerequisite. At the same time, judging investments solely on the basis of cash on hand could cause us to miss significant growth opportunities. When appropriate, we will make prudent use of debt and build a financial foundation that enables us to pursue investments that enhance corporate value.

Of particular importance is our financing capacity to support global R&D. Several pipelines are currently advancing, and once promising development candidates enter the stage of global development, substantial investment funding may be required. We must not allow funding constraints to cause us to miss development opportunities. In addition to maintaining appropriate liquidity and using bank borrowings, we will consider a broad range of financing options, including corporate bonds, and establish in advance a framework that enables us to raise funds swiftly and flexibly when needed.

To manage and utilize Group funds efficiently across borders, we also need to enhance our global cash management. As our overseas business expands, rather than supplying funds one-way from Japan, it will become important to reinvest cash generated overseas in R&D and business growth overseas. Taking into account funding needs, tax regimes, and country risk in each region, we will establish mechanisms to optimally allocate and efficiently utilize funds across the Group, evolving the financial strength we have built around our domestic business into financial capabilities that support global growth.

Our highest-priority investment under our financial strategy is R&D. The source of corporate value for a pharmaceutical company lies in its pipeline, which enables it to deliver new treatment options to patients, and R&D investment is a growth investment that generates future products and revenue. We regard an R&D expense ratio of 20–25% of revenue as the medium- to long-term level and plan to invest approximately 300 billion yen over the two years from FY2025 to FY2026. In FY2025, due in part to continued high levels of R&D investment, the R&D expense ratio was 28.5% and the operating profit margin was 17.9%. Although we are currently in a phase of upfront growth investment, we will continue making the necessary R&D investments and translate the commercialization of our pipeline and the expansion of our global business into profit growth, aiming to achieve our medium- to long-term targets of revenue CAGR in the high single digits, an R&D expense ratio of 20–25%, and an operating profit margin of 25% or higher.

At the same time, R&D takes many years and always entails uncertainty. Therefore, rather than pursuing long-term growth solely through in-house drug discovery, we also need to combine this with initiatives that generate revenue and profit over the short to medium term through in-licensed products, M&A, and the maximization of value from existing products. The growing sales of Deciphera’s QINLOCK and ROMVIMZA are one tangible result of these efforts. While strengthening our earnings base over the short to medium term, we will reinvest the funds generated in in-house drug discovery to drive the next stage of growth. In collaboration with the business divisions, Finance & Accounting considers what products and pipelines will be needed, and when, whether to secure them through in-house drug discovery, in-licensing, or M&A, and how much funding each option will require. Designing our growth scenarios and the associated cash inflows and outflows in an integrated manner is a key role of finance.

Of course, prioritizing growth investment does not mean deploying capital without limit. The amount of capital available for investment is finite, and discipline in achieving returns on investment is essential. When evaluating M&A and in-licensing opportunities, we use metrics such as net present value (NPV) and internal rate of return (IRR) to carefully assess whether the expected return on capital exceeds the cost of capital. After an investment is made, we continue to monitor the need for additional investment and changes in the business environment and assess whether the expected results are being achieved. We are also continuously enhancing our investment decision-making framework to inform future decisions.

In addition, non-financial factors such as R&D capabilities, human resources, digital infrastructure, and social trust are also essential to sustainable growth. How does investment in people increase employee engagement and lead to stronger R&D capabilities and business growth? We intend to visualize, as far as possible, the links between financial and non-financial factors and more clearly demonstrate the relationship between investment and outcomes.

Furthermore, maintaining an appropriate balance among growth investment, financial soundness, and shareholder returns is important. Under our progressive dividend policy, we aim to enhance shareholder returns through sustainable profit growth. Rather than focusing on short-term share price movements, we aim for sustainable improvement in total shareholder return (TSR) by bringing the results of R&D to market and linking growth in revenue and profit, together with improved capital efficiency, to shareholder returns. The pharmaceutical business is highly uncertain, and it takes time for R&D results to translate into revenue. That is precisely why we need to clearly explain to shareholders and investors not only the current figures, but also the growth story we are pursuing, what we are investing in, and how far we have progressed. We will explain pipeline progress, the rationale for our investments, and the expected time horizons as clearly and carefully as possible, while deepening dialogue so that shareholders and investors can support Ono’s challenges from a long-term perspective.

In terms of capital efficiency, we place particular importance on ROE as a common management indicator. We will not be satisfied with the current level. By translating our investments in R&D and global business into profit growth, we will achieve ROE that consistently exceeds our cost of capital.

We are also continuously reviewing our cross-shareholdings as part of our efforts to improve capital efficiency. Because long-term partnerships with other companies are essential to the creation of innovative medicines, we hold shares that we judge necessary for enhancing corporate value over the medium to long term, taking into account business relationships and the potential for synergies. At the same time, once a year the Board of Directors reviews the purpose, benefits, and risks of each individual holding. For shares determined to be reduced, we proceed with reductions while continuing dialogue with the investee companies.

Ono has now reached a stage in which multiple development candidates are advancing and we are positioned to achieve a new phase of global growth. We will build the financial foundation and financing capacity needed to reliably support this growth, invest with discipline, and translate the results into profit growth and enhanced corporate value. I believe that is the responsibility of the Finance & Accounting function.