Company Reports

Narrow-moat Daiichi Sankyo’s fourth-quarter revenue grew 30% year on year, which is in line with our optimistic expectations. Guidance for fiscal 2024 is above our expectations because of the company’s forecast of 28% growth in global Enhertu sales. Additionally, the company reviewed several recently initiated or planned clinical trials for the pipeline, including I-DXd and R-DXd. We raised our fair value estimate to JPY 5,500 per share from JPY 5,100 to include revenue for Enhertu from its second-line pan-tumor approval in HER2-expressing patients. We also incorporated higher risk-adjusted revenue for Dato-DXd now that its applications in lung cancer and breast cancer have been accepted by the US Food and Drug Administration.

Narrow-moat Daiichi Sankyo is a Japanese drugmaker with a global footprint and cutting-edge development platform for antibody drug conjugates. As an established pharmaceutical company with a long history, it also has numerous lucrative business lines including generics, anticoagulants, painkillers, and heart medications. In 2019 it formed a partnership with AstraZeneca and will co-develop and co-commercialize Enhertu and Dato-DXd, its two leading assets from its ADC platform. In 2023, it formed another partnership with Merck & Co. to co-develop and co-commercialize three other ADCs: HER3-DXd (HER3 ADC), I-DXd (B7-H3 ADC), and R-DXd (CDH6 ADC). We expect its ADC platform and other pipeline assets to drive growth over the next 10 years.

Narrow-moat Daiichi Sankyo’s third-quarter results came in stronger than expected due to a jump in sales of influenza and COVID-19 products. The company also raised its full-year revenue guidance to JPY 1.58 billion from JPY 1.55 billion and full-year core operating profit guidance to JPY 180 million from JPY 155 billion. In addition to higher sales of Inavir (for influenza) and Daichirona (COVID vaccine), the revision includes foreign-exchange tailwinds. Operating profit margins for the quarter and in the full-year guidance are in line with our expectations.

Narrow-moat Daiichi Sankyo is a Japanese drugmaker with a global footprint and cutting-edge development platform for antibody drug conjugates. As an established pharmaceutical company with a long history, it also has numerous lucrative business lines including generics, anticoagulants, painkillers, and heart medications. In 2019 it formed a partnership with AstraZeneca to co-develop and co-commercialize Enhertu and Dato-DXd, its two leading assets from its ADC platform. We expect its ADC platform and other pipeline assets to drive growth over the next 10 years.

Narrow Moat Daiichi Sankyo's second-quarter earnings were in line with our expectations after adjusting for foreign exchange tailwinds. Revenue for the three months was JPY 372.5 billion, which is 14% year-on-year growth or approximately 9.5% after removing currency exchange effects. Operating profit margins were in line with expectations.

On Oct. 19, narrow-moat Daiichi Sankyo announced an out-licensing deal with Merck for three of Daiichi’s antibody-drug conjugate candidates. The total up-front payments are $5.5 billion, up to $16.5 billion of potential milestones, and a 50/50 split of profits and costs excluding Japan where Daiichi retains rights. This massive deal reinforces our positive view of Daiichi’s ADC platform beyond Enhertu. We reiterate our fair value estimate of JPY 5,100 per share and continue to view shares as modestly undervalued.

Narrow-moat Daiichi Sankyo reported strong first-quarter results, mostly due to better-than-expected sales in the U.S. of its flagship drug Enhertu. Operating profit margins were in line with expectations. However, the expected top-line readout for Destiny-Breast06, or DB06, has been delayed to the second half of fiscal 2023. We lower our fair value estimate to JPY 5,100 per share from JPY 5,200 to reflect small adjustments to our forecasts for Dato-DXd and Enhertu. We think the stock is attractive at current levels.

Narrow-moat Daiichi Sankyo is a Japanese drugmaker with a global footprint and cutting-edge development platform for antibody drug conjugates. As an established pharmaceutical company with a long history, it also has numerous lucrative business lines including generics, anticoagulants, painkillers, and heart medications. In 2019 it formed a partnership with AstraZeneca to co-develop and co-commercialize Enhertu and Dato-DXd, its two leading assets from its ADC platform. We expect its ADC platform and other pipeline assets to drive growth over the next 10 years.

Narrow-moat Daiichi Sankyo is a Japanese drugmaker with a global footprint and cutting-edge development platform for antibody drug conjugates. As an established pharmaceutical company with a long history, it also has numerous lucrative business lines including generics, anticoagulants, painkillers, and heart medications. In 2019 it formed a partnership with AstraZeneca to co-develop and co-commercialize Enhertu and Dato-DXd, its two leading assets from its ADC platform. We expect its ADC platform and other pipeline assets to drive growth over the next 10 years.

Narrow-moat Daiichi Sankyo’s fiscal 2022 earnings and fiscal 2023 guidance were in line with our expectations. We reiterate our fair value estimate of JPY 5,200 per share and view it as modestly undervalued.

Narrow-moat Daiichi Sankyo is a Japanese drugmaker with a global footprint and cutting-edge development platform for antibody drug conjugates. As an established pharmaceutical company with a long history, it also has numerous lucrative business lines including generics, anticoagulants, painkillers, and heart medications. In 2019 it formed a partnership with AstraZeneca to co-develop and co-commercialize Enhertu and Dato-DXd, its two leading assets from its ADC platform. We expect its ADC platform and other pipeline assets to drive growth over the next 10 years.

Narrow-moat Daiichi Sankyo’s fiscal third quarter was in line with our expectations. Revenue and operating profit for the third quarter were JPY 340 billion and JPY 32 billion, respectively, which is in line with management’s guidance in October. Although the company gave revised guidance, full-year revenue and core operating profit remain unchanged at JPY 1.25 trillion and JPY 120 billion, respectively. Despite upward revisions to Enhertu forecasts due to stronger-than-expected sales ramp-up in the U.S. and Europe, this was mostly offset by lower guidance for the Japan Business Unit. Our fair value estimate remains unchanged at JPY 5,200 per share, and we think shares are attractive.

We initiate coverage on Daiichi Sankyo with a narrow moat rating, positive moat trend, and fair value estimate of JPY 5,200 per share. Daiichi is a global leader in antibody drug conjugates and its flagship HER2-targeting ADC, Enhertu, and its strong efficacy is changing the treatment landscape of HER2-expressing breast cancer.

Narrow-moat Daiichi Sankyo is a Japanese drugmaker with a global footprint and cutting-edge development platform for antibody drug conjugates. As an established pharmaceutical company with a long history, it also has numerous lucrative business lines including generics, anticoagulants, painkillers, and heart medications. In 2019 it formed a partnership with AstraZeneca to codevelop and cocommercialize Enhertu and Dato-DXd, its two leading assets from its ADC platform. We expect its ADC platform and other pipeline assets to drive growth over the next 10 years.