d. western therapeutics institute inc. impact of glaukos
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ANALYST NET Company Report
D. Western Therapeutics Institute Inc. (4576 JASDAQ) Issue date: Nov. 16, 2020
1/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
Impact of Glaukos joint research contract
The Glaukos expansion strategy
Glaukos Corporation is a global maker of ophthalmic devices. At present its main products are the minimally invasive devices for the treatment of glaucoma, iStent® and iStent Inject®. These achieved a 10-fold increase in sales in a mere 6 years. For the treatment of ophthalmic diseases, it is not easy to apply regular and continuous eye drops, and therefore drug sustained-release devices and aqueous humor draining devices are building big growth markets. Until 2018 Glaukos focused on the development of devices, such as drug administration devices for glaucoma, but since 2019, it has pursued an opportunity to expand its product portfolio in the promising area of corneal disorders and retinal diseases. It therefore acquired Avedro Inc. and DOSE Medical Corp., and concluded a technology license agreement with Intratus Inc., thereby becoming a leading maker of a broad range of devices and drugs in ophthalmology, a market valued at USD 54 billion.
Why did Glaukos choose DWTI?
In September 2020, Glaukos amended the joint research contract and license agreements it had concluded in 2018, expanding the area of indications and signing new license agreements. Why did Glaukos twice select DWTI as its joint research partner? The target of the 2018 joint research was related to iDose, a device which could provide a long-term sustained release of DWTI's drug (a ROCK inhibitor) for the treatment of glaucoma. In the September 2020 agreement, indications were expanded to cover corneal disorders and retinal diseases, and the agreements incorporated milestone payments upon several events during product development and royalties after product launch. Glaukos highly evaluated the potential of DWTI’s ROCK inhibitors and other kinase inhibitors and the fact that DWTI’s drug discovery technology was capable of creating device-suitable drugs (such as long-term stability of the chemical structure, low water solubility, and affinity of new DDS techniques such as gels).
What does the new contract bring to DWTI?
The two joint research and licensing agreements were not the result of aggressive marketing by DWTI but the result of a decision of Glaukos to select DWTI when Glaukos was expanding its strategy. Therefore, it seems likely that the size of the milestone payments and royalty rates to be generated by the contracts could overturn DWTI’s former image. DWTI is presently gradually extending the labeled indications of its existing products on the market and the geographic territories where they are sold, but at the same time, during the interval until its next in-house product is launched, the company also is extending the geographic market territories of their products and the surgery targets which it has in-licensed from other companies in order to stabilize its earnings. In other words, the company is securing multiple sources of stable earnings, and furthermore, is now at the stage that it can license out new drugs developed in house after completing early clinical studies. We therefore infer that adding in the impact of products jointly researched with Glaukos will be significant.
Follow-up Report
Fair Research Inc.
Tsuyoshi Suzuki
Company Outline
Location Nagoya
President Yuichi Hidaka
Established Feb. 1999
Capital JPY556 mil.
Listed Oct. 2009
URL www.dwti. co.jp
Industry Pharmaceuticals
Employees 17 (consol)
Key Indicators (as of 2020/11/13)
Share Price 326
52week High 699
52week Low 301
Shares
Outstanding 29,251thou.
Trading Unit 100 shares
Market Cap JPY9,536mil.
Dividend (est.) 0
EPS (est.) -12.94 JPY
Forecast PER NA
Actual BPS 53.02 JPY
Actual PBR 4.17X
Results Revenues JPY mil
YoY %
Op. Income
JPY mil
YoY JPY mil
R.P. JPY mil
YoY %
Net Income JPY mil
YoY %
EPS JPY
Share Price
High Low
2015/12 Actual 61 - -290 NM -295 NM -296 NM -12.99 1,069 520
2016/12 Actual 168 171.8 -319 NM -304 NM -253 NM -10.46 862 362
2017/12 Actual 254 51.2 -633 NM -668 NM -1,563 NM -59.89 829 404
2018/12 Actual 292 15.3 -786 NM -796 NM -748 NM -28.51 715 387
2019/12 Actual 580 98.2 117 NM 109 NM 133 NM 5.07 699 312
2020/12 Forecast 310 -46.6 -390 NM -410 NM -340 NM -12.94
Note: EPS、PER、BPS、and PBR calculated on non-treasury shares outstanding.
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
2/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
A research and
development-oriented drug
discovery company with a
focus on rho kinase (ROCK)
inhibitors
Different companies have
individualized approaches to
the development of kinase
inhibitors
Research on intracellular
signal transduction systems
has led to successful
products
Isoquinoline derivatives
constitute the core of
DWTI’s product pipelines
Rock inhibitors are involved
in contraction and
cytoskeletal movement
ROCK inhibitors are
involved in aqueous humor
outflow in the trabecular
meshwork of the eye. It
has also been suggested that
long-term administration
enhances the effect of
lowering intraocular
pressure
Succesful licensing-out of
ROCK inhibitor to Kowa in 2002
In 2014 the world’s first
ROCK inhibitor for the
<Business model>
D. Western Therapeutics Institute, Inc. (DWTI) is a bio-venture from a university
background specialising in the research and development of ROCK inhibitors. It
focuses on ophthalmic diseases, an area with relatively few competitors.
A feature of DWTI’s approach is its use of a well-stocked library of chemical
compounds with kinase-inhibiting properties to create promising new pharmaceutical
compounds.
While the development of chemical compounds to inhibit targeted kinases is regarded
as relatively uncomplicated with modern chemical techniques, pharmacokinetic issues,
such as absorption and metabolism, and side effects, can present problems. It is thought
that the main cause of side effects is the effect on kinases other than those targeted, and
so a major effort is now dedicated to the development of highly selective inhibitors
which act only on the target.
The origin of DWTI's technology comes from the long years of research done by its
founder, Hiroyoshi Hidaka (current chairman and chief scientific officer), on
intracellular signalling systems using protein kinase inhibitors at Mie University and
Nagoya University. Chairman Hidaka has a worldwide reputation in the fundamentals
of pharmacology, particularly for his “Cellular level studies on calcium ions”, and for
his contribution to two novel products developed and brought to market in
collaboration with Japanese pharmaceutical companies. One of these is fasudil
hydrochloride (Asahi Kasei Pharma: indicated for delayed cerebral vasospasm after
subarachnoid hemorrhage), the world’s first ROCK inhibitor. Fasudil hydrochloride is
a kind of isoquinoline sulfone amide compound, and even now, remains one of the
more potent compounds of the specific inhibitor of rho kinase. Similar chemical
structures are recognisable in many of the drugs currently being developed by DWTI.
Rho kinase, is a type of serine threonine kinase (STK) that acts as a mediator of the
MAPK pathway. Previous studies have shown that rho kinase is deeply involved in
such physiological cell functions as contraction, proliferation, migration and gene
expression induction. Among them, phosphorylation of various proteins such as
myosin, adducin, and the erm family of proteins, is involved in contraction by actin-
myosin polymerization, movement of cytoskeleton, remodelling of extracellular
matrix, etc. have been linked to drug discoveries. For example, fasudil hydrochloride,
mentioned earlier, inhibits ATP from competing with phosphatases such as rho kinase,
which prevents phosphorylation of myosin light chains and prevents actin and myosin
from polymerizing and contracting, thereby expanding contracted blood vessels.
When it was verified in the early years of this century that ROCK inhibitors reduce
intraocular pressure, there was a significant increase in applied research into glaucoma.
It was found that contraction due to actin-myosin polymerization, cytoskeleton
movement, and extracellular matrix remodeling are involved in aqueous humor
outflow in the trabecular meshwork pathway of the eye.
DWTI was established in 1999 with the aim of researching and developing kinase
inhibitors. As early as September 2002, the ROCK inhibitor glaucoma treatment K-115
and antiplatelet agent K-134 were successfully licensed out to Kowa Company, Ltd.
(at the basic research stage) with Kowa becoming the main developer of these two
products. In September 2014, K-115 (ripasudil; trade name Glanatec®) was approved,
and in December of the same year, was launched as the world's first ROCK inhibitor therapeutic agent for glaucoma. Meanwhile, in October 2009, DWTI was listed on
JASDAQ. (The second ROCK inhibitor for treating glaucoma is netarsudil (trade name
Company Outline and Philosophy
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
3/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
treatment of glaucoma
(Glanatec®) received
approval
In the interval before a
product could start
producing profits following
Glanatec® the company
secured the licensing-in of
products in its core area of
ophthalmology
Outside the area of
ophthalmology, the
company looked to stabilize
revenues by licensing-in
candidates with the potential
for an early market launch
Expediting the development
of in-house products while
Glanatec® and licensed-in
products provide stable
revenues
H-1337 is also a type of
isoquinoline derivative and
DWTI seeks to show
lowering effects on
intraocular pressure through
the mechanism of ROCK
and LRRK2 inhibition.
Now developing new
products with device maker
Glaukos
Stable sources of earnings
and expanded indications
and geographical regions of
use should lead to growth
Rhopressa®) from the US company, Aerie Pharmaceuticals Inc. (approved in 2017).
(This is referred to below.)
DWTI continued to promote the development of its own in-house products but, in the
interval before such a product could start producing profits on a stable basis and to
diversify risk, in 2015 it licensed-in an ocular painkiller. Also, in 2017, it licensed in
the eye surgery adjunct business (DW-10028 (BBG250)) from Helios Co., Ltd (the
former was licensed out to Rohto Pharmaceutical in 2019, the Japanese rights to the
latter to Wakamoto Pharmaceutical, and the US/European rights to DORC B.V.)
The company also plans to use its knowledge and experience of drug development in
in-licensing products under development outside ophthalmology which have the
potential for an early market launch, thereby stabilizing revenues. In April 2020, the
company concluded a joint development agreement with a Japanese company, MEDRx
Co., Ltd. This related to a lidocaine tape preparation (MRX-5LBT; DWTI development
code: DW-5LBT; target indication: neuralgia following shingles), which MEDRx has
been developing in the US. An NDA was submitted to the FDA in August 2020 and its
receipt was confirmed on October 27. The FDA’s review process is likely to be
completed in a year or so. After launch, DWTI will receive royalties on the sales.
As noted above, DWTI is promoting the development of several of its own new
compounds, with Glanatec® already on the market and products acquired externally
beginning to earn a certain level of stable revenues.
In particular, the multi-kinase inhibitor H-1337 showed favorable results in Phase 1/2a
clinical trial in the US in 2018 and DWTI is seeking out-license opportunity while
doing further in-house development.
Further, the company has, since 2018, been undertaking joint R&D with Glaukos, using
a new ROCK inhibitor to develop a product to treat glaucoma. Furthermore, in the
recent joint research and development agreement concluded with Glaukos (September
2020), target indications aside from glaucoma have been added (glaucoma => corneal
disorders and retinal diseases) and new license agreements have been concluded. We
will discuss the significance of this expansion in detail later.
In addition, the company is proceeding with an expansion of indications and areas of
indication for existing products, mainly with product licensees.
Glanatec® (out-licensed to Kowa, which took over the later development) received
authorization to import and sell into South Korea in February 2019, and from August
Kowa submitted NDAs to four Asian countries, one of which, Singapore, approved in
March 2020. Additionally, in August 2019 a Phase 2 trial began in the US for Fuchs
endothelial corneal dystrophy. Further, in February, began the development of a fixed
dose combination product (K-232, Japan) containing Glanatec® and a different
existing glaucoma drug.
DW-1002 is an in-licensed drug originally for use in Europe. Wishing to expand its
indications an NDA was submitted in the US in April 2019, followed by an NDA in
Canada in October. The approval in the US came in December 2019 and sales in the
US began in April 2020. In terms of expanding indications, Phase 3 investigator-
sponsored trials in Japan on cataract surgery were completed in August 2018, and in
February 2019 the Japanese rights for the indication was out-licensed to Wakamoto
Pharmaceutical.
Thus, DWTI is engaged in R&D related to ophthalmic indications as its intensive
research field. In addition to the above, it is conducting research to expand indications
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
4/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
Challenging new modalities
for H-1337 beyond glaucoma including systemic diseases and is seeking out new drug
candidates for retinal diseases with its research and in-licensing strategy.
Further, the company’s subsidiary, Japan Innovative Therapeutics, Inc. (JIT), shares a
patent on the diagnosis and treatment of premature infant retinopathy with the Tokyo
University of Agriculture and Technology. Together with the university and the Tokyo
Biomarker Innovation Research Association (TOBIRA) the company has promoted
joint research aimed at the development of diagnostic agents and drugs for treating
premature infant retinopathy. In October 2020, JIT concluded a sub-license agreement
with Hong Kong’s Splendor Health International Ltd. regarding exclusive rights to use
a patent covering diagnosis and detection of retinopathy of prematurity and
anaphylactic shock in mainland China, Hong Kong and Taiwan.
In addition, the company has started research on a new modality, targeted protein
degradation inducers rather than kinase inhibitors, in collaboration with UBIENCE
Co., Ltd. (October 2019).
Reference: DWTI’s Product Pipeline
Source: DWTI
In-house products
Code IndicationDevelopment
stageRegion
Partner
(code)
Glanatec® Glaucoma ・ Launched Japan Kowa
Applic. For
approval
S. Korea, Sing.,
Malaysia, Thailand
Viet Nam
K-321
Corneal endothelium disorder
(Fuchs corneal endothelial
degeneration)
Phase 2 USKowa
(K-321)
Ripasudil
hydrochloride
hydrate/Brimo
nidine tartrate
K-232Glaucoma
・High ocular pressurePhase 3 Japan
Kowa
(K-232)
H-1337Glaucoma
・High ocular presssurePhase 1/2a US DWTI alone
K-134 ー Phase 2 * JapanKowa
(K-134)
*
Ripasudil
hydrochlori
de hydrate
K-134 has been targeted arteriosclerosis obliterans as indication, developed and completed phase 2 by Kow a Company,
Ltd.. Meanw hile, Kow a is now considering another target disease.
Licenced in
Code Indications Stage RegionPartner
(origin)
DW-1002 Peeling of inner limining membrane Launched EuropeDORC
(Kyushu Univ.)
Peeling of inner limining membrane Launched USDORC
(Kyushu Univ)
Peeling of inner limining membrane NDA CanadaDORC
(Kyushu Univ)
Staining of inner limining membrane Phase 3 JapanWakamoto
(Kyushu Univ.)
Cataracts surgery Phase 3 JapanWakamoto
(Kyushu Univ.)
DW-1001 Ophthalmic therapy (not public) Preclinical JapanRoht
(UK Corp.)
DW-5LBT Neuropathic pain afer shingles NDA USMedrx
co-development
Japan Innovative Therapeutics, Inc.
Code Indication Stage RegionPartner
(origin)
Retinopathy of prematurity Preclinical Japan
JIT Development
( Tokyo University
of Agriculture and
Technology)
Therapeutic agent for
Retinopathy of
prematurity
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
5/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
(Reference)
Santen Pharmaceutical licenses Rhopressa® and Rocklatan® from Aerie
Pharmaceuticals Inc.
On October 28, 2020 Santen Pharmaceutical in-licensed from Aerie Pharmaceuticals an
exclusive development and commercialization rights in Japan and several other Asian
countries of Rhopressa® and Rocklatan® (a combination agent with the PG agent
latanoprost). Santen plans to start the Phase 3 clinical study with Rhopresssa® in
Japan by the end of 2020. Under the agreement Santen will pay to Aerie a lump sum
contract payment of USD50 million, maximum milestone payments of USD99 million,
and 25% royalties. Santen’s acquisition of this ROCK inhibitor could have the following
implications:
1. Although by now Glanatec has been the only ROCK inhibitor in the domestic anti-
glaucoma market, Santen’s in-license of ROCK inhibitor is expected to enhance the
recognition of ROCK inhibitor in the anti-glaucoma market and expand the whole
market.
2. H-1337 (ROCK inhibitor) under development by DWTI will be paid much attention
and depending on the data to be obtained by DWTI, the compound could be highly
valued on out-licensing, given the Santen-Aerie contract.
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
6/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
Global ophthalmic device
maker, Glaukos
Sustained drug release
devices and devices to drain
aqueous humor are a growth
area because of difficulty
patients have in medicating
regularly and continuously
After developing the
iStent® device for the
treatment of glaucoma,
regulatory approval was
given for a second product,
iStent inject®, in 2012
<The Glaukos strategy>
Glaukos is a worldwide ophthalmic device maker, founded in 1998 with the purpose
of developing ophthalmic devices. The company’s main products at the present time
are iStent® and iStent inject®, which are used in the treatment of glaucoma. Eye drops
are the most commonly used therapy in ophthalmology but many patients are of
advanced years and find it difficult to medicate regularly and continuously This
problem led to growing interest in developing sustained-release devices and devices
that drain aqueous humor to reduce intraocular pressure.
.
Focused its efforts on glaucoma until 2018
After developing the first micro-stent model for glaucoma in 1999 Glaukos redoubled
its research and development efforts and in 2012 received approval from the FDA for
iStent®, the first minimally invasive device for the treatment of glaucoma. In the
following year, iStent® became eligible for Medicare coverage, and in 2014 a second-
generation, iStent inject®, was approved and launched in Germany. (Incidentally,
iStent® was approved in Japan in 2016 and iStent inject® received approval in 2019).
Glaukos Timeline
Source: Fair Research Inc. using the Glaukos website
Glaukos sales in 2013 barely totaled USD21 million but by 2019 had grown more than
ten-fold to USD237 million. The company has rolled out a direct sales network in more
than 17 countries and has announced 13 pipelines under development. Additionally, in
2019 there were more than 500,000 implants of iStent® devices sold by the company
worldwide (the size of the world market for glaucoma therapies is estimated at around
JPY400 billion, within which ophthalmological devices account for an estimated
JPY30 billion).
Year
1998 Glaukos established
1999 Develops first MicroStent for glaucoma
2012 iStent® is first minimally invasive device approved in US
2013 iStent® gets Medicare coverage
2014 iStent inject® launched in Germany
2015 Listed
2016 iStent® approved (Japan), iStent® launched (Aust., Canada)
2017 iStent® approved Brazil, Israel, Saudi, Singapore
iDose® Travoprast Phase 2 start
2018 iStent inject® approved, launched in US, iDose Travoprast Phase 3 start in US
iStent infinite® clinical trial application (US)
Conclusion of ROCK inhibitor (glaucoma) joint research contract with DWTI
2019 Transplants worldwide using iStent devices exceed cumulative 500,000
Acquires Avedro, Inc. (corneal procedures)
Acquires sole US market rights to microshunt from Santen
Signs dev and market rights licensing contract for dry-eye DDS agents with Intratus Inc.
Acquires DOSE Medical Corp.(AMD-related)
iStent inject® approved in Japan
2020 Extends joint research agreement with DWTI to corneal and retinal diseases
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
7/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
Glaukos has grown its sales
by a factor of 10 in just six
years
Glaucos is now working to
enhance its range of
glaucoma-related devices
Source: Compiled from Glaukos Securities Report filings
Glaukos’s strategy until 2018 was to concentrate on developing devices for the
treatment of glaucoma. Even now it is promoting devices to succeed iStent® and iStent
inject® (iStent infinite and iStent SA). iStent® and iStent inject® are approved for use
on patients with low-moderate field of vision impairment undergoing combo-cataract
surgery for both glaucoma and cataracts. iStent SA, however, is a candidate for
glaucoma surgery alone on patients with low-medium field of vision impairment, and
iStent infinite™ is a candidate for use on patients with serious field of vision
impairment. Additionally, in 2019 the company acquired sole US sales rights to Santen
Pharmaceuticals’ micro-shunt PRESERFLO™ for the treatment of late-stage
glaucoma. It has thereby lined up the full range of minimally invasive devices for the
treatment of glaucoma.
Glaukos’s minimally invasive stents for a wide range of glaucoma indications
Source: abstract from Glaukos presentation materials, August 2020
Ref: Stent®
The iStent® device consists of a body with a pointed tip for inserting and fixing in the
Schlemm’s canal, which acts as a drainage groove in the eye, and a water valve called a
snorkel. It has an L-shape with a length of 1 mm.
The iStent inject® is a 0.36 mm sized I-shaped body, two of which are inserted vertically
into the Schlemm’s canal. It has a greater intraocular pressure-lowering effect than the
iStent®, and it is said to have the same intraocular pressure lowering effect as surgery
to remove the trabecular meshwork.
In addition to devices for draining aqueous fluid the company is promoting the
development of iDose®, a sustained release device for treating patients with a wide
range of indications from mild to severe. In 2017, iDose® Travaprost underwent Phase
2 clinical trials and in 2018 Phase 3 trials were initiated (now in patient registration).
The company subsequently undertook research into successor drugs, iDose® TREX
0
50
100
150
200
250
2013 2014 2015 2016 2017 2018 2019
Glaukos Salesmillion USD
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
8/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
Aside from minimally
invasive stents the company
is now developing
combinations of sustained
release capsules and drugs
DWTI’s ROCK ihhibitor is
the promissing candidate of
these developments
and iDose® ROCK. iDose® consists of a titanium capsule measuring a mere 0.3mm
into which is inserted the relevant ophthalmic drug (typically PG drugs like Travaprost
or a ROCK inhibitor) for porting into the eye for sustained release over a period of
years.
In 2018 Glaukos entered into a joint research and development agreement with DWTI
to develop iDose® ROCK, focusing its attention on that DWTI’s ROCK inhibitors.
DWTI was selected as the company with capability to invent the compounds satisfying
the various requirement such as Long-term stability realizing sustained release over
several years, low water solubility keeping concentration in aqueous humor and non-
deterioration of receptor affinity even after long-term administration, etc.
Glaukos’s iDose® system
Source: Glaukos web site
The size of the US market is shown on the right of the chart below. Glaukos estimates
this is made up of 1.3 million minimally invasive stents (of which, 600,000 are for
combined cataracts and glaucoma and 700,000 for glaucoma alone). It further estimates
the iDose® market at 3 million eyes. The global market could become perhaps twice
the size of the US market. In value terms, Glaukos posits worldwide market size
potentially at USD13 billion.
Development status and market size for products to treat glaucoma
Source: Glaukos presentation materials, August 2020
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
9/21
This report is prepared by Fair Research Inc. (Fair Research) for the purpose of providing information to investors, and not for solicitation of securities trading. Although this is based on information and
materials that Fair Research judges reliable, there is no guarantee of accuracy, credibility, completeness, suitability or timeliness. Fair Research shall not take any responsibility whatsoever for any
results including direct or indirect damage arising from the use of, or reliance on, this report. Investors should take their own responsibility for securities and other transactions.
The intellectual property right of this report belong to Fair Research, and any copy, transmission or quote of any contents without permission is legally prohibited
The global market for
glaucoma therapeutic
devices and drugs is valued
at USD13 billion
Since 2019 the company has
been expanding its
involvement in non-
glaucoma areas
For that purpose, has been
acquiring companies with
the required technology, and
licensing in
Acquires Avedro, Inc. for its
corneal disorders therapy
Since 2019 – aiming to become an all-round maker of ophthalmic devices and
drugs
① Expanding into corneal disorders
In 2019, Glaukos changed its emphasis on glaucoma and greatly expanded its area of
interest. This change started with the acquisition of Avedro, Inc. in 2019 and its entry
into the area of corneal disorders.
Keratoconus
From Avedro, Inc. comes Photrexa Epi-off, the sole FDA-approved treatment available
for patients with keratoconus. In this treatment, the deformed corneal epithelium is
excised, and drops of the bioactive drug Photrexa® are administered and exposed to
ultraviolet rays to form a new cornea. Avedro is also now conducting trials of a follow-
on therapy called Epi-on, which does not require removal of the corneal epithelium
(the value of the US market for keratoconus therapies is estimated at around USD3
billion).
Photrexa Epi-off Epi-on
Source: Glaukos presentation, August 2020
Presbyopia
In addition, Avedro is developing a bio-active drug, PiXL™, for the treatment of
presbyopia, which is now in Phase 2 trials. The treatment seems to be derived from
Photrexa, involving as it does alter the thickness of the cornea with eye-drops of the
drug administered to the eye and irradiating the relevant part with ultraviolet light. The
technique can also be used for myopia and in the future could replace LASIK surgery
(Glaukos estimates the value of the US market for presbyopia at USD13 billion).
Dry eye
In August 2019 Glaukos acquired exclusive development and sales rights worldwide
for the Intratus Inc. drug delivery system. This involves the application of
pharmaceutically active lotion on the eyelids for delivery to the cornea, thus obviating
the need for troublesome eye drops. The company has specified dry eye as the
indication targeted, but it seems to have many applications. Glaukos estimates the
worldwide value of the dry eye market at USD4 billion.
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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Aquires technology which
makes possible a therapy for
the huge presbyopia market
Now developing an eyelid
application lotion, licensed
in from Intratus Inc., to treat
dry eye
Lotion to treat corneal disorders
Source: Glaukos presentation materials, August 2020
Development status of products to treat corneal disorders
Source: Glaukos presentation materials, August 2020
② Expanding to retinal diseases
The development of drugs for the posterior segment of the eye, such as the retina, is
very difficult in terms of drug reach and in the difficulty of conducting clinical trials
(such as the time required to measure the effect). Typical retinal diseases are age-
related macular degeneration (AMD) and diabetic macular edema (DME). The cause
of DME is diabetes, but the clinical symptoms are often similar to those of wet-AMD,
and the therapeutic agents are often common to both.
Age-related macular degeneration
AMD is a retinal disease in which the macula is damaged by aging and it becomes
difficult to see. In Europe and the United States, it is the number one cause of blindness
in adults, and in Japan it is number four. There is a wet-AMD type and a dry-AMD
type, with different onset mechanisms.
There is a single layer of cells called the retinal pigment epithelium (RPE cells) in the
lower part of the retina, and underneath it is tissue called the choroid, which is lined
with blood vessels. In wet-AMD, inflammation occurs in the retinal pigment
epithelium due to various causes such as aging, ultraviolet rays, and tobacco smoke,
and abnormal new blood vessels (choroidal neovascularisation or CNV) form under the retinal pigment epithelium or between the retinal pigment epithelium and
photoreceptor cells, impairing their functioning due to bleeding from the cells and
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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Entering the field of retinal
diseases such as age-related
macular degeneration
(AMD) and diabetic
macular edema (DME)
leakage of blood components.
Currently, in the wet-AMD market, vascular endothelial growth factor (VEGF)
inhibitors such as Lucentis®, Eylea®, and Beovu® have established themselves as
first-line drugs (global sales of approximately JPY1 trillion). Many patients have
injections in the eyeballs of these drugs on a monthly or 2-monthly basis. However,
some one-third of wet-AMD patients are non-responsive to VEGF inhibitors.
Additionally, even for many of those patients who are responsive, there occurs a
gradually lesser effectiveness in the course of lengthy treatment, with loss of vision the
end result (the drug effect lasts around 2 years). The main causes of this may be the
acquisition of resistance to VGEF inhibitors or scar formation (fibrosis) in the retina,
but there is currently no therapeutic agent to prevent it.
Glaukos acquired Dose Medical Corporation in May 2020. Glaukos aims to develop a
minimally invasive, bio-friendly device that can continuously reach the posterior
segment of the eye over a long period of time using the drug transmission system
developed by Dose, rather than injections in the eye. It has an anti-VEGF effect and a
scar-suppression effect and renders gel-like a multi-kinase inhibitor with a stable
structure that does not denature for a long time. The therapy under development
appears to involve the placement of the gel in a small cannula (tube) and implant
in the eye.
Gel implants to treat AMD
Source: Glaukos presentation, August 2022
Retinal pigment epithelium
Retina
Bruch membrane
New blood vessels
Choroi
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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The company acquired Dose
Medical Corporation,
acquiring the technology to
mix drug with gel and
implant in the eye
Becoming a comprehensive
ophthalmic device and drug
maker involved not only in
the anterior segment of the
eye but also the cornea and
posterior segment. The
market targeted has a
potential value of about
USD54 billion
Glaukos estimates there are 29 million people suffering from retinal diseases in the US,
of whom an estimated 89% have AMD or DME. The value of the market is around
USD13 billion and, because of population ageing, further growth (9.3% annually) is
predicted. A market launch is planned for 2025 or after.
It is apparent that Glaukos is interested not only in anterior ocular diseases, like
glaucoma, but in corneal disorders and posterior ocular diseases, such as AMD and
DME. It is aiming to become a leading maker worldwide of a broad range of devices
and pharmaceuticals for the treatment of these diseases. The target market is therefore
growing more than four-fold.
Target market to expand from USD13 billion to USD54 billion
Source: Glaukos presentation on takeover of Avedro, August 2019
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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DWTI now doing joint
research with Glaukos, a
global leader in ophthalmic
devices, on the development
of sustained release devices
Plans to provide novel
ROCK inhibitors
DWTI’s ROCK inhibitor
seems to have anti-VEGF
effect
DWTI technology highly valued by Glaukos
DWTI has on two occasions, 2018 and 2020, concluded joint research agreements and
license agreements with Glaukos which aims to become the global ophthalmic leader
covering widely devices and pharmaceuticals. These agreements were not the result of
aggressive promotion of DWTI. This is because Glaukos select DWTI by themselves
focusing on the highly valued potential of DWTI’s ROCK inhibitors applicable to the
devices of Glaukos and DWTI’s ability to invent such compounds.
① ROCK inhibitors’ potential as the anti-VEGF agent
ROCK inhibitors have already been marketed indicating glaucoma through their effect
of reducing ocular pressure. ROCK is also present in the trabecular meshwork cells of
the eye and the Schlemm’s canal endothelium. Activation of the ROCK signal
promotes actin polymerization and cell adhesion, causing tissue contraction and
reducing aqueous humor outflow. ROCK inhibitors have a mechanism to suppress this
signal and modulate the ocular pressure.
In addition to decreasing ocular pressure it is thought that some ROCK inhibitors have
some anti-VEGF and fibrosis-suppressing effects. For example, one DWTI’s
compound, H-1337 has the effects to suppress VEGF secretion and retinal pigment
epithelial cell migration (announced in ARVO2015). Additionally, H-1129 has the
effect to suppress VEGF production and epithelial-mesenchymal transition (EMT),
andVEGF secretion and fibrosis through binding to Hsp90 (presented in ARVO 2017).
We believe the Glaukos research collaboration is likely to lead to novel device-suitable
compounds (ROCK inhibitors)
H-1337’s ability to suppress VEGF secretions
Source: ARVO 2015
H-1129’s suppression of VEGF secretions
Source: ARVO 2017
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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DWTI's ROCK inhibitor
was adopted as an initial
candidate for sustained-
release capsules for
glaucoma in 2018
In September 2020, the
company broadened
indications to targets beyond
glaucoma to corneal
disorders and retinal
disorders
This was because of
Glaukos’s high evaluation of
the potential of DWTI’s
ROCK inhibitors and
DWTI’s technical ability to
invent device-suitable drugs
② Joint research agreement with Glaukos in 2018
In August 2018 DWTI concluded a joint research agreement with Glaukos, targeting
the creation of new intra-ocular products for the treatment of glaucoma. Under this
agreement, in addition to receiving joint research funding, DWTI grants Glaukos a
worldwide license to develop, manufacture and sell, and to receive up-front fees,
milestones and royalties if the product is approved by the FDA.
Glaukos selected DWTI’s new ROCK inhibitor as the candidate drug for iDose®
ROCK, one of the company’s iDose® series sustained release devices for treating
glaucoma. Glaukos confirmed its effect to reduce intra-ocular pressure in an
experimental rabbit model and a prototype is now being developed. In addition, the
company plans to proceed with verification of drug properties, etc. applicable for
iDose® system. DWTI expects that the clinical trials of iDose® ROCK will start within
the next 2-3 years.
DWTI will receive annual development collaboration fees (estimated at tens of
millions yen) and, it is expected, will additionally receive milestone payments upon
the certain events related to the progress of commercialization in the US. After launch
it stands to receive royalties on sales.
Concluded a joint research agreement and license agreement in August 2018
Source: IR release from DWTI
In 2020 revises joint research agreement and concludes new license agreements
Since the above-mentioned iDose® ROCK development is proceeding smoothly,
Glaukos and DWTI have decided to expand the research target beyond glaucoma as
including corneal disorders and retinal diseases using DWTI’s compounds and revised
the existing joint research contract and license agreements to reflect the additional
indications. This means an increase in development collaboration fees. It also means
the generation of revenue as the milestone payments and royalty related to intravitreal
administration devices.
Joint research and license agreements: Post–Sept. 2020 revisions
Source: IR release from DWTI
Joint Research Licensing
Research fees receivable
Ind
ica
tion
Glucoma
Products for administration to
ocular anterior chamber
Products for topical
administration (option rights)
Move to licensingcontract under certain conditions
Joint Research Agreement Licensing Agreement
Products for eye anterior chamber administration
Topical administration products (option rights)
Vitreal retainer administration products
Vitreal retainer administration products (option rights)
*Research fees receivable (amount increase)
Ta
rge
t diso
rde
r Retinal disorders
Glaucoma、 Corneal
disorders Licenseagreement continues under certain
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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It is possible to envision a retinal disorder (e.g. AMD) being treated using DWTI
ROCK inhibitors or other kinase inhibitors as the API, which is then mixed with gel
made with DOSE technology and injected into the eye for sustained release.
Note:
The US company, Aerie Pharmaceuticals’, AR-13503
One product which is similar to that described above is AR-12503, under
development by the US company, Aerie Pharmaceuticals, to treat AMD and DME This
is a multikinase inhibitor combining ROCK and protein kinase C mixed with gel and
injected into the eye. It is now at the pre-clinical stage.
(The yellow area on the penny is the size of the AR-13503 implant on the left)
Source: ARVO 2018, Aerie Pharmaceuticals
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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Revenues up to the third
quarter in line with the
company’s plan
Excluding the JPY100
million milestone payment
to MEDRx in the 4th quarter,
R&D spending for the year
should be around JPY300
million or less, in line with
the midterm plan
<Revenues/financial structure>
Results for the third quarter of the fiscal year ending in December 2020 were released
on November 12, 2020. Sales stood at JPY240 million, some JPY200 million below
the JPY451 million posted in the same period of the previous year. The previous year’s
figures had been boosted by revenues from Wakamoto Pharmaceutical, particularly
milestone payment revenue when H-1129 (development subsequently suspended)
moved to Phase 3, and lump sum received on the out-licensing of additional indication
(cataract) DW-1002. Both revenues were from Wakamoto Pharmaceutical and the
amount was JPY 200 million in total. We surmise the sales amounts up to the third
quarter were almost in line with the projection of the company.
R&D expenditures up to the third quarter stood at JPY180 million, approximately the
same level as the third quarter of the previous year. However, for the year as a whole,
the company is planning expenditures of JPY420 million. We assume this takes into
account the milestone payments of JPY100 million payable to MEDRx flowing from
the FDA acceptance of the NDA for DW-5LBT in October. It probably also reflects
R&D strengthening (development of H-1337 and acceleration of new projects) and the
goodwill amortization related to DW-1002 which was explained in the documents
accompanying the 10th issue of stock warrant (on August 7, 2020).
Trend in P&L
Source: Fair Research using company’s securities report filings, etc.
(JPY-mil)
2015 2016 2017 2018 2019 2020 2020/3Q 2019/3Q
(DWTI plan)
Sales 61 168 254 292 580 310 240 451
Kowa 61 97 119 138 158
Wakamoto 0 50 50 0 209
DORC 63 96 88
Glaukos 38 62
COGS 0 5 7 13 25 11 16
SG&A 352 482 880 1,065 437 376 328
R&D 143 226 603 795 249 420 184 181
Misc. 209 256 277 270 188 192 147
Op. Profit -290 -319 -633 -786 117 -390 -147 107
Non-Op. Profit 4 25 1 0 0 2 0
Non-Op. costs 9 10 36 11 8 19 8
Rec. Profit -295 -304 -668 -796 109 -410 -164 99
Extra. Profit 0 0 103 1 0 0 0
Extra. Losses 0 0 1,040 6 0 0 0
DW-1002 Impairment
Net Profit -296 -253 -1,563 -748 133 -340 -150 119
Inc. JPY100 mil
to MEDRx
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
17/21
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The company has enough
cash in hand considering
repaymebts of bank loan
through exercise of stock
warrant. The strong
financial foundation for
continuous invention its
own new products has been
prepared.
No.10 new share options – uses of funds revised
Note: Portions in red denote uses of funds raised by exercise of the 10th issue of stock
warrant. The Glaukos project costs will be covered by research collaboration fees
from Glaukos and is not related to this fund raising.
Source: DWTI’s Timely Disclosure related to the 10th private placement stock warrant
(July 22, 2020)
Cash on the balance sheet at the end of September 2020 stood at around JPY2.5 billion.
This is above the level at the end of 2019 because of JPY 1 billion proceeds from the
issue of No. 10 stock warrant and its exercise up to the end of September (56.5%
exercised). Bank loan repayments have also proceeded and balance at the end of
September was JPY390 million. We assume therefore that net cash stands at JPY2.1
billion. This is well above the cumulative losses (JPY880 million – JPY500 million)
of the mid-term plan (2020-2022), and demonstrates that DWTI has the necessary
financial foundation to proceed to its third stage in which it invents a series of new
products in-house continuously.
Balance sheet
Source: Fair Research using company’s securities report filings, etc.
Pipeline Region Phase Licence Pipeline Region Phase Licence
Japan On sale Europe/US On sale
S. Korea, Sing.,
Malaysia,
Thailand
Approved Canada Appproved
Viet Nam Applied Japan P3
K-321 US P2 DW-1001 Japan Pre-clinical
K-232 Japan P3 DW-5LBT US P3Medrx co-
development
K-134 Japan P2
Drug for
retinopathy of
prematurity
Japan Pre-clinical not decided
H-1337 US P2a In-House
Increase (new R&D projects)
Increase (pipeline acquisition)
Glantec®
Out-
Licensed
In development Joint R&D partners
Industry-academia-government collaboration course with Mie University + joint
dev. with other universitiesSignal transduction inhibitor project
Out-LicensedDW-1002
Inc
rea
se (c
rea
tion
of n
ew
dru
g c
an
did
ate
s)
New device dev. project Glaukos Corporation
Target proteolysis induction project UBIENCE
(JPY-mil)
2015/12 2016/12 2017/12 2018/12 2019/12 2020/9
Liquid assets 2,024 2,776 2,515 1,764 1,715 2,517
Cash, etc. 1,747 2,291 2,132 1,584 1,540 2,302
Securities 182 353 0 0 0 0
Fixed assets 115 136 361 309 265 236
Tangible fixed 4 25 15 4 3 5
Intangible fixed 1 1 330 291 249 218
Investments, etc. 109 109 16 12 12 11
Total assets 2,140 2,912 2,877 2,073 1,981 2,754
Liquid liabs 27 35 156 268 189 170
S-T loans 0 0 0 120 120 120
Fixed liabs 0 0 625 505 384 294
L-T loans 0 0 600 480 360 270
Net assets 2,112 2,877 2,095 1,300 1,408 2,289
Shareholders equity 1,886 2,722 1,999 1,259 1,393 2,286
(Ref.)
Income from issue
of new share
options and
exercise
87 1,071 824 0 0 1,031
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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Reference: Medium term management plan – sales/P&L
Source: DWTI “Notification of amendments to medium term management plan”,
August.13, 2020
Note: The company’s August 20, 2020 revised medium-term management plan only
revised the development plan of DW-1001 (licensed out to Rohto Pharmaceuticals and
currently in pre-clinical trials) which is to start Phase 1 in 2022. No amendments were
made to the various ‘management coefficients’.
Source: DWTI Results meeting materials, August 2020
(JPY-mil)
Sales R&D expenditure Operating Profits Recurring Profits Net Income
2019 actual 580 249 117 109 133
2020 forecast 310 420 △390 △410 △340
2021 target 420~580 560 △460~△310 △480~△320 △420~△270
2022 target 450~750 300 △170~100 △170~100 △120~110
Pre-amendment
Pipeline RegionBasic
ResearchPre-Clinical Phase1 Phase2 Phase3 NDA Approval Launch
DW-1001
(eye therapy
drugs)
Japan
Post-amendment
Pipeline RegionBasic
ResearchPre-Clinical Phase1 Phase2 Phase3 NDA Approval Launch
DW-1001
(eye therapy
drugs)
Japan
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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It used to be that out-license
conditions were not always
particularly advantageous
for DWTI
However, it seems likely
that the agreements with
Glaukos will show DWTI in
a new light in terms of out-
licensing
Investors should look not
only at DWTI’s multiple
sources of stable revenues
but at its in-house products
and the contribution to
revenues from the Glaucos
collaboration
<Conclusion>
DWTI is focused on ophthalmological disorders, a niche area with relatively high
barriers to entry, and uses its proprietary well-stocked library of chemical compounds
with kinase inhibiting properties to create a platform of promising new drug candidates.
It already has one product on the market, Glanatec®, which it has successfully licensed
out. However, Glanatec® was licensed out at the basic research stage in 2002 when the
company was at an early stage in its development and specialising in basic research,
and hence the licensing-out terms were not particularly attractive from DWTI’s point
of view.
Meanwhile, Glaukos is implementing its strategy to become an ophthalmic full-range
maker of ophthalmic devices and medical drugs and had, in 2018 and 2020, twice
concluded joint research and license agreements with DWTI. These were not the result
of aggressive promotion of DWTI. Rather, Glaukos selected DWTI when it was
launching its expansion strategy because of the potential it saw in DWTI’s ROCK
inhibitors and the high regard in which it held DWTI’s ability to invent drugs offering
a good ‘fit’ with Glaukos devices. For this reason, the size of the milestone paymentss
and level of royalty rates generated under the new agreements may be far beyond
DWTI’s previous agreements.
The company is presently steadily expanding indications of its existing products and
geographic territory of itsmarketing. It is also expanding the geographic territory and
indicated surgical operations for products it has in-licensed to provide earnings stability
until its next in-house product goes to market. That is to say, while securing several
sources of earnings DWTI will be able to pursue the development of its own new drugs
up to the early clinical stage and then out-licensing. We surmise the impact of the
products derived from the collaboration with Glaukos will be substantial.
D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
20/21
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Note: This report is the English-language version of the original Japanese-language report issued on November 16th, 2020, to
which you should refer for precise details
Fair Research Inc.
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D. Western Therapeutics Institute, Inc.(4576 JASDAQ) Issued: Nov.16, 2020
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