© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen. Thank you very much for coming to this meeting. I am Taniuchi. I'd like to give you the highlights of our business activities.
This slide shows Santen's values and mission and I want to also talk about the ophthalmology, which is our focus. This is Santen's value and mission statement, [Foreign Language]. Towards this goal, based on this principle, we are conducting our business. We were established in 1890, so next year is going to be our 130th anniversary, so we are a company with a long history. [Foreign Language], it comes from Chinese classics from The Doctrine of the Mean by Confucius. The founder of Santen, Kenkichi Taguchi, interpreted this classic to come with the words [Foreign Language]. And this is where the name Santen, company name, comes from. So you can say that our name is based on principle.
[Foreign Language] means to explore the secrets and mechanisms of nature in order to contribute to people's health. And this was established in 1890 and this has been our objective to do business. And by realizing this [Foreign Language], we'll be able to realize our focus on ophthalmology and eye diseases. We have strategically put resources into this area and we have strengthened our relationship with ophthalmologists, patients and health care professionals to contribute to the society.
We believe that human eye is the most important sensory organ. Last month, WHO, World Health Organization, issued a report on vision and the same thing was stated clearly in that report. "Human eye is our most important sensory organ", it stated, and "The world is made for people with vision". For example, traffic signs, all the communication tools are made for people with vision and that's how our economy runs. Therefore, eye is our most important sensory organ. And for human beings' social and economic activities, "Eye is the most important organ", it stated. So it did reassure that what we have been doing is correct. Santen and this report is not related, but this is something I wanted to introduce you to. And as you can see on this slide, on Page 4, there are 2.2 billion people on this earth suffering from visual impairment and out of that, 1 billion could have been prevented or can have treatment. Of course, if you lose vision, that is very serious, but you can suffer from myopia or astigma (sic) [ astigmatism ] or hyperopia. If you cannot correct your vision correctly, you will not be able to work, you will not be able to read the blackboard. And people suffering from glaucoma seem to have higher incidence of car accidents. And these diseases is increasing. Population growth and also aging are other factors that we are seeing all over the world. And in Asian countries, in the next 10, 20 years, we are going to see aging and people's lives are changing. Their lives have changes, and they are now using smartphones, working at home. That is quite hard on the eyes. In other words, people are working in the environments that is not good for their eyes. And with urbanization, people are starting to live more in urban areas and that is going to increase the number of patients visiting their ophthalmologists. And currently and in the future, we will continue to see the number of patients in ophthalmology increase. Of course, this would mean that business opportunities will increase, but this is going to be a national issue. On TV tonight, there will be a program taking up myopia, and they are going to talk about China. In China, myopia is a national issue and it even impacts the GDP growth. So China is working as a whole on myopia and other Asian countries are following suit. Of course, that would mean treatment opportunities will increase, but we can say that this is a social threat. Santen is focusing on ophthalmology on a global basis. We would like to leverage on this strength so that we'll be able to continue to contribute to the society based on our principles. So MTP2020 is what we are working on currently, let me explain MTP2020. This MTP2020 covers years from 2018 to 2020. From 2011, we had a 10-year plan, Vision 2020, to become a specialty company with a global presence. That has been our long-term vision. MTP covers last 3 years in the Vision 2020. So how to realize this specialty pharmaceutical company in the world is something that we are working on. And also, after 2020, how are we going to sustain growth is something that we have set out in our fundamental policy. So these are the 2 policies that we have been working on.
First half of 2019 just ended. Half of MTP period has ended. The strategic goals include increasing profitability, customer satisfaction and organizational strength. So on a global basis, these are what we have been working on. So this is a highlight for the second quarter of fiscal year 2019, with the completion of the first half. You can see that the performance is very strong. I think we are making steady progress towards achieving the full year forecast and also the MTP. The first half revenue was up 3.9%. In MTP2020, we were looking for 6% and for this fiscal year, we are looking at 6% as well. The China business, Asian business and the European business, they exceeded the plan. And in the local currency basis, in China 24%; and in Europe, the market growth is very good and we were able to achieve 11.5% growth. However, there was some foreign exchange impact. In the inception we had originally, we were able to see growth of 6% but with the foreign exchange impact, it comes to 3.9%. However, we believe that according to the local currency basis, we are having and seeing great growth. And with that, with confidence, we go into the second half. And as for operating profit, with sales up and good efficiencies, we were able to achieve profit up 6.2% year-on-year.
When it comes to businesses, in May, I did touch on the partnership with Glaukos, which took place in the U.S. The announcement was made end of April and in the first half, we continued negotiations with Glaukos and we were able to prepare for establishing development in sales structure. And this is a big piece entering into the U.S., which we have been working on steadily. And in order to support the U.S. business, we are preparing entry into Canada as well. And of course, we are building a global foundation. And this is what we've been working on in the past few years, and we are seeing advancement. We have introduced a management framework here in Japan, the global role division. Reporting lines and the cooperation between the businesses was clearly defined, so we can support regional businesses and corporate support is also necessary. That's why we have implemented the management framework, so that we'll be able to work as a global organization. By doing so, we'll be able to have more efficient operating foundation. And this is fiscal year 2019 forecast, there has been no change made from May 9. So the forecast is JPY 248 billion and operating profit of JPY 51 billion. So this is a plan and this is a forecast that we are going to strive to achieve. There's another thing I want to announce. We have decided to increase the dividend. At the shareholders' meeting, this is going to be something that needs to be approved, but we want to increase our dividend by JPY 1 to JPY 27 per share. As for dividend payment, we have been looking for stable and sustainable return to shareholders and stability and sustainability is very important. And as we see that we'll be able to achieve the plan for this year, we have decided to increase the dividend by JPY 1 for mid- and long-term strategic investment for growth beyond 2020 and also to return to shareholders. We will go ahead with shareholder return policies and strategic investment that is going to be in line with our businesses and our outlook. We would like to ask for continued support and understanding from all of you. Thank you very much. Next, about the second quarter fiscal year 2019 financial results, Koshiji will explain.
This is Koshiji. As for the financial results, the President explained the highlights. So I'd like to give some additional information. Please refer to Page 10. This is the P&L. As you can see, in the second quarter, we saw revenue go up and profit go up on the core basis because of strong performance overseas. As was mentioned earlier, the revenue was up 3.9% year-on-year but because of foreign exchange impact, the revenue was up 2.3% impact on the consolidated basis. So in reality, I think it would have become to 6.2%. As for gross margin, the FX impact was 2.8%; SG&A, about 2.3% impact; and R&D, 1.8% impact was seen. So the core basis operating profit impact came to 3.7%.
If we exclude these impacts on the core basis, I believe we would have been able to achieve 10% for operating profit. On the full basis, we saw a decline in profit. There were 2 main reasons for this, the biggest being InnFocus, which we acquired in 2016; the PRESERFLO MicroShunt, dependent on the development progress, we saw increasing provision. It had a very impact on the decline in the profit. And in addition, we had to start the amortization of the acquired products.
On Page 11, now this has been already explained in highlights, and this shows the growth of the revenue, especially in overseas business in Asian countries as you can see the comment on the bottom. And the China growth was the 17.1% in yen basis. However, in local currency, it's 24%. And in Korea, the local base, the growth was 24.7%. And including the Korea, excluding China, the overall growth is 13%. In EMEA region and in yen base, the growth was 4.1%, but in euro or local currency base, it was 11.5%.
So we have seen the major -- the growth in -- on Page 12. And there are some overlap of the explanation of P&L, and this includes profit on sales ratio, so including the idea for the future, I'd like to explain this slide. And the major point includes the cost of sales ratio. Originally, in our forecast, it was 38.3% and it's 40.7% actually. This is due to the product mix change and due to the change of the product mix, there is the increase year-on-year. And domestically, we had a larger weight with those products with higher cost of sales ratio. And SG&A last year, year-on-year, it was a negative growth and partially, due to the yen appreciation. Even though we exclude that impact year-on-year, the growth was around 2% only. And the majority of the time of my activities are actually used for the control of the costs, especially for companies like us, ROE or core operating profits, and those are important KPI. To achieve the target numbers for those KPIs, we have to contain the costs at around 30% of the sales, and that's how we are controlling our P&L. And as to the core operating profit, we'll have to keep more than 20% or 21%. And that's how we are controlling and SG&A should be controlled tightly so that we can divert the investment into the R&D for the future vis-à-vis maintaining the certain level of the profit. So that's how we are controlling our P&L. And same idea applies to the whole year plan.
And another point is the tax rate. And to this term up to second quarter, it was 28.7%. And as the note says, InnFocus-related costs were part of it and can't be recognized on the expense and therefore, in under current term, it was about 26.4%. Therefore, this tax rate should be controlled at 25% to 26%.
And that's it for me. Thank you for your attention. Next to discuss the R&D, the develop status, Shams is going to explain.
Thank you very much. My name is Naveed Shams. I'm the Head of R&D and the Chief Science Officer. Allow me to speak in English, please. So in the next 3 slides, I will give you an update on our pipeline. With this first slide, I'd like to assure you that our pipeline -- products in our pipeline are progressing according to plan and smoothly. As you can tell, between April and September of this year, we were able to launch LENTIS, our LENTIS Comfort lens. We started our Phase III trial. We have DE-130A in Europe. We then filed our next lens for approval and started to file DE-117, our EP2 receptor agonist, in various countries in Asia. DE-127, our myopia program, also started in Japan. This is a Phase II/III study. 076C was approved in Asia. This is our ciclosporin product. It is now expanding in the Asia region. We're also very proud of announcing the top line data for our PRESERFLO MicroShunt, called DE-128. And finally, we have gotten an approval for DE-114 and should be launching very soon after pricing negotiations. Furthermore, DE-111, which is Tapcom or Taptiqom combination product, is in Phase III in China, and we plan to finish the Phase III in the fiscal year 2020. DE-117, the EP2 receptor agonist called EYBELIS in Japan, is in Phase III trials in the U.S., and we plan to complete the Phase III trials very, very soon. In basically our fiscal 2020, we should have data, top line data. DE-126, this is our second IOP-lowering agent, an FP/EP receptor agonist. This is in Phase IIb and we are thinking of doing some exploratory work with this molecule. DE-128 MicroShunt, as I mentioned, we have released top line data. We are in the process of completing our rolling submission to the FDA and we hope to launch in fiscal 2020. It is already CE-marked in Europe.
DE-130A, Catioprost, latanoprost product, is -- we think we can finish the Phase III in fiscal 2021. This is mainly for the European and Asia regions. Furthermore, the DE-109, last time we reported that we were expanding to go outside the U.S. for -- to enhance the enrollment. I can tell you the enrollment has picked up in the study, and we are still looking sites outside the U.S.. DE-122, our endoglin product for wet AMD. We will have completed this study before the end of fiscal '19 in the next few months. The ciclosporin product, as I mentioned, is already approved in various regions, including Europe, Asia and others, will be launching in 2019 fiscal year.
Epinastine, our 114A, the high dose is already approved, was approved in September, and we are now going to launch the product after pricing negotiations have finished. Our myopia product or DE-127, as I mentioned earlier, we plan to complete the Phase II/III study in 2023. And the new lens has been filed called MD-16, and we are expecting approval in this year. I think that's my last slide. Thank you very much.
[Operator Instructions].
My name is Ueda from Goldman Sachs. I want to talk about or ask about the progress of the Asian business. So continuing from the first quarter, the second quarter seems to be going very well. Can you talk about the background? And also, if you see any risk factors in China, please let us know.
Thank you very much. This is Taniuchi. As for the growth in Asia, looking at the fundamentals, as I mentioned earlier, the social factors, that has a big impact. The number of absolute patients, the patients who are going to a hospital is increasing. And of course, aging is making more cataract patients. And of course, Asia's coverage is expanding as well. So these factors are working to increase the market. And of course, the economic advancement has meant that the needs for better treatment, better medicine is increasing. So these are the trends that we're seeing currently. And for Santen in China, we are continuing to increase or expand our market share. And with that, we are showing growth that exceeds the market performance. They are not short-term factors, they are quite long-term, consistent factors that are working in our favor. When it comes to risk factors, the biggest risk is how to supply products. That, I believe, is a midterm risk that we are facing at the moment. 10 years ago, I was in China. The scale of business has changed in the past 10 years. So how to secure production of our products for the China market is something that we need to work on. However, there are restrictions, so we cannot be as flexible as we like. Therefore, we need to have a good production structure so that we'll be able to answer to the needs of demand in China. If we do too much, of course, we may oversupply.
So of course, we need to really understand the lowering regulations in China, it is going to be more stricter going forward. That is a good thing. However, accordingly, we will need to go through more proceedings, and we need to do a timely filing. So that is what we need to do. Stable supply in China on a long-term basis, something that we need to look at. And with that in mind, we need to work beforehand, so that we'll be able to do it in a timely manner.
So you just mentioned that the social factors are quite big. When you created the midterm management plan, I'm sure you had that in mind. But in the past 1 or 2 years, has there been change factors?
Well, in the past year or two, there hasn't been a big change factor, but the market is more stable and growing more. And of course, we are trying to increase the number of emerging China so that we'll be able to achieve more market share and increase the number of hospitals using our products. These are what we have been diligently working on, and that is why we were able to see revenue above our plan.
And the second question about Diquas in China. How are you evaluating the startup of Diquas in China? And in order to expand it further, I'm sure you need to have reimbursement. And also, Hyalein, I believe, is becoming big in China. So do you see potential? With dry eye and glaucoma, the markets are different. Is it difficult to foresee? Can you talk about the potential of these products going forward, please?
Yes. The current numbers are still very small. In China, of course, we have to think about reimbursement, and that is going to take time and of course, we have to look at it in a central government status and also in municipalities. So it is going to be time-consuming. So it is within plan. However, compared to Hyalein, I believe this product is still small in scale, but we hope we will be able to continue with negotiations, so we can grow it further. Hyalein has been on the market for a long time. As a brand, of course, it's been established. So we hope we'll be able to grow Diquas so it will be similar to Hyalein in the future.
And my last question, the third question, is about the Japanese market. Alesion, the second quarter number is very strong. Before the drug price revision, were there onetime factors that had an impact? Or is it doing well in the actual basis?
Well, for Japan, of course, before the consumption tax rise, of course, there were some increases in demand. But I think with the individual products in the individual markets, there were some moves. However, basically speaking, of course, we are seeing demand in -- as a whole go up. That is a trend we're seeing at the moment. And of course, there are onetime factors before the consumption tax rate. But as a whole, it is performing very well.
Sakai from Crédit Suisse. I have 2 questions. The first question. Well, you haven't changed your forecast, so therefore I think the business is smooth. But in terms of the individual product, the EYBELIS in the domestic market is not doing so nicely. And what is the reason why its growth is rather sluggish? And is it a kind of cannibalization taking place in the glaucoma market, for example?
In terms of the EYBELIS, there's no cannibalization at all. And it should be used to those patients who should use it as a first line. This is a new mode of action, therefore, in terms of the side effect, their usage should be done in the results of the care and also our medical reps rather than the property of the product. The safety explanation is more emphasized. And since the launch, the account opening is accelerates. And in that sense, the product is now being understood. And what patient will be the appropriate patient to prescribe. And those will be decided based on the safety. And since this is a new mode of action drug, therefore, in the first half the starting was rather slow, but now we have an increase in the adoption. Therefore, the -- what safety profile it has. And also, there would be the lifting of the 2-week restriction, and this will also increase the sales.
So for the 2-week restriction is going to continue a little bit more, but without that, you can achieve the budget?
Yes, as to the each individual product, we do not have an individual update, but overall, the total revenue of JPY 248 billion can be achieved. But of course, some products are doing better than others.
And another -- in relation to the competition with -- the competition, and pipeline-wise, it's progressing, but brolucizumab from Novartis and in a non-inferiority study with the [ even Eylea ] was very nice, therefore, it was approved by FDA. And I actually don't get any information from Novartis, but I think Novartis is also trying to file in Japan in 2023 and 2022. And Eylea will stay very strong until the launch of generics. But that might be impacted before those years, in terms of the launch of the new competition. And that drug is quite highly accepted overseas. And do you see this drug as a risk? And now Novartis is now growing, especially in the ophthalmology market. What do you think?
First of all, Eylea itself and for the -- we believe that is a product for the patient and also the customer. And that is a [ medium term expire ], our partner and we keep that mindset together. That is the starting point. And in RTH, and that is the situation of the other company. Therefore, we understand the risk is not 0. However -- and those patients who cannot get the prescription due to the economic reasons and how they will react when biosimilar is available. And RHT, [ Alesion ] or a Lucentis patient, and will also grow, but I think that is still the controllable rate amount.
And so the biosimilar will not appear in '22 or '23. By that time, there won't be any competition to Eylea?
Well, I say they could be our competitors but that impact is -- would be staying in the manageable range.
Any other questions? Yes, please.
Hashiguchi from Daiwa Securities. I may be specific. I have 3 questions. First, about the acquisition of InnFocus, and of course, replacement evaluation. From the original plan, you had seen the data of Phase III come out. And with that, there has been no change in the assumptions so far. Is that the correct understanding?
Yes. This is Koshiji. Whether there were changes or not, yes, there were changes. We don't give a 6-monthly forecast. However, if you could refer to Page 12, for other expenses, it comes to JPY 1.9 billion. And this is for revaluation of InnFocus contingent payment, which comes to plus JPY 1.2 billion year-on-year. So this is different from our original forecast at the beginning of the year. However, as a whole, there haven't been any changes, the reason being the other expenses increased because of sales agreement with Glaukos and we changed projections. There was a probability that the expenses will go up because of this, and of course, we needed to recognize payment of milestones, dependent on the development we will be filing this fiscal year, and that led to negative impact on the other expenses. The figure as a whole does not change, however there were increases in expenses in the first half.
So in the first half, the expenses was bigger than expected. But in the -- as a whole, for the full year, there are no changes. Is that correct?
That is correct.
And the next question about Alesion. Mitsubishi Tanabe, the new products will be sold with them in collaboration, but there were no explanation. You did not touch on that. So what are you expecting from that collaboration? And what is the impact on the results? So would you be allocating revenue between the 2 companies, that means that there may be some negative impact on your company? Or as you sell more, will you see a plus or positive impact on your company?
Alesion LX and Alesion, yes, we are doing copromotion with Mitsubishi Tanabe. And this is an allergy eyedrop. So there is ophthalmology market and others, for example, [ ENT ] and pediatrics clinics. Of course, Santen MR is working on glaucoma and we often visit our ophthalmologists. And that's what we cover. But other than ophthalmology, we have had a special group working on that. But with Alesion, the market other than ophthalmology, Mitsubishi Tanabe's MRs of about 1,000 MRs will cover that area going forward. They have allergic medications, therefore, together with that product, they do have a big coverage of allergy doctors. So their capacity will be utilized 100%.
Of course, our model -- Glaukos in our model is very similar, but we will have [ FTEs ] borrowed from Glaukos, and we hope that they will be able to grow the sales. And that will mean that there will be more probability of bigger sales. And of course, we will be able to efficiently manage the business. So the more we sell, we will be able to gain profit. That is a model that we are pursuing.
And my last question is about DE-127. My memory may not be that strong but 3 years ago, you talked about investigator-led study and the data was announced at a society meeting and at that meeting, it was announced that, as a whole, efficacy was gained. However, they were responders and nonresponders. The way we use it and what the target patients are was not very clear. I think that was the gist of the announcement 3 years ago and Phase II/III study, I understand, will now begin in Japan. So based on hypothesis, would you be starting the Phase II/III study here in Japan? Or through this study, are you going to come up with a hypothesis? So what I'm trying to ask is how strategic this development is, 127?
Thank you very much. Yes, your memory is very good. We -- the study that we are talking about, well, the data from the entire study is not yet available. It will be available in the first quarter of next year. However, there were interim analysis built in because this was an early phase exploratory study. So we have some data that we used to have a discussion with PMDA. Based on that data and based on other published data, we chose a design that leads to a Phase II/III-type study. So in Phase II, before we transition smoothly into Phase III, we will decide on the final dose of the product taken going forward into the Phase III portion. The reason is that the original data that was the basis for moving into Phase II that is currently running suggested a certain dose that was efficacious. However, new data suggests that a higher dose may be needed or maybe more efficacious. So therefore, we have decided to do a Phase II/III and test this hypothesis. The intention, long-term intention is to slow the progression of myopia so that the burden of the disease has to be reduced, particularly in Asia. So that study has just started. And as mentioned, but our -- it's a very -- it's a strategic and a tactical development plan to combine. And we will see what happens in the Phase II, and then we can amend the Phase III portion of it as needed. But we will like to save time because these are long trials and so we don't -- we are doing everything possible to do it in the shortest possible time. So the drug can be available.
Next question, please.
Kohtani from Nomura Securities. Thank you very much for your presentation. Since we are talking about myopia, so let me ask you about that. And when we talk about myopia, should we prevent myopia? I don't understand that, especially in Japan and China, the -- how the myopia is seen is quite different. And you said that in China, they are trying to prevent the myopia in 2018. They have a tick up of the older children in the country to prevent the myopia as a national project. And if you go to the rural area, wearing a pair of glasses is quite hated or wearing glasses may further worsen your vision. That's the belief in the rural area, but in urban area, they don't believe in such a way, then why the government is trying to do this? And in Japan, the government is not trying to avoid the myopia. Why are we so different? And there are 2 implications to your business. One is DE-127. And this is -- this doesn't include China in trial and also it includes atrophy. Therefore, how can we leverage this to expand the business in China? Another point is that if you don't wear glasses, then you have to do some surgery, but oftentimes, you need the products like the antibiotics and the healing afterwards. And therefore, such a demand may increase. So if you have any statistics in China, then are we very happy to see them?
Well, talking about myopia and how to interpret and understand the myopia is just the beginning. I think you'll have a better understanding if you watch the TV this evening and why the China or the WHO is quite active because the myopia is increasing quite rapidly compared to the decades ago. And in principle and the lack of the outdoor activities and with those environmental changes, especially in Asia, the myopic patients are increasing quite rapidly. Then maybe you can correct the vision, but with the increase of the myopia and then they progresses, then they will have a very severe myopia, and then this cannot be corrected with the glasses any longer, therefore, even with glasses, they can't see far and also with a further advancement, this may lead to the retinal diseases. And this may lead to the blindness. Therefore, the -- it is not a completely different market. There is a serious market for other severe myopia, apart from the contact lenses or the glasses. And then if you do not do anything, then we will have many patients with visual impairment. And in myopia and in other diseases, the incidence is only a fraction of 1% and in the case of myopia, it could be 50% or 80%. And this will be the huge impact to the country like China. And therefore, China decided or also then United Nation decided to tackle with this issue. Therefore, it's not simply the question that wearing a pair of glasses or not. And we have to change our mindset, including ourselves. And talking about the glasses, and it's not easy to have a good correction. And in Japan, we have a good vision care and the level of the myopia and astigmatism and others can be corrected in quite a readily manner and with a low cost in Japan. But there are many people who cannot have an access in emerging countries. Then, of course, they can see the blackboard from the back and they -- sometimes, it takes very long for the parents to realize that the child has the myopia and that they will not do good in a school and these will be -- give a huge impact in the future. That's one thing. And as to the -- its implication to our business, and in Japan, we put the priority into Japanese trial for 127, but in China or other Asian countries, including the opportunities of the opportunities and also the market opportunities, we will consider in the future and also once we are ready to talk to you, then we would like to make announcements. And the LASIK surgery on the contact lens, and those are the -- have the opportunity for our growth, partially, but we would like to put more focus into the myopia per se.
Then in your antibiotics or artificial tear market, the refractive surgery takes up a very small portion. Am I right?
The use for the refractory surgery, yes, the market-wise, it's rather large. And many surgeries are actually for the cataract and of course, we have to avoid the infectious disease, therefore we need to use such a drug. And our LASIK surgery is not very active in Japan. Therefore, this usage is limited. But in China, there is an increase of the infectious disease and combined with the cataract, but the LASIK surgery is still a very limited market.
So my second question is about the Santen Kerui and [ their ] team. I believe you are now building plants. And what is the situation right now? When will that start operation? And in China, you have uropathogen. I believe that will be the generics in China. You have already obtained approval and I think you attack the [ artificial ] tear market and the joint venture will go to the [ artificial ] tear market and [ patheno ], there's no generics in China launched. So that will be appearing fast in the market. And so you are going to make an inroad to generic market. And there is a Korean company. And [indiscernible] will be introduced. That's only begun in Korean language. And what is your strategies in generics?
And this is Suzuki speaking. The generic environment in China has been greatly changing in a couple of -- in past 1 or 2 years. It relates to the first question and high-quality product and should be launched with a good quality as the originator's product. Therefore, the Santen's -- the formulation and the technique will be the advantage. And on the other hand, generic versus the innovation are still the priority of the company, 4 plus 7, that is the test case, and that's quite changing rapidly.
Therefore, we pay close attention to the progress of the regulatory authorities to decide future direction. And then Santen China has the R&D capability and also it has capability to provide affordable product from Chongqing. And so we can serve both markets from them. And as to the progress of the Chongqing and construction continues, and also, we are carrying out the project of the technical transfer side by side.
And when will with joint venture start the operation? Have you decided that already?
And joint venture already has been started and product transfer, and quite naturally. And the pilot production after the plant is such, and also, we have to get approval. Therefore, the actual start of the business will be in the future.
Any other questions? So we'd like to make the next question the last question.
Muraoka from Morgan Stanley. I just want to confirm, Page 10 of the data book, the second from the bottom, the financial table, IPR&D is JPY 12.2 billion. So there's a huge drop from March. Is this related to the InnFocus product that you talked about earlier? Is that correct?
This is Koshiji. Yes, exactly, as you said. So this is in-process R&D cost. The InnFocus-related DE-128 in-process product, this is intangible asset. So there has been a switch from the one to the other. And that is where the difference comes from. And for LENTIS Comfort, the intraocular lens, until last year, it was in-process product. However, starting from this fiscal year, it becomes an intangible asset. So these are the 2 main reasons.
And you talked about the Eylea and the risk factors going forward, and Suzuki mentioned or talked about biosimilars, are you talking about Avastin? That means that there will be more off-label products available here in the Japanese market. Is that what you're trying to say?
Well, Lucentis, a biosimilar, will appear first. And Eylea and Lucentis, the originators, there will be some economic burdens, and there are many patients who are not able to benefit from these products. But with biosimilars being introduced, the number of patients may increase using those products. However, when it comes to biosimilars, they may have different aspects.
And I have one request I'd like to make. The profit for each of the regions, that was available in the past, but not available today. The operating profit for U.S. is very important for us. Would you be able to resume disclosing the operating profit for regions going forward?
Well, the growth drivers are Asia. And the Asian regions for us at the moment, we have marketing partners and distributors and the timing and seasonal changes or their inventory adjustments, these are the factors that may influence the profit in each of the regions. And when we try to compare the conditions from this year to the prior, there may be some change factors that we need to consider. We are trying to achieve the top line, however, to follow the regional changes quarter-by-quarter. It's very difficult to give you an accurate explanation. That is why we do not offer this data this time. What we will do in the future, we would like to consider going forward. We would appreciate it if you could give us more detailed explanation about the U.S. going forward. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]