The suspension of TissueBlue royalties is the key variable for a sales recovery

Revenue for the first half of the fiscal year ending December 2026 was ¥33 million, down ¥140 million, or 80.9%, from ¥173 million in the same period a year earlier. The company said sales of the "Gla-Alpha combination ophthalmic solution" were solid in Japan and Asia, but royalties on TissueBlue™ (development code DW-1002) were not included in first-half revenue. The direct cause of the sharp decline in revenue was the expiration of the license agreement with DORC in December 2025 and ongoing discussions on the terms of an extension in regions where the patents remain in force.

Looking at the historical earnings structure, revenue for the fiscal year ended December 2025 was ¥387 million, down 17.8% from ¥471 million in the fiscal year ended December 2024. For ILM and other products, royalties in the relevant countries ended when patents expired outside the United States, and overseas royalties for Glanatec have also ended. Because drug discovery is reported as a single segment, revenue and royalty amounts by product and region, including TissueBlue, Glanatec and Gla-Alpha, are not disclosed separately as segment information.

The first-half disclosure did not provide quantitative contract terms such as the countries and regions covered by the extension, the extended contract period, the royalty rate, whether a lump-sum settlement would be made, or how the period for which royalties were not recognized would be treated. The full-year revenue forecast for the fiscal year ending December 2026 has also been maintained at ¥300 million, but the amount of TissueBlue™ recovery included in that forecast has not been disclosed. Accordingly, the first-half revenue of ¥33 million alone does not allow the portion recoverable through increased Gla-Alpha sales to be separated from the portion dependent on a contract extension.

At the next earnings release, it will be necessary to check not only whether the wording has changed from "under discussion" to "contract signed," but also when royalty recognition will begin and which regions will be covered. To the extent possible, we will check cumulative nine-month revenue, the amount of TissueBlue™ royalties recognized and the royalty amounts for existing products such as Gla-Alpha, and determine whether the ¥300 million full-year forecast assumes that the contract will be concluded or can be achieved even without a completed contract.