Daiichi Sankyo reports profit loss due to manufacturing challenges

Japanese pharmaceutical company Daiichi Sankyo reported a decrease in operating profit as the company took actions this past fiscal year to secure third-party manufacturing and internal capacity in support of its antibody-drug conjugate (ADC) portfolio.

Based on a review related to its revised product supply plans, Daiichi Sankyo expects to record “an extraordinary loss” of JPY 149.4 billion (around $950 million) for the 2025 fiscal year ending March 31, 2026. The drugmaker attributed the loss to two main factors: contract obligations to contract manufacturing organizations (CMOs) and an impairment charge related to the company’s production plant in Odawara, Japan.

Daiichi Sankyo has been making investments in its own facilities while leveraging CMOs for outsourced production. However, late last month, the company said it was taking additional time to finalize the financial figures for the 2025 fiscal year to properly estimate the amount of loss provisions in connection with contracts with CMOs.

On May 8, Daiichi Sankyo announced that a “gap has emerged between the new supply plan and the minimum purchase obligations stipulated in the contracts with CMOs.” As a result, the company “recorded the currently estimated amount of compensation to CMOs as a one-time expense in FY2025.”

At the same time, Daiichi Sankyo noted that when it comes to the “medium- to long-term differences between the minimum purchase obligation and the revised supply plan, no provision has been recognized at this stage due to the high level of uncertainty.”

The drugmaker also announced impairment loss and compensation related to capital equipment at its Odawara plant in Japan, based on a review of the production plans at existing manufacturing sites as well as newly planned capital investment projects.

“We determined that it would not be reasonable to continue additional investment in ADC-related equipment at the Odawara Plant in Japan under the revised supply plan and accordingly decided to discontinue the relevant investment project,” Daiichi Sankyo said. “We will record an impairment loss on the relevant equipment, as well as an estimated loss for compensation fee arising from the cancellation and termination of related contracts with construction companies.”

ADC investments continue

Daiichi Sankyo has committed to capital investment in manufacturing to expand capabilities for currently approved ADCs, including Enhertu and Datroway, along with additional ADCs in clinical development.

On May 11, the company unveiled its new five-year business plan (FY2026 - FY2030) outlining plans to deliver more than 2.3 trillion yen in oncology revenue by 2030 through the launch of 20 new indications across five medicines. Ultimately, Daiichi Sankyo’s goal is to become a global top five oncology company by 2035.

“During FY2026, there are five practice-changing launches planned across the DXd ADC portfolio in various countries/regions globally, including four new breast cancer indications for Enhertu and Datroway and the company’s first-ever launch in small cell lung cancer with ifinatamab deruxtecan (I-DXd),” according to the Daiichi Sankyo five-year business plan. 

Daiichi Sankyo and AstraZeneca initiated a global collaboration to jointly develop and commercialize Enhertu in 2019 and Datroway in 2020, except in Japan where Daiichi Sankyo maintains exclusive rights for each ADC. Daiichi Sankyo is responsible for the manufacturing and supply of Enhertu and Datroway.

Earlier this year, Daiichi Sankyo announced plans to spend approximately 300 billion yen ($1.9 billion) to expand its ADC production facilities in Asia, Europe, and the U.S. The company earmarked 140 billion yen ($894 million) for production sites in Munich, Germany. In Japan, the drugmaker allocated 77 billion yen ($491.7 million) to expand an existing plant in Hiratsuka, Kanagawa.

Daiichi Sankyo’s U.S. operations in Ohio will get an injection of 56 billion yen ($357.8 million) to fund an expansion. In China, the drugmaker will spend 24 billion yen ($153 million) on a new ADC manufacturing facility in Shanghai that was first announced in late 2024.