Daiichi Sankyo Co., Ltd. Q2 FY2024 Earnings Overview
Daiichi Sankyo Co., Ltd. (Ticker: 4568), a leading pharmaceutical company, reported notable growth in its second-quarter earnings for fiscal year 2024. Revenue jumped by 21.5% to JPY 882.7 billion, while core operating profit surged by 74.8% to JPY 166.6 billion. Net income attributable to the parent company also saw a robust rise of 51.2%, reaching JPY 146.7 billion. The significant financial uplift was largely attributed to strong sales in the oncology sector, particularly the drug ENHERTU, along with strategic partnerships, including a deal with US-based Merck. Following these positive results, Daiichi Sankyo revised its fiscal 2024 revenue forecast upwards and introduced new vaccines in Japan.
Key Takeaways
- Revenue increased to JPY 882.7 billion, reflecting a 21.5% year-on-year growth.
- Core operating profit climbed by 74.8% to JPY 166.6 billion.
- Net income attributable to the parent company grew by 51.2% to JPY 146.7 billion.
- Oncology sales remained strong, with ENHERTU being a major contributor.
- Established a strategic alliance with US Merck, including a $750 million upfront payment for HER3-DXd.
- Upwards revision of fiscal 2024 revenue forecast by JPY 80 billion to JPY 1.830 trillion.
- Introduced DAICHIRONA mRNA COVID-19 vaccine and FluMist influenza vaccine in Japan.
- Plans to grow market presence and secure new indications for ENHERTU in the ASCA region.
Company Outlook
- Anticipates continued growth driven by LIXIANA and ENHERTU.
- Plans for a sustainability discussion in December.
- Scheduled Science and Technology Day for investors on December 16, 2023.
- Major data presentations at the San Antonio Breast Cancer Symposium are upcoming.
- Regulatory decisions on TL01 and TB01 expected by the fiscal year-end.
Bearish Highlights
- Challenges in Europe regarding Enhertu sales due to reimbursement delays, especially in Spain and the UK.
- Manufacturing issues tied to HER3-DXd applications, necessitating a new submission.
Bullish Highlights
- Continuous growth in the US market.
- Positive regulatory responses with recent approvals in China.
- Strong co-promotion revenue from sales in China and Hong Kong.
- Collaborative efforts with AstraZeneca and Merck anticipated to provide synergies.
Misses
- TROPION-Breast01 trial did not show statistical significance in overall survival.
- Uncertainty surrounds the publication of PT01 trial data regarding Dato DXd's survival outcomes.
Q&A Highlights
- Reduced profit share from AstraZeneca for ENHERTU due to reimbursement delays in Europe.
- The novel ADC platform, DS-9606, showcases unique properties.
- Treatment sequencing for Dato-DXd and HER3-DXd will be informed by clinical trial outcomes.
- FDA ODAC meeting implications for TROPION-Lung01 filing were discussed.
Daiichi Sankyo's earnings call pointed to the company's strong performance and optimistic forecasts for fiscal 2024. A strategic focus on oncology and effective partnerships set the stage for ongoing growth. Despite facing challenges in Europe and regulatory obstacles, the robust pipeline hints at a promising outlook ahead. Investors and stakeholders will closely monitor upcoming data releases and regulatory decisions that may influence Daiichi Sankyo's path in the months to come.
Full transcript – None (DSKYF) Q2 2025:
Hiroyuki Okuzawa: This is Okuzawa. Thank you for taking time out of your busy schedule to attend Daiichi Sankyo's Financial Results Presentation today. Now, I will explain the consolidated financial results for the second quarter of fiscal 2024, which were announced at 1:00 p.m. today.
Please refer to Slide 3 for today’s agenda: consolidated financial results for the second quarter of fiscal 2024, fiscal 2024 forecast, business update, and R&D update. The R&D update will be managed by Takeshita, our Global R&D Head. We will take questions at the end.
Please look at Slide 4, showing consolidated results for the second quarter of fiscal 2024. Revenue increased by JPY 156.4 billion or 21.5% year-on-year to JPY 882.7 billion. Costs of sales rose by JPY 4.6 billion, general and administrative expenses increased by JPY 53.2 billion, while research and development expenses climbed by JPY 27.3 billion year-on-year. Overall, core operating profit increased by JPY 71.3 billion or 74.8% to JPY 166.6 billion. Operating profit, including one-time gains and losses, rose by JPY 91.8 billion or 96.6% to JPY 186.9 billion. Profit attributable to owners grew by JPY 49.7 billion or 51.2% year-on-year to JPY 146.7 billion. The exchange rates were at JPY 152.62 to the dollar (depreciation of JPY 11.62 year-on-year) and JPY 165.93 to the euro (depreciation of JPY 12.55 year-on-year).
Refer to Slide 5 for revenue breakdown by business unit. First, in the Japan business unit, sales from Daiichi Sankyo Espha products were excluded from consolidation from April 2024. Meanwhile, sales of LIXIANA (a direct oral anticoagulant), ENHERTU, pain treatment Tarlige, vaccines, and Daiichi Sankyo Healthcare products saw increases, resulting in an overall revenue increase of JPY 13 billion.
In the overseas business unit, excluding foreign exchange impact, the oncology business increased by JPY 50.3 billion due to sales growth of ENHERTU in the US and Europe. The American region saw an increase of JPY 1.2 billion, primarily from generic injectables, despite a decline in Venofer sales. EU Specialty business reported a JPY 22.8 billion increase from LIXIANA and Nilemdo, while the ASCA business observed a JPY 13.2 billion rise due to ENHERTU sales growth in Brazil. Strategic upfront payments from AstraZeneca and US Merck also contributed to an increase of JPY 16.3 billion. Foreign exchange impact on overall revenue was positive, adding JPY 39.6 billion.
Slide 6 breaks down the increase in core operating profit, highlighting a JPY 71.3 billion rise. Sales revenue boomed by JPY 156.4 billion (including JPY 39.6 billion from foreign exchange). The cost of sales decreased by JPY 7.1 billion due to improved product sales ratios, while SG&A expenses rose by JPY 34.6 billion largely because of increased profit share with AstraZeneca. R&D expenses increased by JPY 16.6 billion, reflecting a growing number of R&D personnel involved in developing five DXd ADCs. Excluding foreign exchange effects, the actual increase in core operating profit was JPY 72.6 billion.
On Slide 7, we review changes in net income, noting a JPY 49.7 billion year-on-year increase in net income attributable to the parent company, prompted by operating profit increases and positive income from the transfer of Daiichi Sankyo Espha shares. Financial impacts were slightly negative due to foreign exchange losses, with income tax adjustments adding an increase of JPY 40.8 billion.
Forecasts for fiscal 2024 are presented on Slide 9. Despite external factors affecting sales, a JPY 80 billion revenue increase is anticipated due to strengthening sales of LIXIANA and ENHERTU, alongside favorable foreign exchange impacts. Cost of sales is expected to rise by JPY 15 billion corresponding to the sales increase, coupled with a projected JPY 25 billion rise in SG&A due to exchange rate influences and strategic investments. R&D expenses are expected to decrease by JPY 10 billion after adjusting for timing, resulting in an upward revision for both core operating income and operating income by JPY 50 billion, with profit before tax estimated at JPY 285 billion.
Revenue performance for ENHERTU is outlined on Slide 11, showing significant year-on-year growth in all regions for Q2 FY2024, driven by the effective management of HER2-positive breast cancer treatments. The US topped market shares for various cancer treatments, with substantial rises in European and ASCA region sales contributing to the company's strong performance.
The partnership with US Merck for the development of MK-6070 further emphasizes the strategic approach to combine therapies, enhancing treatment outcomes for small cell lung cancer. Other corporate endeavors in regions across Japan, including the launch of an mRNA COVID-19 vaccine and FluMist, exhibit the company’s commitment to community health and well-being.
Daiichi Sankyo continues to hold discussions on sustainability, while crucial meetings for investors and essential data presentations convey a proactive approach in addressing pharmaceutical advancements.
This report encapsulates the positive trajectory of Daiichi Sankyo amidst its robust operational framework, innovative pipelines, and strategic collaborations, signaling a bright perspective moving forward.
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