D.Western Therapeutics Institute, Inc.

Business Details

A drug discovery biotech venture that conducts research and development of pharmaceuticals, primarily protein kinase inhibitors, and generates revenue by licensing out its development products to pharmaceutical companies and others. Revenue consists of royalty income, milestone income, and upfront income. The company holds multiple marketed products and a development pipeline centered on ophthalmic-related diseases, and has built a research structure utilizing industry-academia collaboration with Mie University, a national university corporation.

Recent Overview

Revenue declined 84.4% year-on-year due to non-recognition of TissueBlue™ royalties; H-1337 shifted to prioritizing Japan development after concluding an option agreement with Santen Pharmaceutical

Revenue for Q1 2026 was ¥15 million (down 84.4% year-on-year). Regarding TissueBlue™, since the contract extension for regions where the patent remains in effect is under discussion with DORC, no royalties were recorded for the quarter (expected to be recorded in a lump sum after the contract extension). Domestic and Asian sales of Glanatec Alpha® Combination Ophthalmic Solution progressed favorably. For H-1337, the company concluded an option agreement with Santen Pharmaceutical in March 2026, shifting policy to prioritize development in Japan, and accepted an investment of approximately ¥200 million from Santen Pharmaceutical (subsequent event: payment completed on April 10, 2026). For K-321, the observation periods for all global Phase III clinical trials have been completed, and data analysis is underway. Selling, general and administrative expenses were ¥182 million (down 20.2% year-on-year), of which R&D expenses were ¥117 million (down 17.5% year-on-year). Operating loss widened to ¥167 million (from ¥142 million in the same period of the previous year). Cash and deposits at quarter-end stood at ¥1,539 million. There is no change to the full-year earnings forecast (revenue of ¥300 million, operating loss of ¥780 million).

Key Products

Growth Drivers

• Completion of all observation periods for K-321's global Phase III clinical trials, progress in data analysis, and expectations for transition to regulatory application
• Future lump-sum recognition of unrecorded royalties following agreement on the TissueBlue™ contract extension with DORC
• Accelerated development and revenue opportunities in Japan and the Asia region through the conclusion of the option agreement for H-1337 with Santen Pharmaceutical
• Reinforcement of R&D funding through acceptance of an investment of approximately ¥200 million from Santen Pharmaceutical
• Stable securing of royalty income through continued domestic and Asian sales of Glanatec Alpha® Combination Ophthalmic Solution
• Acquisition of new revenue sources through selection of sales partners and progress toward launch, leveraging the U.S. approval of Bondlido (DW-5LBT)
• Progress in DWR-2206's Phase II clinical trial and transition to Phase III
• Emergence of new development pipeline value through progress in clinical preparations for H-1129
• Continued timely fundraising through exercise of stock acquisition rights, third-party allotments, etc., and maintenance of R&D capabilities

Risks

• Risk that if contract extension negotiations for TissueBlue™ with DORC fail, royalty income will permanently disappear, leading to a structural decline in revenue
• Due to the business characteristic where drug discovery research and clinical development expenses are incurred ahead of revenue, continuous operating losses and negative operating cash flow have occurred, and material events raising doubt about going concern exist
• Forecast of deteriorating performance for the full fiscal year ending December 2026, with revenue of ¥300 million (down 22.6% year-on-year) and an operating loss of ¥780 million (widening from the previous year)
• Risk of clinical trial failure, discontinuation, or delay in the development pipeline (performance may fluctuate significantly depending on K-321 data analysis results and DWR-2206 and other trial outcomes)
• Risk that the timing for starting U.S. development of H-1337 becomes uncertain due to the policy shift prioritizing Japan development, delaying global monetization
• Risk of revenue concentration among major customers (DORC, Kowa, Santen Pharmaceutical, etc.) and risk of business policy changes by licensees
• Continuous need for fundraising (dependence on fundraising involving dilution risk through exercise of stock acquisition rights, third-party allotments, etc.)
• Foreign exchange risk (affecting royalty income from overseas licensees)