With Enhertu and Datroway hitting their peak revenue and rivals flowing into the antibody-drug conjugate space, Jefferies cuts expectations for Daiichi Sankyo.
Daiichi Sankyo’s early-stage antibody-drug conjugate pipeline is “not keeping pace,” Jefferies analysts have declared, with the Japanese pharma heading into a period of higher spending and lower operating leverage.
“Competition in ADCs is intensifying, while the early-stage pipeline remains thin,” Jefferies wrote in a Thursday morning note to investors.
The firm has therefore cut estimates for the company, as there are few remaining milestones for the blockbuster Enhertu, which ushered in a new era of breast cancer care with its initial December 2019 approval.
“ADC cash flow may also be nearing a peak, with most of Enhertu’s major regulatory and sales milestones already secured,” Jefferies wrote. The drug “remains one of the most successful oncology launches in recent history,” the firm added, with peak sales of more than 2 trillion yen ($12.28 billion) estimated.
Earlier this year, Daiichi admitted that demand for its ADCs has fallen below the minimum purchase requirements of outstanding deals with contract manufacturing organizations (CMOs), which triggered $850 million in charges for outsourcing. The company also pulled back from a planned facility expansion.
Daiichi’s next big asset is Datroway, which was approved in January 2025 for breast cancer, but has since collected two more indications: non-small cell lung cancer and another breast cancer nod. Jefferies anticipates peak sales of 1 trillion yen ($6.14 billion). But revenue from Enhertu and Datroway is shared with partner AstraZeneca.
Enhertu combined for $2.96 billion in the first half of the year, with AstraZeneca’s take amounting to $1.72 billion, according to the U.K. pharma’s Monday earnings report. Datroway cleared $225 million combined and $98 million went to AstraZeneca.
Meanwhile, Jefferies said, rival companies have been stepping up their game in ADCs but Daiichi has not kept pace.
While Daiichi does have a major partnership underway with Merck—a deal consisting of $4 billion upfront and a whopping $22 billion milestone potential—this revenue is shared just like the AstraZeneca collaboration that brought forward Enhertu and Datroway.
“As partnered products account for a larger proportion of revenue, an increasing share of incremental value accrues to partners rather than shareholders,” Jefferies said.
Key Merck-Daiichi asset ifinatamab deruxtecan (I-DXd) has also had a mixed journey in the clinic so far, with response rates falling between two key studies of patients with small cell lung cancer. Another drug, patritumab deruxtecan, failed to earn the FDA’s approval for locally advanced or metastatic non-small cell lung cancer in June 2024.
Still, Jefferies projects that the three assets from the Merck deal could ”generate meaningful revenues,” though none to the extent of Enhertu or Datroway.
“Enhertu is a global blockbuster and Datroway has significant potential, but the pipeline becomes progressively less compelling thereafter,” the firm wrote. “Beyond these programs, the pipeline remains thin at a time when competition across the ADC landscape is intensifying. As a result, we believe the premium investors are willing to pay for the broader ADC platform is likely to contract over time.”
Daiichi is still forecasting 3 trillion yen ($18.4 billion) in revenue and 600 billion yen ($3.68 billion) in operating profit by fiscal year 2030, according to Jefferies. But the company will have to spend money to make money.
“While the revenue outlook remains attractive, the plan implies substantially higher spending than we had previously forecast,” Jefferies said. “Combined with management’s plan to accelerate R&D and commercial investment, we expect future sales growth to translate into materially lower growth in cash flow and earnings than investors have become accustomed to over the past five years.”
