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[Interpreted] Hello. My name is Taniuchi, President and Chief Operating Officer. I would like to explain the highlights of Q1 fiscal year 2019 results.
On Page 2 and 3, we have the mission statement and also the policies of the midterm plan. 2019 is the second year of MTP2020. As you know, in our company, we have Vision 2020, which is a 10-year long-term plan which began in 2011, and MTP2020 is the last 3 years of Vision 2020. And 2019 is the second year of MTP2020. We have been involved in various reforms and also growth based upon new products. And in the first quarter of this year, we have been able to focus on these aspects as well to incur growth.
On Page 4 is the highlights. We have made a strong start toward achievement of fiscal year 2019 full year forecast, and we are very happy about that. Revenue, JPY 59.1 billion, which was an increase of JPY 2.7 billion and 4.7% growth. And core operating profit was JPY 12.8 billion, which was a 9.6% growth. So we have been able to make a very good start -- in MTP and beyond.
The overseas business is very important, especially Asia, including China. And in this market, we were able to also achieve robust growth. Of course, the European business has made a sound growth as well, and overseas sales ratio now exceeds 35%. So as we aim in Vision 2020, in order to become an ophthalmological company, which is global with great presence is something that we have been able to attain.
And also with regard to MicroShunt, as you know, at the end of April, we have signed an agreement with Glaukos. And in May, June and July, we have had various working level discussions regarding sales activity and product supply. Towards the launch of 2020, we have been able to establish a very strong cooperative system.
In terms of the Japanese market, the pollen season came earlier than we had expected. Therefore, in Q4 of 2018, the allergen sales grew drastically. On the other hand, this quarter was a little below the plan. However, in order to realize the further growth of the new products such as EYBELIS and LENTIS Comfort has become a focal point for our penetration. And right now, Santen accounts for 47% of the Japanese market, and we will be able to grow strongly with these present products and new products. And so we have made a very good start in Q1 of 2019. And beyond Q2, we will make a effort to continue this trend.
[Interpreted] This is Suzuki speaking. Page 6. The left side shows PL for this year, and the right side shows the key points for this year. The revenue was JPY 59.1 billion. Asia and other foreign market is growing fast, so it's up 4.7% or JPY 2.7 billion from the previous year.
In domestic market, Tapros, Tapcom, Alesion, Diquas, Eylea and also the new product EYBELIS and LENTIS Comfort are growing fast. As to the core base operating profit, in addition to the good overseas market, optimization of the expense is progressing well. So it's 9.6% up from the previous year or JPY 1.1 billion. As to IFRS basis, the operating profit is JPY 9.2 billion or our net profit is JPY 6.4 billion. This is for accounting reason for DE-128.
Page 7. Those are the factors for increase and decrease for each division. At the left side is for domestic and overseas market. It was JPY 56.5 billion for 2018 and JPY 59.1 billion for 2019. The key points are shown at the right side. For domestic market, Eylea and Diquas are growing well so it's positive from the previous year. EYBELIS is still having the prescription restriction. And also, LENTIS Comfort, the kit has not been provided yet, but the number of account is increasing steadily. As to the overseas market, we are seeing positive growth both for Asia and EMEA market. Especially in Asia, the growth is more than 20% in major market. Especially China and Korea, which account for 80% of the overseas market, has enjoyed a growth of more than 30%.
In local currency, the revenue increased by JPY 2.5 billion with the adjustment of the foreign exchange but JPY 3.6 billion without the adjustment.
Page 8. The core operating profit is shown, which grew from JPY 11.7 billion to JPY 12.8 billion. On the right-hand side, there is the explanation. In Japan, there was COGS ratio increase from product mix, but cost optimization efforts has mitigated this. Overseas, there was a great increase of the revenue, and thereby, there was a significant growth of the profit. And cost optimization effort is made in order to enhance the investment efficiency and absorb the exchange rate and thereby make growth. The following 3 pages shows the performance by business from the first quarter of fiscal year '13 to fiscal year '19, both revenue and operating profit before R&D.
On Page 9, this is Japan. There may be some fluctuations, but totally, we see a growth for both revenue and operating profit before R&D. Next is the Asian business. Double-digit growth is shown. And there also, in Q1 of FY '19, we see the same tendency. In Asia, especially in China, the market grew by 12%. However, Santen's growth has exceeded drastically beyond this figure, and it is greater than twice as much as the growth of the total market, and our market share is also growing. Next is EMEA. There are headwinds like the approvals and the price. However, the pharma cluster is very attractive including the clinical study and medical infrastructure and data creation. Therefore, we are increasing our profit and also enhancing our presence in EMEA.
This is the fiscal year 2019 forecast overview, no change from May. Revenue is JPY 248 billion, which was an increase of JPY 14 billion, 6% increase. Operating profit, JPY 51 billion, a JPY 2.8 billion increase, 5.7% increase. Operating profit, minus JPY 10.6 billion, which was JPY 34.5 billion, and we will continue to make growth both in Japan and overseas, especially in overseas. There is a double-digit growth in Asia. And also in EMEA, we will maintain our growth and contribute to the profit. In terms of SGA, we have made a great effort in making our operation efficient. And also, R&D expense is showing some increase. But after this, Naveed will give you a detailed explanation with regard to R&D.
The next page is the same information as I have explained. And on Page 14, I will give you the dividend forecast for fiscal year 2019. There has been no change from the initial announcement. The annual dividend is JPY 26 per share. A stable and sustained return to shareholders and mid- and long-term strategic investment for growth beyond 2020 are our objectives, and we will balance the 2 in order to provide a total return, including dividends. Mr. Naveed, please.
Thank you very much. My name is Naveed Shams. I'm the Chief Science Officer and Head of Global R&D, I'm going to give you an update on the progress we have made with our pipeline products. [Foreign Language] I will start with DE-111. As you heard, our China business is very important to Santen, and we continue to develop products for this market. This Phase III trial is going well and will complete as planned in the first half of fiscal 2020. [Foreign Language] DE-117 also called EYBELIS is in Phase III development in the U.S. and will complete Phase III in 2020. [Foreign Language] We have also started the geographic expansion of DE-117, mainly in the Asia region. [Foreign Language] DE-126. This is a Phase II asset. We are hoping to start exploring some differentiation for this product in the very near future. [Foreign Language] PRESERFLO MicroShunt, DE-128. As we have planned, we are trying very hard to complete the rolling submission by the end of this year -- November, December time frame. [Foreign Language] DE-130A. This is Catioprost, a new formulation of a prostaglandin analog for the European and Asian market. And we hope to complete Phase III in 2021. [Foreign Language] DE-109 is the intravitreal sirolimus product. A third Phase III study is currently running in the United States. We plan to open sites outside the U.S., for example, in the U.K. to expedite enrollment. [Foreign Language] DE-122, the anti-endoglin antibody for wet AMD. Phase II asset is -- we'll be completing the Phase II study -- Phase IIa study in fiscal 2019 second half. [Foreign Language] The DE-076C, which is also called Vekacia or Verkazia, has already launched. [Foreign Language] And we plan approval in the Asia region in this calendar year. [Foreign Language] For Epinastine, DE-114A for allergic conjunctivitis, we are looking for approval by the end of this year in Japan. [Foreign Language] DE-127, atropine for Myopia. We were planning to start in the first half of fiscal 2019, and I'm delighted to tell you that we already have enrolled our first patient in the study. [Foreign Language] A Phase II study is also running in Singapore, which will complete at the end of this fiscal year. [Foreign Language] MD-16, intraocular lens for cataract. We are looking for approval by the end of 2020, and it's on track. [Foreign Language] Thank you very much. [Foreign Language]
[Interpreted] That is all for the explanation. Now we would like to entertain questions.
[Interpreted] The first question is from Citigroup, Mr. Yamaguchi.
[Interpreted] This is Yamaguchi. Can you hear me?
[Interpreted] Yes, we can hear you.
[Interpreted] In the presentation from the President, I understand that the discussion with Glaukos is proceeding, and I would like to ask you in your discussion, how are you going to sell the product and the potential and also the commitment of the Glaukos towards this discussion? Is there any update information that you can give us? That's my first question.
[Interpreted] Yes, let me respond to your question. My name is Taniuchi. As of today, I cannot just say that there is positive or a negative discussion yet. And so with respect to the negotiation, we have had a sales forecast. And also, we have discussed about the market scale, and we have agreed upon this kind of information. And what we are discussing right now is the working level discussion, how are we going to do the training, what are we going to do with the training materials. These matters are being discussed as of today. That is how our discussion is proceeding.
[Interpreted] My second question is with regard to EYBELIS in Japan. I know that you are conducting your sales activity. I saw in one of the sites with regard to cataract in the hospitals, there has been some mistakes with regard to administration of the drug. And I understand that you have sent a letter in -- correcting the way of administration. And could you give us some update on that?
[Interpreted] Yes. With regard to patients who have gone through a cataract surgery, in other words, patients with IOL, the drug is contraindicated to such patients. So we have always asked them not to use the drug for such patients. However, due to the decisions made by the doctors, the drug is being continuously used. And of course, in such a situation, and if there is any side effects, we report the fact to the agency. And due to the discussion with the agency, we have issued a white letter, but it is the same kind of information provision that we have always done in the past. And also, it is not our fault that this has happened. It was a thing that has happened according to the misjudgment of the doctors. So our attitude, as far as our company is concerned, has not changed.
[Interpreted] It's like JPY 100 million of sales per month according to the information that I am looking at, and if this is the pace, I don't know, I wonder whether you will be able to achieve the full year goal. And from April to June in terms of sales, maybe you are having some difficulties? Or is it not true? Or -- so what do you have to say with regard to the sales trend?
[Interpreted] This is Suzuki responding to your question. Right now, there is a prescription limitation until December, so the prescription is up to 2 weeks as of today. Therefore, the volume of prescription to be increased is one matter, but rather than that, we want to increase the number of accounts or patients, and we have achieved 70% of our goal, objective with respect to the number of patients. And also, as I said, there is still prescription 2-week limitation. And sometimes, as has been said, there are some doctors who kind of use it in a different way. But we are -- we will continue to provide a careful detailing to our customers.
[Interpreted] The last year's Q1, the actual business was okay, but there was some difficulties in terms of its looks or appearance. But with regard to allergen, I understand that there was some shift in the seasonal environment. But -- so there was a shift than you had expected. Is that understanding correct?
[Interpreted] Yes, your understanding is correct. The peak of the pollen was earlier than we had expected. And also, there was no cypress this year. Usually, there's cypress pollen, but this year, there was none. So these are the 2 factors.
[Interpreted] Now we have Mr. Ueda from Goldman Sachs.
[Interpreted] My name is Ueda from Goldman Sachs. First, I want to ask about Asia. The numbers in Asia is very strong, especially Cravit in China and also Diquas in Asia. They are growing very fast. Is there any special situation in this quarter? Or is it actually growing? If we look at the budget, [ I think it may ] be a bit lower than the budget, but what is the situation in Asia?
[Interpreted] Suzuki speaking. As to Cravit, I think this is growing actually, especially in China and other Asian nations, LASIK in cataract, these refractive error surgeries are increasing. So at the preoperative time, this product is being used. And this is growing faster than our expectation. So that's why we are seeing a very good growth.
[Interpreted] So Diquas in Asia, what's the situation?
[Interpreted] Likewise, for dry eye, the awareness is higher. Hyalein, Hialid and Diquas. There are 2 lines in Santen. As to Asia, Diquas is growing fast and it's penetrating well. Diquas has just launched in China, and it has not been listed yet. So the expansion in Asia will be in the future.
[Interpreted] My second question. The progress of the sales and also profit in the first quarter. [ Our ratio ] was lower than the expectation, and that has negatively contributing to the profit. But on the other hand, it's going very well in Asia. So in total, against the full year, what's the progress?
[Interpreted] Suzuki speaking. As to the budget, as to the balance between the overseas and domestic market, overseas include Asia is stronger. In Japan, it's very close to the original budget. So if you look at the balance, [ ASEAN ] is taking a lead with strong growth.
[Interpreted] And I have a question about DE-109. So the completion -- expected completion is delayed from 2021 to 2022. I want to ask why it's been delayed in the U.S. And also as to this product, it will be protected by data protection period. So even if it's delayed, it won't affect the value of the product. Is this understanding correct?
This is Naveed. I'll try to answer your question. Yes, your understanding is correct. Because of the orphan indication, the data protection will start after we get approval. And so that has -- will not change because of this delay, will have no effect on that. [Foreign Language] We have taken several steps to increase the probability of technical success. [Foreign Language] One such step is the use of a reading center to make sure that the correct patients enter the study. [Foreign Language] This is causing an impact on the recruitment of patients as the screen failure rate is becoming high. [Foreign Language] However, it is very important not to lower the chances of success. So at this point, we do not wish to amend the protocol. [Foreign Language] Instead, we will open sites outside the U.S., for example, in the United Kingdom. [Foreign Language] So success is very important. [Foreign Language]
[Interpreted] Crédit Suisse, Mr. Sakai, please.
[Interpreted] This is Sakai speaking. I have 2 questions. So in general, your business is doing well. And I would like to ask you with respect to some specific products, according to the plan that you have by product in Japan, Tapros, Cosopt, glaucoma-related products, you said that you are expanding EYBELIS. Therefore, the other products will be shrinked and so EYBELIS will be focused. And the plan says that EYBELIS will be growing. However, you were talking about the white letter, but -- and it seems that the first quarter start-up of EYBELIS is not so magnificent. On the other hand, in Cosopt and Tapros, Cosopt seems to be declining a little bit. And I wonder what will happen in the second quarter and beyond. Are you going to recover in the second quarter and beyond? Would you give us your forecast?
And another product that I would like to ask you about is Timoptol. The plan in EMEA, I think, was very big. And to that, the first quarter result was smaller. And I would like to ask you the reason why you have a gap between the actual and the plan.
[Interpreted] With respect to your first question, let me respond. This is Suzuki. With respect to EYBELIS and other glaucoma products relationship. What EYBELIS is focusing is PG products aside from Tapros. That's the positioning. And so including Tapros, the products are doing well. And also, EYBELIS is just starting. And therefore -- and the relationship between the 2 is not related. And there's a limitation in the prescription of EYBELIS right now. And also, there is less generic erosion. And with regard to EYBELIS, the number of accounts is growing as expected. So after the limitation of 2 week is lifted, so beyond the fourth quarter, I think it will be growing. Therefore, in the glaucoma business in total, there may be some variations. But in total, I think we are progressing as planned.
[Interpreted] With regard to EYBELIS. In the first quarter trend, will that continue in the second and the third quarter? And in the fourth quarter, you will be growing -- you will be accelerating. Is that correct?
[Interpreted] The number of accounts is increasing. So I think the number will be growing in spite of the fact that there is a limitation of 2 weeks. And after the limitation is lifted, we will be accelerating.
Let me discuss about the Timoptol role. And there are 2 numbers, 2 items, and the formulations are different between the 2. But if you add the 2, this is as planned. And depending on the countries, there may be some gaps. And it might look irregular, but if you add the 2 columns together, we are proceeding as scheduled or planned.
[Interpreted] So this is a situation specific to EU, depending on the different countries. Is that correct?
[Interpreted] Yes. In Japan, too, there are 2 formulations with respect to Timoptol in Japan as well. And so if you could add the 2 columns, you will be able to get the correct figure.
[Interpreted] With regard -- with regard to 127 in Japan, Phase III has started, you said. And the result of the clinical study in Asia was the basis, I think you said in the past, and you have started the clinical study in Japan. But you already have the data from Asian countries, and so is there any plan that you will make the plan earlier in Japan? And also Singapore, you have said that you have completed a clinical study in Singapore, but was it a shift of the site from the Philippines to Singapore?
So this is about 127, the myopia product. I take a few reminders. We started a Phase IIa study in Singapore, a small study. As you know, the treatment is -- involves a lot of children. [Foreign Language] As you may also know that there is a substantial amount of data available in -- regarding atropine and myopia. [Foreign Language] So taken together, we did an interim analysis. It was mainly designed to see for any safety concerns. [Foreign Language] As we were comfortable, we decided to proceed in Japan. [Foreign Language] The study is very small and short duration, so the trends were similar to published atropine data. [Foreign Language] But the study is still running, it has not ended yet. It will end later in the year. [Foreign Language] I hope that answers it. [Foreign Language]
[Interpreted] So you were talking about the Asian study?
Yes. [Foreign Language]
[Interpreted] Yes, I will have a look at it.
Next question, Mr. Hashiguchi from Daiwa Securities.
[Interpreted] Hashiguchi speaking. I have one question about LENTIS Comfort. As compared to your full year plan, the progress being delayed. From the second quarter and beyond, how do you see the progress of this product? Is there any factors which may enhance the growth?
[Interpreted] As to LENTIS Comfort, the number of adoption. It's on track or it's even faster than our original plan. As compared to the past IOL product, the speed of the adoption, the number of adoption is progressing faster. So I think that it's progressing very well. But on the other hand, as you -- as we mentioned, the kit inserter hasn't been supplied yet. So after the start of the kit, I think the growth will be accelerated.
[Interpreted] And it was approved in May. When do you plan to launch this? But I don't think the kit will make much difference, but what do you think?
[Interpreted] As to the inserter, we haven't launched it yet. We are thinking that it will be launched in December or beyond. Some doctors are saying that they like to have inserter to increase the number of the sales. So that number of adoption is progressing very well. And I think by introduction of inserter we can -- we will be able to see even better figure.
[Interpreted] Merrill Lynch Nihon Securities, Mr. Arai.
[Interpreted] My name is -- Merrill Lynch Securities. Arai is my name. There is one question with regard to MicroShunt, DE-128. November to December will be the timing of filing, but when will be the data announcement? I think before, you said that you will do the filing and then announce the data after that. And has your plan not been changed?
The data has to be made available before we can complete the filing, which is the last module, as we call it, the last component of the PMA. And so we will make an announcement after we receive the data. [Foreign Language]
[Interpreted] From Morgan Stanley Securities, Mr. Muraoka.
[Interpreted] Muraoka speaking. I have a question about EYBELIS. So full-fledged sales will start from December and beyond. So several billion of sales will be necessary for EYBELIS in the fourth quarter. Is this understanding correct?
[Interpreted] Suzuki speaking. There is a prescription restriction now, but the situation is different depending on the prefecture. And the number of patients is increasing and this may change depending on the judgment of the doctor. So it will be 100 million until December, and then it won't [ explode ] right after that. So it will grow gradually, we think. The specific numbers, we do not know yet because it just launched recently. So we would like to continue to make efforts.
[Interpreted] And as for overseas market. Asia has been strong and that's great. As to Europe, you said that there are many factors. And I believe that you have to grow by 7% for EYBELIS for this year. So are you thinking that if Asia is good, that will offset -- this will progress Europe?
[Interpreted] We are not thinking that Asian growth will offset the slow growth progress of Europe because we would like to see the growth in Europe as well. However, it's more challenging in Europe. So we would like to see the balance between the investment and the benefit. As to Asia, the top line is very high. We are seeing strong growth. So that will have a very big contribution to the profit. And we'd also like to see even bigger profit by maximizing the expense -- I mean, optimizing expenses. As to EMEA, for example, Ikervis and new products are penetrating well, and they are enjoying double-digit growth. On the other hand, glaucoma portfolio, there are some factors. But in total, we are seeing -- we are expecting healthy growth. As to the market situation as compared to Asia, it's more conservative. But it's -- the price is higher than Japan, and we want to be optimistic about the sales or the growth of EMEA.
[Interpreted] Thank you very much. With this, we would like to conclude the Conference Call on Q1 FY 2019 Results by Santen Pharmaceuticals. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]