Thank you for joining Daiichi Sankyo's briefing session on FY 2025 consolidated financial result forecast revision. I'm delighted to serve as MC today. I'm Ari Fujishiro from the Investor Relations and Shareholder Relations Department. First, about the language. In this briefing session, we are going to use Japanese. Simultaneous translation is available. Please click the interpretation icon at the bottom of your Zoom screen and choose Japanese, English, or the original audio. If you choose the original audio, you can listen to the original sound. On Zoom screen and during live streaming, we will show a presentation material in Japanese. We have posted a presentation in both Japanese and English on our corporate website under IR Library, IR Presentation Materials section. Please download if necessary.
Today, three members are in attendance: Representative Director, President and CEO, Hiroyuki Okuzawa, Senior Executive Officer, CFO, Tomohiro Kodama, and Senior Executive Officer, Head of Technology Unit, Koji Sato. After the presentation, we will have time for Q&A with all the executives. Please note that this meeting is being recorded. Thank you for your understanding. Now, Okuzawa-san, the floor is yours.
Okuzawa speaking. Thank you very much for joining out of your very busy schedule today. First, we would like to sincerely apologize for rescheduling the dates of FY 2025 financial results announcement and five-year business plan presentation and asking you to adjust your schedule. Please also allow me to apologize for holding today's briefing at a short notice. From here, I am going to explain the revision of FY 2025 consolidated financial results forecast we announced at 1:00 P.M. today based on our presentation material.
Today, I will cover the revision of FY 2025 consolidated financial results forecast, revision of ADC manufacturing and supply strategy, and future dividend policy in this order. We will entertain your questions at the end. This page shows the revised FY 2025 financial results forecast. While core operating profit and temporary income increased, we are booking new temporary expenses in the fourth quarter of FY 2025. We are forecasting operating profit to decrease by JPY 106 billion from the forecast we announced in October to reach JPY 229 billion. The main temporary expenses we are recording this time include JPY 75.7 billion as provision for CMO compensation fees and JPY 19.3 billion as expenses associated with the cancellation of ADC related CapEx plan at Odawara site.
We are recording provision for CMO compensation fees as we revised our product supply plan and differences have occurred between the new supply plan and the minimum purchase obligations based on our contract with the CMOs. For Odawara site, we revised the production plans at existing manufacturing sites and new capital investment plans. As a result, we decided to cancel our capital investments into ADC related facilities at Odawara site. Due to this decision, we are recording impairment loss and the current estimate of compensation fees. Pre-tax profit and profit attributable to owners of the company are expected to reach JPY 264 billion and JPY 260 billion respectively by factoring in the operating profit revision and increase or decrease in financial income expenses and tax expenses.
From the next page, I will explain the background for this forecast revision, the history and the revision of our ADC manufacturing and supply strategy. First, let me explain our previous ADC manufacturing and supply strategy for the initial launch of our DXd ADC business. Given ADC's technological and manufacturing characteristics, we aim to secure initial manufacturing capacity through outsourcing to CMOs and investment in in-house facilities, as it would take a long time to operationalize in-house manufacturing facilities. In other words, in the early stage of our ADC business, in-house manufacturing capacity was limited, so we prioritized the use of CMOs with established capabilities in highly specialized manufacturing. On the other hand, in the mid to long term, from the perspectives of cost efficiency and stable supply, we aim to utilize our in-house manufacturing facilities as well and executed capital expenditure in both in-house and CMO manufacturing.
Furthermore, from BCP, business continuity planning perspective, we built multiple manufacturing and supply routes by combining in-house and CMO manufacturing in order to mitigate product supply risks. Next, I will explain the transition of our supply strategy associated with demand changes. Our ADC R&D strategy has evolved significantly by now.
Under the initial phase of our ADC business, when we developed our 5-year business plan, maximizing 3 ADCs was the number 1 pillar of our growth strategy. Due to steady progress of clinical development, indication expansions, increase in launch countries and regions, et cetera, as an R&D strategy, we shifted to broader ADC portfolio of 5 DXd ADCs and next wave. ADC demand forecast as a whole also expanded substantially in the early phase of the initial 5-year business plan. Based on these circumstances, we decided to ensure stable product supply to all patients as a top priority and change approach to secure manufacturing capacity, assuming the maximum demand. Specifically, we decided to secure manufacturing capacity to meet base demand without risk adjustments, assuming successful approval of all planned indications in principle.
In increasing manufacturing capacity, in order to meet a rapid expansion in demand, we aim to establish a hybrid model combining in-house manufacturing with further expanded CMOs utilization to expand supply capabilities and respond to demand changes. Our in-house manufacturing capacity was still limited. In addition, reliable CMOs capable of highly specialized ADC manufacturing are limited. We secured manufacturing capacity for stable product supply through long-term commitments to CMOs by setting minimum purchase obligations and securing dedicated production lines with associated capital investments. As a result, we were able to build a stable and continuous supply chain framework to meet peak demand substantially exceeding our initial plan, which we think worked effectively in assuming a responsibility to ensure stable product supply to all patients. Since then, numerous clinical trials have been conducted in parallel.
Based on the results of each trial, we have refined our demand forecasts while reviewing our target patient populations and product launch schedules. As a short-term measure, we recorded CMO compensation fee and inventory write-down in the 2Q of FY 2025. In light of these developments, we redesigned our mid to long-term global supply chain strategy as we formulate the 6th five-year business plan. Specifically reflecting the acquisition of the indications and launch plans based on the results of each clinical trial for 5 DXd ADCs. We revised the balance between supply and demand while prioritizing to secure stable supply of the products to all patients. We have also factored in risks that can be anticipated at this time. Furthermore, from a BCP perspective, we have reexamined the manufacturing balance across our global production sites.
In light of these reviews, with a view to further expanding the ADC portfolio and our entire pipeline of the breakthrough generating technology candidates that will underpin Daiichi Sankyo's future, we have revised our production plans at the existing manufacturing sites and our new capital expenditure plans. Until now, our policy has been to expand manufacturing capacity at both our own facilities and through our CMOs to ensure sufficient supply to meet demand. Throughout the fifth five-year business plan period, our in-house manufacturing system has been established, and our ability to flexibly respond to changes in manufacturing plans has improved. Moving forward, we will leverage our technological foundation, which allows us integrated optimization from process development to initial commercial production to accelerate development speed. Furthermore, we will appropriately transfer established technologies to our CMOs and utilize them as our fundamental manufacturing capacity during the full-scale commercial production phase.
In addition, by securing a commercial manufacturing framework within the company capable of responding to fluctuations in demand, we will shift to a strategic policy aimed at optimizing the roles of the company and CMOs. Through this framework, we will ensure appropriate capacity over the mid to long term, while addressing both the stable supply of the expanded ADC portfolio and the rapid launch of development candidates for BGTs. Furthermore, by optimizing our global supply chain and establishing a flexible and a stable supply system, we will work to reduce the future risks related to production and supply. We view this restructuring not merely as a short-term measure, but as an initiative to enhance the effectiveness of our supply framework. Moving forward, we will aim to achieve sustainable growth based on a business foundation that is resilient to environmental changes.
As a result of refining these demand forecasts and redesigning our global supply chain, we have revised our supply plan to incorporate risk adjustments for each product and indication. Consequently, when comparing the new supply plan with the previous one, which was based on historical peak demand during the sixth five-year business plan period, cumulative volumes are expected to decrease. Although minimum purchase obligations are stipulated in our contracts with CMOs, under the new supply plan, our planned purchase volumes are falling below those minimum obligations. For the portion of this discrepancy expected to arise in the short term, we have calculated the estimated amount at this time as compensation for these CMOs and have decided to record it as a temporary expense in fiscal year 2025.
Regarding the discrepancy with the mid to long-term minimum purchase obligations due to high uncertainty and the fact that it doesn't currently meet accounting requirements, we have not recorded as a provision. Since the provision is based on current estimates, there is a possibility of additional recognition or reversal in the future, depending on clinical trial results and other factors. Furthermore, risks may materialize in the future, particularly regarding the discrepancy with the mid to long-term minimum purchase obligations. On the other hand, regarding actual loss, compensation to the CMO, based on our agreement with the CMO, we view the payment of a compensation fee strictly as a last resort. Going forward, we will consider and sequentially implement various measures to effectively utilize the manufacturing capacity corresponding to the variance from the minimum purchase obligations.
For example, we are already discussing specific measures with the CMOs, including the flexible utilization of a basket of our products at various stages of development, as well as the transfer of manufacturing capacity that we determine not to use to third parties. We will provide a further disclosure regarding the impact of the fiscal year 2026 during our earnings call on May 11th. Next, I'd like to discuss our future dividend policy. Even if the risks I have described were to materialize in the future, we expect to continue generating sufficient profits and free cash flow, and we intend to maintain a stable dividend going forward. Specifically, our annual dividend forecast for fiscal year 2025 remains unchanged from the previously announced JPY 78 per share.
For fiscal year 2026 and beyond, we plan to continue the trend of increasing dividends that has been in place since our 5th five-year business plan. Further details will be provided on our 6th five-year business plan, which we will present on May 11th. That concludes my presentation. We will now take questions.
You'll be able to ask questions either in Japanese or English. If you have multiple questions, please ask 1 question at one time, and please limit the maximum number of questions per person to 2. Please also identify to whom you'd like to ask a question. Now, we'd like to accept the questions. Please use the raise hand function at the bottom of the screen.
First question. Mr. Yamaguchi from Citigroup Securities, please.
Can you hear me?
Yes, we can hear you.
I'm Yamaguchi from Citigroup Securities. Thank you very much. My first question. I tried to digest what you have explained, specifically from 3 ADCs to 5 ADCs. There has been a shift leading to these results. In terms of the product, two was one of the product and also DATROWAY. There was the inventory assessment. This time, the amount is huge. First, DATROWAY and patritumab deruxtecan development and the reality had differences causing this issue. Which product caused this problem? Could you elaborate more on this point?
Yamaguchi-san, thank you for your question. From 3 ADCs to 5 ADCs, 5 DXd ADC, we shifted our focus. What kind of products specifically affected the provision? That's how I understood your question. As you said, 3 DXd, DATROWAY were mentioned by you, including those products, 5 DXd ADCs as a whole in principle. We are doing in-house development for the 6th and the 7th DXd ADCs and non-DXd ADC pipeline assets. Our products and our pipeline as a whole, we are developing growth strategy for the future and also for the plan and decided to have a provision according to a conclusion. Thank you very much.
Second is a similar question. Still there is a mid to long term minimum commitment or requirement obligations. You have reviewed this time, but as time passes by, going forward, I wonder that in the future there may be the similar things occurring. In the past 6 months, if things went well, then it wouldn't happen again. There is also the minimum requirement, the purchasing requirements in the mid to long term. Therefore, it is always there. We have an impression that it's just occurred, coming out from FY 2026. It looks like that you have always having this potential occurrence risks all the time.
Well, I think, thank you very much.
Given the situations in FY 2025, which is handled as a temporary expenses, what about the situation going forward after FY 2026? That's the question. CFO Kodama will answer to your question.
Thank you for your question. Regarding the future forecast, this time, provision recorded is for short-term portion. We have the provision in our accounting record. I wouldn't give you more specific details. This is a provision for the discrepancies for 2 years. After the 3rd year and beyond, for mid to long term, it's not recorded in a provision. It is a possibility. There is a possibility that they may emerge. This time, it's a little over JPY 7 billion.
For the 2nd year, that's also covered. The same size of amount may occur in the 3rd year or beyond. Is that what you are telling?
Thank you for your follow-up. Next week on Monday, 11th of May, we will announce the FY 2026 guidance, and there we'll be able to discuss more details. Concerning the next fiscal year's probability, we will discuss in the next week. For further future forecast going beyond, as Okuzawa mentioned, we need to consider a future new products and also the areas of the manufacturing capacities which may not be transferred to the others. There are plans in progress.
As time passes by, we believe that the financial impact will diminish year after year. That's our understanding.
Thank you very much.
Next, Mr. Hashiguchi from Daiwa Securities, please.
Hashiguchi speaking. Thank you very much.
Impact on the current fiscal year will be explained at the results announcement next week. Is it based on cash flow? This time, as a provision, you are booking expenses in the last quarter. What is not cashed out will emerge in the quarter to start. Is that what you're planning to explain? The expenses to be booked in the last quarter, there is a possibility of the additional expenses to be incurred. Is that what you're planning to explain on the 11th next week? In FY 2026, regarding the expense outlook, is that cash-based or additional provisions to occur?
I understood your question as such. For cash, regarding the provision, we are recording, this is the provision as the nature, so it's for the future.
2026, FY 2026 guidance is not cash-based, but in the account settlement, in FY 2026, regarding the possible provision, additionally for FY 2026, is the point. At what time are we going to recognize this provision according to accounting for FY 2025? Regarding the current need for provision, we had provision for 2 years, and we would determine the liabilities in accounting. We think there's going to be possibility in FY 2026, and that is going to be explained next week.
Okay. Understood. Thank you very much.
You changed the schedule of earnings call. From that point in time, you also disclosed that you are reviewing a supply plan. In the discussion with investors, in undisclosed clinical trials, unexpected results have been generated. There are some reviews of supply plan which were not disclosed. I think not a small number of investors have that types of concerns. According to your explanation, there are plans several years ago and the latest plans, there are discrepancies between the two. The background is that your in-house and CMOs ADC production capacities, the surrounding environment changed remarkably. Therefore, your way of making a supply plan itself substantially changed.
Very recently, the clinical trials readouts were available. Just very recently, you also made a review of the development plan, but those are not in the background of those changes. Is that right understanding?
Yes, your understanding is correct. This time, in the initial phase of ADC businesses, we came back our historical process, and that is around the time that we formulated the fifth five-year business plan. Back then, risk adjustment was incorporated, and that way we started this business. The clinical trials went so well, the products increased. Every time we revise the demand estimate, it was a revision for upside.
Therefore, without having any risk adjustment, we need to make capacity, production capacity available for the maximum potential demand. Then, we needed to change this plan during the preparation of the sixth five-year business plan. As a result of the review, we came up with the new supply plan, including the risk adjustment. There was, however, the stipulation in the contract with the existing CMOs, that is a minimum purchasing obligations. That as a result, we came up with this current situation. It is nothing relating to any undisclosed clinical trials.
Next, Mr. Seki from UBS Securities, please.
Seki from UBS Securities. Thank you for the presentation. My first question goes to CFO Kodama-san. In EDINET, there is an extraordinary report uploaded there.
From 1 through 4, there were events, ADC, and the liquidation loss or gain of the affiliates. There are 7 numbers for profit and loss. JPY 210 billion impact for COGS and JPY 70 billion for SG&A expenses. Could you explain these numbers? JPY 210 billion for the COGS. Thank you very much, Seki-san, for your question.
In the extraordinary report, we discussed this on EDINET. The consistency with those numbers was the topic of your question. As Okuzawa explained earlier, we had a revision of the forecast. That's PL based on core profit. As for the EDINET disclosed numbers, IFRS full basis are the basis for the disclosure. That's why there is some difference.
For the details on the 11th of May, next week, we will explain the IFRS numbers as well. We will disclose them in transient reports, so you can check the details there. Temporary expenses include CMO costs. To CMOs, we're expecting payments to them, and we have a provision, which is recorded in the COGS. Regarding the temporary expenses, this could hit our PL in the end, and we are showing the net value there. That's why there is a slight difference in the numbers. For the further details in others, we aggregated all those elements. You can check the details next week. Thank you very much.
Understood. Understood. Thank you very much. Second question is a question to Okuzawa-san. This happened this time, and regarding the backdrop of this occurrence, I wonder, from the external viewpoint that there might not be good collaboration or communication between different functions. It has made such a big scale, and you had kind of a blue sky, the expected numbers by sales especially, and marketing. But production function, they needed to supply stably. Therefore, they needed to prepare a little larger than the expected amount. But if, you know, functional collaborations are working well, communications are working well, it wouldn't have happened. That's what I wonder. Could you comment on this? Thank you very much.
Regarding ADC business promotions, through our preparation for the sixth five-year business plan, we have accumulated our experiences and we do have know-how as a result. One of them is to refine in the supply plan, be it R&D strategy or marketing sales, the working together amongst the different functions, we need the optimization. That is a point that we actually felt the strong importance. It is true that as Seki commented, those close collaboration needed amongst the different functions. We came into this ADC businesses with expected risks. Original ENHERTU made big success, which was even better than our estimate.
As we disclose the clinical studies data, that was better than we expected, and we could report all those positive data to you. In the practical business, be it R&D or marketing or sales, those results were quite close to the best possible level of the potential, and that itself was an excellent achievements. In that circumstances, we needed to worry about the potential stock out or unstable supply in some regions. We needed to avoid all those by all means. We need to prioritize stable supply to all the patients. That is the process that we have come so far. That basic idea itself remains unchanged. Not just ADC portfolios, but we also assess various different products.
Also risk-adjusted the supply plan that we originally considered in the initial stage of ADC businesses. We now come back to this risk-adjusted supply plan. That is the time process.
Thank you.
Next, Mr. Wakao from J.P. Morgan Securities, please.
JP Morgan, Wakao. Wakao from JP Morgan, thank you very much. JPY 75.7 billion provision. You would book provision in the current fiscal year. I'd like to know more details about to what they are linked. JPY 75.7 billion provision for 2 years, as you said. This is the manufacturing outsourcing costs. If we consider the cost ratio, JPY 400 billion of pharmaceutical sales per year would be leading to the recording of the provisions. This can be seen as a major phenomena. What happened to recognize these provisions?
Recently, HER3 filing was not made, and AVANZAR is also being delayed in development. I wonder whether there is any impact from the delay in development to what we should link these. I'd like to know more details. By knowing those details, in case of clinical trial failures, whether you may record provisions or not, we can see specific impact. I know this is a difficult question, but I hope you can comment on this.
Thank you very much. You mentioned HER3-DXd and DATROWAY. We explained to you before, our development strategy has been revised. At that time, our supply planning, we had on our mind back then, and the new supply plan with risk adjustment included. This is in the prior stage, the former supply plan.
The thinking as of that timing is to cover, meet the maximum demand. We had a revision in the clinical development, and it was one of the factors leading to some variance. This time, including those 2 products, 5 DXd ADCs as a whole, the 6th and the 7th DXd ADC we are developing on our own and the other pipelines. In developing the next 5-year business plan comprehensively based on our growth strategy, the new supply plan, we think, is appropriate. That's our judgment. If you have further accounting-related questions, Kodama can respond.
HER3, the result was somewhat different from expectation and also delay over DATROWAY development. These had impact, that's my understanding.
I'd like to know furthermore that the provisions that may be further recorded in this fiscal year, to which items it is tied? Is it, I think, the delay of Datroway development or anything else? If you don't record a provision without having a certain certainty.
Well, I think the largest point is that we changed our approach or idea as to the supply plan. Whether or not we try to cover the potential maximum demand without risk adjustment or as we did in the initial stage of ADC businesses, we go for the plan with risk adjustment. Well, in-house, we changed our idea of making a supply plan, and that change is one point.
We do have existing contracts with the CMOs, and there is a minimum requirement obligations in that contract. As a result, there are discrepancies between the two. Meaning that this time, in this fiscal year's provision. Is it that for FY 2025 line reservations, you mentioned it is for 2 years. Provision in FY 2025 is for 25 and 26 or 26 and 27. Thank you for your question. For a provision to be recorded in FY 2026, our contracts with CMOs, there are various types of contracts, but there is a binding portion. Usually, the contract has the confirmed orders. Based upon that, we do have portions that we expect not to use all those portions. For that, we recorded a provision.
For 2025 and 2026, for these two years, how much we will manufacture under this contract, that became clearer, and the shortages will be covered via provision. For FY 2026, in, at the end of March 2027, after finishing FY 2026, the next two years, a portion will be identified. Another 1-year portion will be clarified, and there may be a generation of a provision for that. Regarding this phenomena, how you're going to share with your partners. The business plan was revised in your discussions with your partners, or when there is a need for provision, AstraZeneca and Merck do not have to take any burden for the costs. Kodama-san, please. Thank you very much.
Regarding the provision we are recording this time, it's a reasonable amount we are estimating for a company. As of now, our company, negative cost, we have to record is being recognized right now. I may not be directly answering your question, but based on this, you can judge. Are the partners going to take the burden for the future as well? Could you repeat your question, please? The losses are not going to be shared in the end. On that point, we'd like to refrain from responding as of today.
Okay. That's all from me. Thank you very much.
Next question. Ueda, Goldman Sachs, please.
Thank you. Ueda speaking, Goldman Sachs. I'd like to ask a question about the impairment loss and provision and the background reaching to this situation. The manufacturing capacity to cover the demand without risk adjustment, based upon that planning formulation, I think, in the development of pharmaceutical products, there is always such a risk. Therefore, this may happen at some point in timing. That way, you have come forward. Is that right? In terms of ADC franchises, well, your view to the potential of the ADC franchises haven't changed. In this area, you entered into that business in a larger scale, and as a result, you came out with this current situation. How should I understand this time course and the current situation?
Well, as we set the targets, in terms of merchant capacity, whether to include the risks, or without, I think, that's one of the decision point. As a result, this time, the supply plan, the actual was lower than that planned number, and we take it seriously. At the time that we started up ADC businesses, as we mentioned, the ENHERTU rapidly grew. We focused on addressing to the upward variations of the demand fluctuations. That is a matter of fact. As we reflect that situation, we had this manufacturing plan or supply plan without risk adjustment. Regarding ENHERTU, we could avoid the stockout issue in ENHERTU. Therefore, it definitely contributed to that point.
We could fulfill our supply responsibilities to the patients. That worked well as we originally intended. From that viewpoint, in the series of other products, followed that basically, our idea remains the same, that we'd like to ensure the stable supply so as to avoid the stockout. And we are trying to refine further the demand forecast and what will be the demand for all those ADCs in 3 years to come. It is quite difficult and challenging to prepare the supply plan. We have a lesson learned this time, and as a result, we came up with this new supply plan. Thank you very much.
Thank you very much. This is my second question. A factor for the downward revision other than the provision for losses. You have impairment loss for the CapEx at Odawara site. Additional impairment loss or compensation fees may emerge additionally as a possibility. JPY 38 billion is others, which is a quite a big amount. What's included in there and additional losses are to be incurred like this one?
Thank you for your question. First, our own manufacturing facilities to be leveraged for the future, so the Head of Technology, Koji Sato, is going to explain. Other temporary expenses will be responded by a CFO, Tomohiro Kodama.
First, Sato speaking. Leveraging our own facilities from the process development to early commercial production, we'd like to use the technology platform to have the consistent production to realize the BGT candidate development. We'd like to transfer the manufacturing to CMO so that it's going to be used as a commercial production platform capacity. We would like to secure a framework to produce on our own as well, so that we can optimize our supply chain as a whole.
For other investments, we will proceed with the investments in a steady fashion. Thank you.
Regarding this temporary expenses, I'd like to explain. As items included in others, major one is former Yasukawa site soil improvement expenditure. That's recorded as a provision. There was additional expenditure incurred, therefore, we recorded provision and this is going to the final one for this matter. The next career system is another point. That is kind of early retirement the favorable treatment. So this is also another major item. These are 2 main items.
Next question. Morgan Stanley MUFG Securities, Muraoka-san, please.
Thank you very much. Muraoka from Morgan Stanley. You are asking us to wait until Monday, but in-house manufacturing capacity according to the order chart is going to be 50/50 for the future. According to today's chart, CMO will handle full-scale commercial production. In-house production CapEx outlook is substantially reduced. CapEx for in-house manufacturing is reduced. Into the future- up until now you need CapEx. We discussed how to use the cash, but for the future, no major CapEx to be required, so there's going to be an increase in returns to investors. You talked about the dividend policy today.
A ratio allocation to investors is going to increase in the future. Is that what we can hear on Monday? Is that what we can assume?
Muraoka-san, thank you for your question. On Monday, we will announce our results, and also we talk about the next 5-year business plan and return to shareholders. Our policy would also be explained as we are preparing, so you can count on us. As for CapEx in the next 5-year business plan, we'd like to talk about it as the cash allocation so that we can discuss in-house manufacturing facility investments. Up until now, we talked about the expansion of the manufacturing capacity as a whole.
For the future, we have the new supply plan, and based on that, we would be more selective to make investments where necessary and we would make the maintenance investments where necessary. In the CapEx, reinforcing R&D is going to be included as well. We are hoping to explain those points on Monday.
Understood. Thank you very much. Next question is based upon the assumption at this point in time. I understand that anything based upon the available results of the clinical trials at this point in time, that's not included in the provision. In case AVANZAR study fails, then how much provision will be needed? If AVANZAR succeeds, then how much is the reversal of provision? Could you explain what is your view in a plain languages that we can understand?
Well, I think that is one of the topics regarding the sixth five-year business plan. Therefore, basically, we would like you to wait for the midterm plan announcement. But in our explanation today regarding new supply plan, what's the difference from the previous one? It is whether the risk adjustment is incorporated or not. That's what we explained to you. That way of thinking is basically included in the sixth five-year business plan. There are various clinical studies ongoing or the data readouts aiming at new indications. There are many clinical studies in the next midterm plan period. Therefore, there we make a plan considering risk adjustment. That way, I'd like you to understand for today.
This is a request to you. Somebody mentioned this earlier. Going forward, we have to worry whether you'd have additional provision or not for your company into the future. If that's the case, you, in order to eliminate concern for the investors, I'm not telling you to buy back your shares directly, but we want investors to follow your company in the longer term. We are hoping to hear such a story on Monday. Otherwise, it's difficult for us to move forward with your company. I hope you understand our point.
Muraoka-san, thank you very much. For us, the next five-year business plan for the further continuous growth for Daiichi Sankyo and why we think so. The financial KPIs and the shareholder return policy would be presented together. I hope you look forward to that occasion. Thank you very much.
Thank you very much. That's all from me.
Next question. Sogi-san, Bernstein, please.
Thank you very much. First question is that the timing of earnings announcement changed and also for today's announcement, we received a last-minute notice. Therefore, could you tell us the background?
Of course, thinking about the supply matters, you have a view of a quite long term when you plan supply. I cannot expect that there are any very immediate changes or sudden changes. That's difficult to imagine. Could you explain us the background?
Well, we feel sorry, causing inconveniences to all of you, but this time we actually needed time to review and especially to the directly relevant matters where we needed to formulate a new 5-year business plan and through 2025, we have been formulating a 5-year business plan. During that process, we conducted a review and update of sales forecast of each individual product. Based upon that, we came up with a new supply plan. Also, we needed to consider the contracts with existing CMOs. We also analyzed any differences from the minimum purchasing obligations in that contract. Then we needed to discuss with CMOs how to mitigate all those differences. Also, we reviewed the global supply chain.
This time we also announced regarding our plan on Odawara site, and we needed to redesign global supply chain. Taking all those processes, we took substantial time. In the end, more than usual, a very deliberate review and preparations were made for this accounting this time. Therefore, as a result, we came up with this timing of disclosure. Kodama-san, if you have any additional comments.
Yes. In our CFO units, well, in our organization, there are many things that we could have done better. Because of that, we caused lots of co-inconveniences and anxiety on your side, and I apologize for that.
Regarding the announcement date changes, as Okuzawa explained, at the time that we made accounting process and record it as a provision, we apply IFRS. As per IFRS accounting standard, what accounting processes is appropriate, we needed time for that scrutinization and the review of the contents. As a result, we couldn't actually prepare all of them as we planned in terms of the announcement schedule. The guidance was published in October, and there was a discrepancy of 30% from that previous guidance. As a result, we needed this timely disclosure. As a result, with a short notice, we needed to have this briefing today. I'm sorry for that.
I have another question. In order to prevent a situation like this for the future, increasing your in-house manufacturing capacity to have more flexibility according to my understanding. Is my understanding correct? If that's the case, Odawara site capacity is not going to be increased. I think it looks opposite. What's the background for this?
Thank you for your question. Regarding our in-house facilities, for demand changes, we should be able to address them, and it's going to be responsible for commercial production and BGT and ADC portfolio, from the process development to early commercial production would be handled there. For Daiichi Sankyo, one of the strengths is the science and technology. We'd like to leverage that to develop manufacturing processes, to design open processes so that we can have competitive COGS and costs.
Including cost aspect as a whole, we'd like to optimize the roles to be played by CMOs and our company. We would like to shift our strategy in that direction. In terms of the flexibility, you have outsourcing of the manufacturing. In a sense, there may be a level of flexibility to change the contracts, which may lead to cost.
When you say flexibility, how should I understand your mention of flexibility? To minimize changes of the contracts with CMO, are you going to handle your own in-house manufacturing or are you going to use the CMOs more to minimize your waste? For the future with CMO and our company?
I think you are asking about the structure of flexibility.
In principle, products and also the development stages accordingly, 50/50 was the ratio before. Rather than such a fixed ratio, we'd like to optimize the use of the facilities at CMO and at our company.
Understood. Thank you very much.
Now the time of closure come, we would like to conclude the briefing on the revision of the FY 2025 consolidated financial results forecast of Daiichi Sankyo. Thank you very much for your participation today.