Daiichi Sankyo is poised to report significantly lower full-year profit for fiscal year 2025, primarily due to a 95 billion Japanese yen ($610 million) hit linked to its precautionary antibody-drug conjugate (ADC) manufacturing strategy.
The Japanese pharma revealed (PDF) Friday that while revenue is on track to beat its previous forecast and reach a new high, a shift in ADC supply planning led to two major charges that are expected to drive an extraordinary loss of 149.4 billion yen ($950 million) for the company’s non-consolidated fiscal year 2025 financial results.
Daiichi recently postponed its annual report to iron out the specific impact from the supply changes, a move that worried investors, who sent its shares down by over 10% on April 24.
The decrease reflects a 75.7-billion-yen payment to contract manufacturers and a 19.3-billion-yen impairment loss and compensation related to capital equipment at Daiichi’s own Odawara plant in Japan.
To hear Daiichi tell it, the downward revision reflects the cost of its own precautionary planning; by aggressively earmarking capacity to ensure a stable supply, Daiichi left itself vulnerable to the shifting demand of its ADC portfolio.
Daiichi earned its first ADC approval from the FDA—for AstraZeneca-partnered Enhertu—at the end of 2019. As the portfolio grew, estimated demand expanded significantly beyond expectations. Therefore, Daiichi “adopted a policy of securing manufacturing capacity sufficient to cover maximum demand without risk adjustment, with the highest priority placed on ‘ensuring a stable supply to all patients,’” the company explained in a May 8 release.
As a result, Daiichi signed long-term contracts with CMOs, committing to minimum purchases while securing dedicated production lines. The company was apparently trying to avoid potential shortages given the small number of CMOs with ADC capabilities and the infancy of its own manufacturing capacity.
However, clinical trial results led to revisions to target patient populations, while delays in launch timelines further reduced Daiichi’s forecast for demand.
TROP2-directed Datroway, Daiichi’s second ADC from its AZ collaboration to reach the market, showed limited efficacy in second-line non-small cell lung cancer, leading to a revised FDA application and eventual go-ahead in an EGFR-mutated niche last summer.
Based on learnings from the readout, Daiichi and AZ tweaked several of Datroway’s phase 3 trials, including the closely watched Avanzar study in first-line NSCLC, to include analyses of an AI-enabled TROP2-related biomarker as a primary endpoint.
“Based on the totality of data that we’ve seen so far across multiple data sets, we’ve seen consistent improvement in performance for both [progression-free survival] and [overall survival] in the biomarker-positive patient population, both as monotherapy and in combination with [immuno-oncology] in a first-line setting,” AZ’s oncology R&D chief Susan Galbraith, Ph.D., said on the company’s first-quarter earnings call last week.
In addition, the launch timeline of Daiichi and partner Merck & Co.’s HER3 ADC, patritumab deruxtecan, looks significantly delayed, if the agent ever reaches the market at all. Following an FDA rejection in 2024 due to problems at a contractor’s manufacturing facility, the pair last year pulled an application because of an overall survival miss in EGFR-mutated NSCLC. In its Merck partnership, Daiichi is responsible for manufacturing.
Meanwhile, another Merck-partnered Daiichi project, B7-H3 ADC ifinatamab deruxtecan (I-DXd), is awaiting an FDA decision for previously treated extensive-stage small cell lung cancer by Oct. 10, 2026. However, competition in the B7-H3 space is heating up.
Daiichi has updated its ADC supply plan, incorporating risk adjustment. The compensation of 75.7 billion yen to contractors reflects short-term differences from the old strategy. As for the mid- to long-term gaps, Daiichi has not made any adjustments yet “due to the high level of uncertainty,” the company said.
Simultaneously, as part of the supply chain redesign, Daiichi examined its own manufacturing sites and decided to discontinue a planned investment in ADC-related equipment at its Odawa plant, resulting in a one-time charge of 19.3 billion yen.
Daiichi is halting its production expansion in Japan as the Trump administration is pushing for onshoring of drug manufacturing through tariffs. Daiichi is reportedly investing up to 56 billion yen ($351 million) to build additional facilities at its Ohio plant.
Daiichi will report its official financial results for fiscal year 2025—which ends in March 2026—as well as its new five-year business plan on May 11.