Kubota Pharmaceutical Holdings Q2 FY2026 Earnings Deep Dive: Advancing Pipeline Commercialization and European CUP Strategy Through Intellectual Property Leverage

Executive Summary

In the second quarter (interim period) of the fiscal year ending December 31, 2026, Kubota Pharmaceutical Holdings Co., Ltd. made significant progress in strategic investments aimed at future monetization. Key developments included preparations for the commercialization of its lead pipeline candidate, Emixustat Hydrochloride for Stargardt disease , in Europe, and a shift in the business model for its myopia progression care device, "Kubota Glass®."

For the interim period, the company reported consolidated revenue of ¥8 million (a 39.8% decrease year-on-year) and an operating loss of ¥650 million (compared to a loss of ¥450 million in the same period last year). While revenue reflects a temporary accounting impact from the transition of Kubota Glass® to a subscription-based model, expenses rose as R&D costs increased by 118.2% year-on-year to ¥313 million , driven by higher active pharmaceutical ingredient (API) manufacturing costs for Emixustat Hydrochloride.

As shown in the slide above, the primary highlight in business development was the signing of a supply and licensing agreement with Laboratoires KÔL in France, followed by the receipt of the first milestone payment in July 2026. By leveraging the Compassionate Use Program (CUP) for designated patients , starting in France, the company aims to achieve early commercialization and revenue generation ahead of the standard regulatory approval process.

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Analysis of Q2 FY2026 Consolidated Results

1. Trends in the Statement of Profit or Loss (IFRS)

Revenue for the interim period decreased from ¥13 million in the same period last year to ¥8 million . This is primarily due to the transition from direct sales to the "Kubota Glass® My Vision Program" (subscription-based) , which resulted in revenue being recognized on a monthly pro-rata basis. This shift from lump-sum recognition to a recurring revenue model serves as a foundation for stabilizing long-term earnings.

Total operating expenses were ¥646 million (a 49.9% increase year-on-year, up ¥215 million). The breakdown is as follows:

• Cost of sales : ¥22 million (a 376.5% increase year-on-year, up ¥17 million)
• R&D expenses : ¥313 million (a 118.2% increase year-on-year, up ¥170 million, primarily due to Emixustat manufacturing costs)
• SG&A expenses : ¥311 million (a 9.9% increase year-on-year, up ¥28 million; while personnel costs decreased, stock-based compensation and patent-related expenses increased)

Looking at the quarterly progression (Q1 to Q2), Q2 operating expenses were ¥339 million (a 10.4% increase quarter-on-quarter), with R&D expenses trending upward at ¥174 million (a 24.8% increase quarter-on-quarter).

2. Financial Position and Cash Reserves

As of the end of June 2026, the company maintains a strong financial position.

• Current assets : ¥1,766 million (down ¥203 million from the beginning of the fiscal year)
• Cash and cash equivalents (including other financial assets) : ¥1,580 million (down ¥339 million from the beginning of the fiscal year)
• Total assets : ¥1,776 million
• Total equity : ¥1,602 million
• Equity ratio : 90.2% (down 1.4 percentage points from the beginning of the fiscal year)

Although cash reserves have decreased due to R&D-related cash outflows, the equity ratio remains above 90%, ensuring a solid capital base for ongoing business operations.

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Source of Competitive Advantage: An Overwhelming IP Portfolio

The foundation of Kubota Pharmaceutical Holdings is its robust patent portfolio , which the company has focused on since its inception. As of December 2025, the company holds 137 patents in total: 59 for pharmaceuticals and 78 for medical devices .

As indicated in the slide above, the company was ranked 4th in the pharmaceutical industry (following Astellas Pharma, Daiichi Sankyo, and Takeda Pharmaceutical) and 28th out of 3,980 listed companies in the "Patent Value Growth Ranking" published by Nikkei Business (June 2, 2025 issue).

This evaluation, calculated using LexisNexis's "PatentSight+" analysis tool, objectively proves not only the quantity of patents but also the frequency of citations by other companies and the qualitative growth potential of the portfolio. This IP foundation acts as a barrier to entry for the company's unique business model (a three-tier approach: prevention, progression inhibition, and cure).

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Pipeline Progress and Growth Potential

1. Emixustat Hydrochloride (Stargardt Disease Candidate)

Emixustat is a small molecule compound that protects visual function by reducing metabolic stress on the retina through Visual Cycle Modulation (VCM) technology.

• Early Commercialization Strategy in Europe : In March 2026, the company signed a supply and licensing agreement with France's Laboratoires KÔL . Based on subgroup analysis from Phase 3 clinical trials, the company is pursuing early monetization through the Compassionate Use Program (CUP) in France, where there is greater flexibility in pricing. The first milestone payment related to API manufacturing was received in July 2026.
• European Market Potential : Europe accounts for approximately 45% of the global Stargardt disease treatment market. The company estimates the European market size as follows:
  • Total Addressable Market (TAM) : Estimated $3.188 billion (approx. ¥462.3 billion)
  • Serviceable Available Market (SAM) : $1.594 billion (approx. ¥231.1 billion)
  • Serviceable Obtainable Market (SOM) : $1.036 billion (approx. ¥150.2 billion, target share 32.5%)
• US Market Development : The company is confirming requirements for a 1-to-2 pivotal trial while continuing to seek joint R&D partners.

2. Kubota Glass® (Wearable Myopia Progression Care Device)

This flagship product uses proprietary technology to project special images onto the retina to improve or inhibit myopia.

• Japan Market : The subscription-based "Kubota Glass® My Vision Program" was fully launched in April 2026. The transition to a model that lowers initial costs and increases user retention is progressing, with a steady increase in the number of users.
• China and Taiwan Markets : In China, a Randomized Controlled Trial (RCT) for primary prevention is underway at the Shanghai Eye Disease Prevention and Treatment Center (Shanghai Eye Hospital) , involving 118 children aged 6 to 9 (Principal Investigator: Dr. He Xiangui, 1-year observation period). The company is prioritizing the construction of scientific evidence and organizational readiness for approval while carefully monitoring local regulatory trends.

3. eyeMO® (Home/Remote Retinal Monitoring Device)

Utilizing ultra-compact OCT (Optical Coherence Tomography) technology, this device enables home monitoring for wet age-related macular degeneration and diabetic macular edema.

• Market Size : The TAM is estimated at $4.079 billion (approx. ¥591.5 billion), with an SOM of $306 million (approx. ¥44.4 billion, target share 7.5%).
• Global Joint Research : Clinical research is ongoing with the Joslin Diabetes Center (Harvard Medical School) in the US and the National University Hospital (NUH) in Singapore. Phase 1 subject recruitment is complete, and Phase 2 clinical trials are progressing smoothly. Research related to NASA's manned Mars exploration project is also being conducted in parallel.

4. VAP-1 Inhibitors (Inflammatory and Degenerative Diseases)

As a novel oral drug with higher selectivity and more potent action than existing inhibitors, the company is expanding its research scope into areas with high unmet medical needs, such as Alzheimer's disease and Metabolic Dysfunction-Associated Steatohepatitis (MASH) .

• Alzheimer's Market Size : The TAM in major markets (US, EU4, UK, Japan) is estimated at $50.521 billion (approx. ¥7.3255 trillion), with an SOM of $7.678 billion (approx. ¥1.1133 trillion, target share 15.3%). The company is currently selecting partners for in vivo POC verification.

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Future Outlook and Key Points to Watch

Investors should focus on the following key themes regarding the future development of Kubota Pharmaceutical Holdings:

1. Progress of Emixustat's French CUP and Expansion to Other European Countries : The start of early prescriptions in France through the collaboration with KÔL and the realization of associated royalty and milestone income.
2. Kubota Glass® Subscription Growth and Chinese Clinical Data : The accumulation of MRR (Monthly Recurring Revenue) in Japan and the 12-month evaluation data from the pediatric myopia prevention trial at the Shanghai Eye Disease Prevention and Treatment Center.
3. Partnerships and Licensing for eyeMO® and VAP-1 Inhibitors : Securing commercialization partners following research results from Harvard and NUH, and progress in strategic alliances within the Alzheimer's disease sector.

Building on its strong patent assets, the company is deploying a hybrid portfolio of pharmaceuticals and medical devices, steadily transitioning from the upfront investment phase to the early commercialization phase.