Good afternoon. Welcome to JP Morgan Healthcare Conference. This is Seiji Wakao, Japanese pharmaceutical healthcare analyst. It's my pleasure to introduce Okuzawa-san, CEO of Daiichi Sankyo. Welcome to him at the conference. Please go ahead, Okuzawa-san.
Thank you, Wakao-san. Hello, colleagues. I appreciate your interest in Daiichi Sankyo. I would like to express my sincere gratitude to JP Morgan for providing the opportunity to present at this remarkable conference today. My name is Hiroyuki Okuzawa, and I have taken on the role of CEO at Daiichi Sankyo since April 2025. It is a privilege to stand before you today and share our vision and progress as we strive to contribute to the enrichment of quality of life around the world. First, I will start with a brief overview of Daiichi Sankyo. Next, I will introduce you to our ADCs, focusing on our DXd ADC technology that is currently the main driver of our company's growth, led by ENHERTU and DATROWAY. Following that, I will talk about our science and technology, focusing on our exciting new multimodality strategy.
Finally, I will conclude with our shareholder return policy and our strong commitment to enhancing shareholder value. With that roadmap in mind, let's begin with the first part, the overview of Daiichi Sankyo. Daiichi Sankyo is a global pharmaceutical company headquartered in Tokyo, Japan. For the current fiscal year ending March 31st, 2026, we expect revenue of approximately JPY 2.1 trillion and an increase of 11% from the previous fiscal year. Our forecast for core operating profit, which excludes temporary income and expenses, is JPY 350 billion , reflecting a growth of 12% from the previous fiscal year. We generate approximately 70% of our revenue outside of Japan, particularly in the United States. Our growth is primarily driven by the strong performance of our key products, the HER2-directed ADC ENHERTU and the TROP2-directed ADC DATROWAY, which I will discuss in detail later.
As you may be aware, the DXd ADC technology created Daiichi Sankyo's proprietary technology platform, which is currently being evaluated in clinical development programs across seven different ADC assets. This robust technology platform has generated two launched products, which are ENHERTU and DATROWAY, approved in multiple indications. In addition, I-DXd has demonstrated promising clinical outcomes in small cell lung cancer, and R-DXd has shown favorable efficacy and safety profile in ovarian cancer. Most recently, DS3790 is about to advance to the clinical stage for hematologic malignancies. We believe these products will also provide meaningful therapeutic benefit to the patients in need. As for external evaluation of the DXd ADC technology, five DXd ADCs have received breakthrough therapy designation from FDA. Most recently, in December last year, ENHERTU DESTINY-Breast05 study was granted BTD, making the 14th BTD for our DXd ADCs. The DXd ADC platform has been widely acknowledged.
In November last year, we won the Best ADC Platform Technology Award at the 12th Annual World ADC Awards, recognizing our DXd ADC technology as the best ADC platform capable of creating new standards of care for cancer patients. We will further leverage our science and technology to maximize our contributions to the patients with our DXd ADC platform. Our oncology foundation is built on the strengths of ENHERTU. ENHERTU has become the standard of care and achieved market share leadership in the HER2-positive second-line metastatic breast cancer indication, the HER2-low metastatic breast cancer indication, the HER2-mutant non-small cell lung cancer, and the HER2 second-line gastric cancer indication. Impressively, in every country and region where it has launched, it has become the market share leader and the new standard of care in less than 12 months.
Global net sales in the second quarter of the fiscal year 2025 totaled JPY 160 billion, growing 24% versus a year ago. All regions are contributing to this growth, led by the United States, with more than half the total revenue. ENHERTU has made a historic mark in the community of oncology and is now poised to have an even bigger impact in 2026. This performance is a result of ENHERTU's exceptional clinical profile and the strengths of our medical and commercial organizations and our alliances. To date, almost 200,000 patients from across 85 countries and regions have now benefited from ENHERTU. Now, I will describe the opportunity of the new growth of ENHERTU's HER2 first-line metastatic breast cancer indication that was obtained last month. There are 24,000 patients across the G7 countries.
Today, 30% of these patients never receive a second-line treatment, mainly because their disease advances too quickly, to the point that the physicians and patients decide to stop treatment. This insight underscores the urgent need to treat with the very best drug immediately, and the remarkable benefits of ENHERTU in the treatment of first-line HER2-positive metastatic breast cancer cannot be overstated. In DESTINY-Breast09, ENHERTU, in combination with pertuzumab, reduced the risk of disease progression or death by 44% compared to the standard of care taxane, trastuzumab, and pertuzumab. ENHERTU provided over 40 months of progression-free survival, adding more than a full year free of progression compared to today's well-regarded standard of care. ENHERTU is viewed as the most effective drug in this setting by the overwhelming majority of oncologists.
This belief, coupled with the urgency to treat with the best drug from the start and the feedback from the oncology community that we received, leaves us very confident that ENHERTU will be quickly embraced by the oncology community and become the new standard of care for these patients. I will now transition to an update on DATROWAY, our second DXd ADC. In the U.S., DATROWAY is approved for HR-positive, HER2-negative metastatic breast cancer patients and EGFR-mutated non-small cell lung cancer patients. In Japan, it is the first TROP2 ADC approved for HR-positive, HER2-negative metastatic breast cancer patients. Global DATROWAY net sales have now exceeded JPY 10 billion in the second quarter. In the U.S., second-quarter revenue was JPY 7 billion, growing 113% versus the previous quarter. In Japan, second-quarter revenue was JPY 3 billion, growing 59% compared to the previous quarter.
Early experiences, as reported by oncologists, have been extremely positive in both regions. Oncologists are becoming more and more comfortable and confident every time they prescribe this medicine. These early experiences will benefit DATROWAY greatly when it receives its expected triple-negative breast cancer indication. The clinical data in triple-negative breast cancer is viewed as best in class by most oncologists, and we believe it has the potential to become the new standard of care. Let's talk a little bit about the expected triple-negative breast cancer indication. For nearly 15 years, there has been no new treatment advances in the first-line metastatic triple-negative breast cancer for patients who are PD-L1 negative. Metastatic triple-negative breast cancer is the most aggressive breast cancer subtype with the fewest treatment options. Five-year survival is only 15%. There are 16,000 patients in G7.
One out of two patients never receives a second-line treatment, so there is a significant urgent unmet need. DATROWAY's TROPION-Breast02 trial demonstrated a statistically significant and clinically meaningful improvement in progression-free survival. It uniquely delivered a statistically significant improvement in overall survival. It doubled the overall response rate. We shouldn't forget that DATROWAY provides a very convenient once-every-three-week dosing, which is a significant advantage compared to the other TROP2 ADC in the market. This is a full picture of where Daiichi Sankyo is going. In the past five years, we have made a successful transition into oncology. We start our next five years from a position of strength. Daiichi Sankyo has now reached a data-rich, growth catalyst-rich moment with our new highly meaningful new indications expected for ENHERTU and DATROWAY in 2026.
Behind these, there are numerous other new pivotal trials reading out over the next few years, as shown in this slide. This clinical development program creates a continuous stream of new launches across at least four ADCs every year through 2030. These pivotal registration trials offer the opportunity to help nearly six times as many patients live longer, better quality of life, and even bring more cures to patients across the global oncology community. Our ADC technology continues to advance across antibodies, linkers, and payloads. We are enhancing tumor specificity through improved target selection, FC engineering, and novel antibody designs, developing conjugation methods for precise DAR control, and researching payloads with mechanisms distinct from DXd. With more than 15 years of ADC research, we have accumulated deep expertise and insights into antibodies, targets, linkers, and payloads. This foundation is our core strength.
Building on this, we remain committed to creating a new ADC and will continue to lead the field of antibody drug conjugates. As next ADC technology platform candidates, we are developing modified PBD ADC technology as well as STING agonist ADC technology, incorporating cancer immunotherapy concepts. The first assets based on these platforms, DS-9606 and DS-3610, have already entered clinical trials. We are also actively conducting research for other innovative ADC concepts beyond these ADC technologies. Next, I will present our science and technology. I will now provide an overview of our immunotherapy research for cancers. Why are we investing in immuno-oncology, or IO? The rationale lies in the fact that cancer immunotherapies, exemplified by immune checkpoint inhibitors, have demonstrated sustained effects in preventing cancer recurrence, which is thought to be attributable to the acquisition of immune memory.
Furthermore, IO approaches have the potential to offer new treatment opportunities for tumor types that exhibit low sensitivity to existing therapies. In addition, we aim to achieve curative outcomes through complementary pharmacological effects by combining cancer immunotherapy with DXd ADCs. Over the past decade, we have conducted extensive research to identify signaling pathways and various molecules that activate cancer immunity as drug discovery targets, resulting in the creation of multiple development candidates and the establishment of our proprietary IO franchise. While today's presentation only shows you a portion of our work, as illustrated on this slide, we are pursuing cancer immune activation through multiple mechanisms. Since DXd ADCs include apoptosis in cancer cells and thereby serve as a trigger for immune activation, we anticipate complementary effects when combining IO franchise agents with DXd ADCs, in addition to their anti-tumor efficacy as monotherapy.
As part of our multimodality strategy, we are advancing innovative drug discovery using diverse approaches, including antibody-based therapies such as ADCs, as well as medium-sized molecules, nucleic acids, gene therapy, glycoengineering, and messenger RNA vaccines. On the left, within our ADC platform, we have created multiple novel ADC technologies, including the DXd ADC platform. Through the development of innovative medicines leveraging varieties of modalities, we are committed to transforming standard treatments for a broad range of diseases, including cancer, and we will continue to pursue this goal through daily research efforts. Please go to slide 20. This slide shows our in-house global ADC manufacturing sites. Currently, Daiichi Sankyo has 13 manufacturing sites globally. In Japan, we have four sites. Globally, we are building ADC manufacturing capabilities at three sites in Germany, China, and the United States. Here, I will talk about shareholder returns.
By improving capital efficiency and by enhancing shareholder returns, we aim to achieve fiscal year 2025 target for dividend on equity of eight percent or more, which exceeds shareholders' equity cost. We will enhance shareholder returns by dividend increase, taking profit growth into account, and through flexible share buybacks. We plan to increase the annual dividend for four consecutive years, taking our profit growth into account. By realizing dividend increase, we expect to achieve DOE of 8.5% or more in fiscal year 2025, which exceeds our original target. We are more confident today than ever before that our work over the next few years will cement Daiichi Sankyo's position as a true global oncology leader. We are currently at the last year of our current five-year business plan, and with the start of our new fiscal year in April this year, we plan to announce our new five-year business plan.
Leveraging our greatest strengths, science and technology, we will continue to prioritize maximizing the value of the DXd ADCs. Through challenging new innovations, we will strive to contribute to the patients and achieve sustainable growth. That concludes my presentation for today. I hope this overview has given you a valuable insight into Daiichi Sankyo's current position, our innovative ADC technology, our evolving multimodality strategy, and our strong commitment to delivering enhanced shareholder returns. At this point, I would like to invite my colleague, Ken Takeshita, Global Head of R&D, to join me for a Q&A session. Ken brings extensive expertise, and we'll be happy to address any questions or comments you may have. Thank you all very much for your time and attention. We look forward to your questions.
Thank you, Okuzawa-san , our Q&A session. And I have two questions for Okuzawa-san regarding the Mid-term Business Plan.
I believe that the growth achieved during the 5th Mid-term Business Plan, which concluded in fiscal year 2025, has been symbolized by the success of the DXd-based ADC franchise. With only a few months remaining in the current Mid-term Business Plan, how do you reflect on this phase?
Thank you, Wakao-san. So the current five-year business plan is a time for us, a rapid and significant growth and transition from a cardiovascular company to an oncology company. In the first five years, our revenue doubled from JPY 1 trillion - JPY 2 trillion, and our profit tripled. And this growth was realized mainly by the significant growth of ENHERTU, our first DXd ADC. So we are developing these DXd ADC platforms not only for ENHERTU, but for other DXd ADCs, in total, five DXd ADCs. We successfully launched the second DXd ADC, DATROWAY, that is also growing nicely.
Our both products, we are collaborating with AstraZeneca. We have the other three DXd ADCs partnered with U.S. Merck, and co-development is going smoothly. Not only these five DXd ADCs, we have still the sixth and seventh DXd ADCs, both unpartnered. As I presented, new modalities are now coming into the clinical stage. Those are the remarkable successes in clinical development and commercialization. Thanks to those successes, we are now foreseeing achieving the main financial KPIs for the current five-year business plan, including the ROE and the DOE target. Also, we increased the dividend in the four consecutive years in the past, and we will continue the enhancement of shareholder returns for the future. Thank you.
Thank you for this question.
As you plan to announce the sixth Mid-term Business Plan in April, what will be the key pillars of the new Mid-term Business Plan?
Yeah. So our first pillar will be the continued growth of five DXd ADCs. These are the near-term growth opportunities. So for realizing that, we continue the investment in clinical trials and also commercial and medical affairs activities. And second, we are going to establish our own capacity and capability to pursue the key clinical trials by ourselves. We have good candidates like sixth DXd ADC or seventh DXd ADCs and so on. So therefore, this will be the second pillar to become the standalone global clinical development player in oncology. And third, we are aiming at the identification of new breakthrough-generating technology after DXd ADCs. Our Tokyo Discover Research Team is working on various candidates of next BGT.
And with that, we aim at the sustainable growth even beyond 2030. And last but not least, we would like to continue the enhancement of shareholders' return, including dividend growth with flexible share buyback.
Thank you. Any questions from the floor? Please raise your hand if you have questions. Please.
I have one comment.
Sorry.
One question.
Oh, thank you. I have one comment and one question. First of all, your TROP2-targeted DATROWAY is superior to the other TROP2 targeting 100% due to your linker payload, which is the gold standard. My question is about the STING a gonist after the Mersana trial that had kind of disastrous outcomes. And I don't know if you can disclose, but what are you doing differently that you haven't encountered these problems?
Okay. Thank you very much for that question.
It's a bit difficult for me to give you all the details of why we think it's different, but I think it's very important to note that the linker, as you mentioned, for the TROP2 program, it's also key to understanding how to administer these STING agonist ADCs.
Yeah. Okay. Any other question?
Okay. Following this question, I have one question on your TROP2, DATROWAY. Increasingly becoming a consensus view that ENHERTU will continue to scale further. Could you share your expectations for DATROWAY, that DXd, which has been showing solid sales momentum recently? Yeah, please.
Yes. So as you just heard, the DATROWAY, the TROP2 ADC is already approved in certain indications in EGFR-mutated lung cancer and certain types of breast cancer. And at least in breast cancer, we have many more phase III clinical trial readouts in triple-negative breast cancer, particularly the PD-L1 positive patient population.
And so the early data that we can see from the AstraZeneca conducted BEGONIA study really suggests that this combination of a checkpoint inhibitor plus TROP2 ADC, the DATROWAY, is really a great combination for these patients with triple-negative. So we can all expect really great results from these ongoing phase III studies. In addition, we do have very important first-line programs in EGFR-mutated lung cancer, as well as in the non-EGFR-mutated lung cancer, the frontline clinical trials. In totality, in lung cancer, between these EGFR-mutated patients and the non-EGFR-mutated patients, we have about a half a dozen different frontline lung cancer studies. So we are very much heavily invested in DATROWAY for lung cancer. When I say we, we're talking about this is a partnered program. So AstraZeneca and Daiichi Sankyo, both, we are very much very interested in this drug in lung cancer.
Okay.
So I have an additional question on DATROWAY's Lung01. Market is interested in data readout on AVANZAR. And how do you assess the probability of success, AVANZAR, TL07 and TL08, which target first-line lung cancer with DATROWAY DXd and are expected to readout in 2026?
So in the DATROWAY lung cancer program, the non-EGFR-mutated patient population, this is what we're talking about. We have right now three different studies which combine DATROWAY with either a PD-L1 drug or a PD-1 drug, pembrolizumab or durvalumab. And in those studies, we are incorporating this very important predictive biomarker that we call the QCS biomarker that was developed by AstraZeneca. This is a digital pathology biomarker. And in the relapse setting, this biomarker works very well.
And so because we have this access to this incredible digital biomarker, we think that the probability of success is quite good in the frontline lung cancer patient population.
Any question? Open floor.
Okay. Going back to the Mid-term Business Plan, Okuzawa-san, I have one question. So could you share your outlook on R&D investment under the sixth Mid-term Business Plan and how you intend to balance R&D investment with operating profit?
Thank you. So we foresee the continued growth for the R&D investment because we have a rich pipeline, not only for the partnered programs, but for our own unpartnered programs. So if we look at the balance between R&D spend and profit, because of the LOEs of some key products like Lixiana, in the first half of the coming five years, we would face a slight decline of the profit. So more continuous R&D investment.
But in the second half of the coming five years, we will come back to the recovery phase of also the profit. So by the end of the next five-year plan, by 2030, we will see the good balance between R&D and also operating profit. And the margin ratio will be improved as compared to today's margin. That is our rough sketch of the next five-year plan.
Okay. Thank you. Any question?
So Takeshita-san , could you share your expectations for ADCs beyond ENHERTU and DATROWAY? And are there any pipeline assets that you believe could have ENHERTU-like potential or beyond ENHERTU?
Okay. So let me just make a comment about what we have in our pipeline beyond ENHERTU and DATROWAY. So it's very important to just really talk about our research development strategy. And we're what we call a platform strategy.
So platform refers to the base contract of an ADC with an antibody linker and a payload. And all of you now are witnessing our very first platform technology that we have developed. This is a DXd ADC technology. And we can see that with the DXd platform, we have been able to generate many, many drugs that are either approved or likely to be approved. Right now, I think it's reasonable to say that of the many DXd ADCs we have from the platform, we have enough data from the five of them to say reasonably that five out of five, the success rate is five out of five with phase three. And so that's the platform strategy that we're doing. Now, the next platform, as you heard, is another different payload. And then we have another payload with a different platform, and we have more coming.
And so this is what you can expect from us in terms of productivity from our research programs. And we've been doing this ADC research for 15 plus years. We got an incredible amount of knowledge in linkers and payload, as well as, of course, the binders. And so this is what we're doing, generating many different platforms for the future.
Please.
Hi. Thanks very much for your question and answers. Just a quick question. Hi. So regarding obviously the research and also the multiple pipelines and successful pipelines that you have, with the JPY 1.9 billion investment globally that you've made in terms of the manufacturing facilities globally, do you anticipate that being the future strategy for Daiichi Sankyo, where you build in-house manufacturing capabilities, or do you plan to also outsource some of your manufacturing capacity to partners such as CDMOs or CMOs, etc.? Thank you.
So, in the current five-year business plan, we decided to make investment in both our in-house manufacturing capabilities and external CMO network. And with that, we successfully manufactured and supplied ADC products. And in the coming next five-year business plan, our direction would continue to make use of both internal and external because we have five DXd ADCs. But beyond that, our direction is to make use of more internal in-house manufacturing capabilities and less dependency to CMO. That's a long-term direction.
So, sorry. So there's no time. So we'd like to wrap up this Q&A session. Thank you for your time. I appreciate your presentation and the Q&A. Hope we'll see you soon. Thank you so much.