■Overview and progress of Kubota Pharmaceutical Holdings' main development pipeline ＜4596＞

(4) Sales Status and Future Sales/Development Policies

Sales of “Kubota Glass” began in 2022/8 as a “glasses-type AR device that reproduces outdoor activities” in Japan (sales price 770,000 yen including tax) *. At the beginning of sales of the made-to-order type, there was a shortage of semiconductors, and the lead time from order to delivery required about 3 months, but recently it has been shortened to 1 to 2 months due to the shortage of semiconductors. Sales results for the 2023/12 fiscal year were 39 million yen (up 31 million yen from the previous fiscal year), and dozens of units were sold. The attributes of buyers are about 50% adults, and there are relatively many business people between the ages of 40 and 60, and there were also cases where they first used it themselves to confirm the effects, and then made additional purchases for children. We sell through directly managed stores (1 store), our EC site, and some ophthalmology clinics and eyeglass retail stores (15 stores) as sales channels, but the sales ratio at directly managed stores was the highest. Also, it is characteristic that about 40% of customers who make inquiries or visit stores are foreign customers, and although there are many Asian regions such as China by country, inquiries are also received from a wide range of regions such as Europe, America, the Middle East, and Africa.

* In addition to starting sales through a soft launch in the US in 2022/6 (price 5,200 US dollars), a sales agency agreement was signed with a major **** ophthalmology equipment sales company in July of the same year, but since product improvements and support service construction are prioritized, they are currently sold only in Japan.

As questionnaire evaluations from buyers, while there were negative evaluations such as “no immediate effect,” “it took time to adjust to the optimal position,” and “it stopped moving after 3 months (due to initial failure),” there were also multiple positive evaluations such as “the speed at which children's myopia progresses calmed down,” and “eye drops were used less frequently.” Irradiating the retina with light for a fixed period of time with micro LEDs improved blood flow around the retina, which may have led to an effect of relieving eye fatigue. In addition, 283 adults who participated in a seminar on the theme of myopia held in 2023/10 were asked to wear “Kubota Glass,” and when a questionnaire survey using a free description method was carried out, 68.0% of the 277 people who responded received positive responses such as “clean” and “easier to see.” Conversely, there were 12.0% negative responses, such as “I didn't feel any particular change,” “there is a sense of incongruity,” and “it's hard to see.” The company believes it is necessary to increase the added value of “Kubota Glass” by further improving the product and finishing it into a product that is easy to use from questionnaire results collected, etc., and by working to enhance support services, and it is a policy to focus on promoting such efforts for the 2024/12 fiscal year.

On the service side, the idea is that it is important to properly explain products to customers at directly managed stores, and in addition to making a complete reservation system from 2023/8, installment purchase services and the product guarantee support service “Kubota Care” (39,000 yen including tax) * began in September of the same year. The installment purchase service can also be used on EC sites from 2024/2. Also, in 2023/12, sales began at the “SUGI+ Haneda Innovation City Store” where Sugi Pharmacy Co., Ltd. will open. The store is located in a commercial facility adjacent to Haneda Airport, and it is an experiential store where you can experience the cutting edge of healthcare with the theme of “future health,” and it is also possible to try out actual products and order them from the EC site on the spot if you like them. As for the future, it is planned to enhance the support system, such as regularly announcing existing customers via SMS etc. for recurring.

* In addition to the “1-year manufacturer's warranty,” which is registered within 30 days of receipt of the product, it is a service where you can receive a product warranty at a special rate for 3 years (lens replacement 12,000 yen (tax included), nose bridge replacement 9,900 yen (tax included), nose pad replacement free).

In addition, efforts to raise awareness through seminars and event activities by the “ZERO Diopter Project,” which started in 2023, will also continue. In particular, in the health management excellent corporation certification system by the Ministry of Economy, Trade and Industry from 2024, eye strain has also been added to one of the evaluation index items, and seminar requests from large companies are increasing, and health management support services will also be actively developed while holding seminars for schools and collaboration events* with companies.

*An e-sports English conversation collaboration event was held with Gesippi Co., Ltd., which develops the metaverse business centered on e-sports, in 2024/3.

Meanwhile, there is a high possibility that expansion in overseas markets will take place after the degree of perfection of products and services has been raised in Japan, and we anticipate that concrete movements will be after 2025 at the earliest. As a sales region, in addition to the United States and Taiwan, which have obtained sales approval as medical devices in 2022, China, which has many inquiries, is a leading candidate. As for China, a basic agreement relating to the sale of “Kubota Glass” was concluded with Sanming City, Fujian Province, China in 2023/8. Although no specific decisions have been made yet, it seems that information is being exchanged continuously. Sanming (population approx. 2.8 million people) is designated as a medical health model city in Fujian Province, and is known as one of the cities promoting advanced initiatives in the medical field. The Chinese government formulated a national plan setting myopia reduction targets for each municipality in 2018, and since the goal is to reduce the incidence rate of myopia up to high school students to 70% or less in 2030, there is a possibility that “Kubota Glass” will be used as one of Sanming City's myopia control measures in the future. In addition, negotiations are continuing with companies wishing to sign sales agency agreements in China.

On the development side, it is a policy to accumulate evidence while conducting small-scale clinical trials and long-term tests under various conditions, such as differences in effects due to differences in eye axis length and refractive index, etc. along with improvements to existing products. Furthermore, we will work to reduce manufacturing costs by reviewing designs and components. Looking at the cost of sales ratio on a quarterly basis after “Kubota Glass” was released, it has declined from 91.7% in the 3rd quarter of the fiscal year ending 2022/3 to 23.6% in the fourth quarter of the fiscal year ending 2023/12, and it is thought that efforts to reduce the cost of components centered on semiconductors have been effective. The company seems to expect the cost of sales ratio to remain in the 20% range for the time being. Furthermore, commercialization of contact lenses is also in view in the future, and initiatives including intellectual property strategies are underway.

(Author: FISCO Visiting Analyst Joe Sato)