D.Western Therapeutics Institute, Inc. Q4 FY2024 earnings call

Company Vision and Core Growth Drivers

• Follow the vision of "Bringing innovative new drugs from Japan to the world", with three core growth drivers: 1) Provide optimal treatment for ophthalmic diseases; 2) Deepen and expand the company's core foundational technology; 3) Pursue efficient development and large revenue through strategic market selection.

Approved Product Operational Highlights

• DW-1002 single-agent obtained approval in China in February 2025, the only remaining major market approval needed is in Japan. US combination product is guided to submit application in 2026 after FDA requested a small-scale trial.
• Granatek's 10-year domestic royalty expired in September 2024, and Glaalpha has grown rapidly to become the main revenue contributor for the ripasil product line.

Development Pipeline Progress

• H-1337 (Glaucoma treatment): US Phase 2b topline data was published as scheduled in November 2024 with overall positive results: all three dose groups showed statistically significant superior intraocular pressure reduction compared to timolol, meeting the non-inferiority endpoint. The only observed adverse event was mostly mild conjunctival hyperemia that resolved after discontinuation, with no treatment discontinuations. The company plans to advance to Phase 3, and is simultaneously preparing for Phase 3 while pursuing out-licensing opportunities, prioritizing US launch.
• K-321 (Fuchs endothelial corneal dystrophy): Global Phase 3 is ongoing, trial completion timing shifted from January 2025 to December 2025 due to difficulty in patient enrollment and evaluation, with regulatory application now expected in 2027, pushed back from late 2026.
• DWR-2206 (Regenerative cell product for bullous keratopathy): IND submitted in March 2024, all 6 patient transplantations completed in December 2024. Evaluation and observation are ongoing through December 2025, with Phase 3 planned to start in 2026 and regulatory application in 2027. ArcticVision plans to initiate clinical trials in China in second half of 2025, with milestone payments expected to flow to De Western.
• DW-5LBT (Neuropathic pain treatment): Received a second Complete Response Letter (CRL) in July 2024 after re-submission, is currently conducting additional analysis, targets re-submission in first half of 2025, with approval expected in the 2025 fiscal year and launch in 2026.

Mid-term Strategy Update

• The 2020-2024 mid-term plan achieved its core goals: the development pipeline doubled in size over the 5-year period, and the company expanded its business scope from a foundational technology focus to include self-led development of lead products, including self-development of H-1337 in the US and co-development of DWR-2206 and DW-5LBT.
• The company is advancing multiple collaborative research projects with universities and other companies spanning ophthalmic and non-ophthalmic areas, to leverage core technology and meet unmet medical needs.

1. Approved product segment: Total 2024 sales reached 471 million yen, a 10.1% increase year-over-year, the highest revenue in the past 5 years and 17.9% above initial full-year guidance. This segment contributes 100% of total company revenue.

• DW-1002 (Ophthalmic surgical adjuvant): Royalty revenue grew 21.0% year-over-year to over 300 million yen, driven by higher sales volume and favorable yen depreciation effects; this accounts for ~63.7% of total revenue.
• Ripasjil hydrochloride hydrate (Glaucoma treatment): Glaalpha grew ~75% year-over-year, Granatek domestic royalty expired in September 2024, so overall segment revenue is on a declining trend, with Glaalpha now the main contributor to this product line. Granatek retains a small amount of overseas royalty.

1. Research and development segment: Total R&D expense was 1.367 billion yen, a 47.0% increase year-over-year, driven by higher development costs for H-1337 and DWR-2206. R&D expense came in 14.5% below the initial 1.6 billion yen guidance due to the delayed DW-5LBT milestone payment and shifted H-1337 development timeline.

• 2025 full year financial guidance: Forecast total revenue of 400 million yen, a decrease from 2024's 471 million yen, driven by the expiration of Granatek domestic royalty. Forecast R&D expense of 760 million yen, roughly half of 2024's actual expense, due to the completion of 2024's large clinical trials, which reduces expected operating and ordinary loss significantly compared to 2024.
• Pipeline guidance:
  • H-1337: Preparations for Phase 3 are ongoing, no specific public timeline released at this call.
  • K-321: Phase 3 will continue through the end of 2025, regulatory application is expected after the end of 2026.
  • DW-5LBT: Target re-submission and approval in 2025.
  • DW-1002: China targets launch after 2025 approval, Japan targets submission in 2025, US combination product targets submission in 2026.
  • DWR-2206: Japan expects positive Phase 1/2 data in 2025 to prepare for 2026 Phase 3; China expects clinical trial initiation in late 2025.
• Capital raising guidance: Additional capital raising will be required to fund H-1337 Phase 3, management will carefully consider timing given the recent 2024 capital raise.

• DW-1002 core patents will expire in major markets (including Japan) in December 2025, royalty revenue will decline or disappear in non-US markets from 2026 onward, though the company retains revenue from domestic supply contracts via exclusive know-how terms independent of patent protection.
• K-321 Phase 3 trial completion and regulatory submission has been delayed by 1 year due to challenges in patient evaluation, pushing back potential commercial launch.
• DW-5LBT has received two CRLs from regulators, and its re-submission is already behind the original 2024 timeline.
• Cash and cash equivalents declined to 1.126 billion yen at the end of 2024 due to large R&D investment, and additional capital raising will be needed to fund H-1337 Phase 3.
• The 12th new share subscription warrant raised 1.145 billion yen, ~20% below the original target of ~1.4 billion yen.
• H-1337 did not show the expected dose-dependent intraocular pressure reduction effect in Phase 2b, which is noted as a remaining development issue.

No Q&A section was included in the provided earning call transcript.