Healthcare Equity Analyst - Emerging & Dev Markets, daaimon

Avien Pillay

Healthcare Equity Analyst - Emerging & Dev Markets

daaimon

daaimon is an independent research company focusing on healthcare and consumer sectors across developed and emerging markets. We produce insightful research which challenges conventional thinking. In particular, we look for new ideas by testing consensus forecasts and markets expectations.

Equity Bottom-Up

<ul>
<li>At a 51 NPE, Daiichi Sankyo was priced for perfection.</li>
<li>We do like their focus on the high growth oncology segment, however, we felt that the valuation left no room for error.</li>
<li>Post the two disappointing trial announcements, at a 39 NPE, the valuation is become more palatable and getting closer to our mid-thirties target entry point.</li>
</ul>


At a 51 NPE, Daiichi Sankyo was priced for perfection.
We do like their focus on the high growth oncology segment, however, we felt that the valuation left no room for error.
Post the two disappointing trial announcements, at a 39 NPE, the valuation is become more palatable and getting closer to our mid-thirties target entry point.


Daiichi Sankyo (4568 JP) Valuation Update – Are We There Yet?

Global Healthcare Analyst

Tina Banerjee

<ul>
<li>
<a href="https://www.smartkarma.com/entities/daiichi-sankyo-co-ltd" target="_blank" data-smartkarma-citation="entities:3014:1" rel="noopener">Daiichi Sankyo (4568 JP)</a> announced better-than-expected Q1FY25 result, with all key parameters exceeding expectation. Q1 revenue increased 24% to ¥436B, mainly driven by 59% growth in Enhertu sales to ¥130B.</li>
<li>For its approved indications, Enhertu maintained #1 market share for new patients in U.S. The drug is expected to have blockbuster status in both US and Europe this year.</li>
<li>Despite a good progress in Q1FY25, especially on profitability front, Daiichi Sankyo has reaffirmed FY25 guidance. Better-than-anticipated Enhertu revenue and Fx should lead to guidance revision later this year.</li>
</ul>



Daiichi Sankyo (4568 JP) announced better-than-expected Q1FY25 result, with all key parameters exceeding expectation. Q1 revenue increased 24% to ¥436B, mainly driven by 59% growth in Enhertu sales to ¥130B.
For its approved indications, Enhertu maintained #1 market share for new patients in U.S. The drug is expected to have blockbuster status in both US and Europe this year.
Despite a good progress in Q1FY25, especially on profitability front, Daiichi Sankyo has reaffirmed FY25 guidance. Better-than-anticipated Enhertu revenue and Fx should lead to guidance revision later this year.


Daiichi Sankyo (4568 JP): Starts FY25 on Firm Note; Enhertu Flying Higher Highs; Guidance Reaffirmed

<ul>
<li>During 1H24 <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a> reported 18% YoY growth in revenue from pharmaceuticals segment to ¥767B, mainly driven by a 27% YoY growth in Rexulti revenue to ¥122B.</li>
<li>The company has revised upward 2024 revenue and business profit, while reduced 2024 operating and net profit guidance due to the recording of an impairment loss.</li>
<li>Otsuka is acquiring Jnana Therapeutics for $800M. The transaction includes JNT-517, a potential first-in-class oral treatment for Phenylketonuria, a rare inherited metabolic disorder. The acquisition will close in 3Q24.</li>
</ul>


During 1H24 Otsuka Holdings (4578 JP) reported 18% YoY growth in revenue from pharmaceuticals segment to ¥767B, mainly driven by a 27% YoY growth in Rexulti revenue to ¥122B.
The company has revised upward 2024 revenue and business profit, while reduced 2024 operating and net profit guidance due to the recording of an impairment loss.
Otsuka is acquiring Jnana Therapeutics for $800M. The transaction includes JNT-517, a potential first-in-class oral treatment for Phenylketonuria, a rare inherited metabolic disorder. The acquisition will close in 3Q24.


Otsuka Holdings (4578 JP): H1 Revenue Rises 17% on Rexulti; Picks Up Jnana Therapeutics for $800M

<ul>
<li>
<a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a> announced FDA acceptance of indication expansion filing for Rexulti for the treatment of post-traumatic stress disorder. The FDA action date is February 8, 2025.</li>
<li>Due to impairment loss associated with termination of a pipeline asset, the company has reduced operating and net profit guidance for 1H24. However, 1H24 revenue guidance has been raised.</li>
<li>2028 revenue is expected to reach ¥2.5T, an increase of ¥480B from 2023 results, that too after absorbing the negative impact of ~¥310B for loss of exclusivity of core drugs.</li>
</ul>



Otsuka Holdings (4578 JP) announced FDA acceptance of indication expansion filing for Rexulti for the treatment of post-traumatic stress disorder. The FDA action date is February 8, 2025.
Due to impairment loss associated with termination of a pipeline asset, the company has reduced operating and net profit guidance for 1H24. However, 1H24 revenue guidance has been raised.
2028 revenue is expected to reach ¥2.5T, an increase of ¥480B from 2023 results, that too after absorbing the negative impact of ~¥310B for loss of exclusivity of core drugs.


Otsuka Holdings (4578 JP): Label Expansion of Rexulti; 1H24 Guidance Revision; New Mid-Term Plan

<ul>
<li>Given the high number of pipeline dropouts, and the potentially disappointing $6 bn psoriasis drug acquisition, we question Takeda’s recent investment track record.</li>
<li>A big restructuring, high expectations from new/recently launched drug portfolio, and punchy company guidance reduces the probability of upside surprises.</li>
<li>Unless you are limited from investing outside Japan and you want exposure to an innovative pharma company, we believe that there are better and cheaper options elsewhere.</li>
</ul>


Given the high number of pipeline dropouts, and the potentially disappointing $6 bn psoriasis drug acquisition, we question Takeda’s recent investment track record.
A big restructuring, high expectations from new/recently launched drug portfolio, and punchy company guidance reduces the probability of upside surprises.
Unless you are limited from investing outside Japan and you want exposure to an innovative pharma company, we believe that there are better and cheaper options elsewhere.


Japan

Daiichi Sankyo Company, Limited is a holding company established through merger of Sankyo and Daiichi pharmaceutical. The Group manufactures pharmaceuticals for human/veterinary use and medical tools and equipment. It also researches and promotes products through related companies throughout the world. The Group also produces food, food additives, livestock feeds, and agrochemicals.

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Daiichi Sankyo (4568 JT)

Daiichi Sankyo (4568 JP) Valuation Update – Are We There Yet?

The “priced for perfection scenario” is unwinding and the valuation is become more palatable. We recommend buying into weakness.

daaimon

Daiichi Sankyo (4568 JP): Starts FY25 on Firm Note; Enhertu Flying Higher Highs; Guidance Reaffirmed

Daiichi Sankyo shares plunged due to mixed clinical trial result of Dato-DXd in lung cancer. While Dato-DXd showed a 2.3-month improvement in...

Tina Banerjee

Otsuka Holdings (4578 JP): H1 Revenue Rises 17% on Rexulti; Picks Up Jnana Therapeutics for $800M

Otsuka reports 27% revenue growth in Rexulti in 1H24. The company raised 2024 sales and business profit guidance. Acquisition of Jnana...

Tina Banerjee

Otsuka Holdings (4578 JP): Label Expansion of Rexulti; 1H24 Guidance Revision; New Mid-Term Plan

Otsuka’s 2Q24 result is anticipated to exceed revised forecast, due to stronger than expected business performance and lower than expected...

Tina Banerjee

Takeda (4502 JP)– Avoid

A potentially disappointing $6bn acquisition, high pipeline dropout, and limited probability of upside surprises sums up our analysis of expensive...

daaimon

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Daiichi Sankyo (4568 JP) Valuation Update – Are We There Yet?

The “priced for perfection scenario” is unwinding and the valuation is become more palatable. We recommend buying into weakness.

daaimon

Daiichi Sankyo (4568 JP): Starts FY25 on Firm Note; Enhertu Flying Higher Highs; Guidance Reaffirmed

Daiichi Sankyo shares plunged due to mixed clinical trial result of Dato-DXd in lung cancer. While Dato-DXd showed a 2.3-month improvement in...

Tina Banerjee

Otsuka Holdings (4578 JP): H1 Revenue Rises 17% on Rexulti; Picks Up Jnana Therapeutics for $800M

​Otsuka reports 27% revenue growth in Rexulti in 1H24. The company raised 2024 sales and business profit guidance. Acquisition of Jnana...

Tina Banerjee

Otsuka Holdings (4578 JP): Label Expansion of Rexulti; 1H24 Guidance Revision; New Mid-Term Plan

Otsuka’s 2Q24 result is anticipated to exceed revised forecast, due to stronger than expected business performance and lower than expected...

Tina Banerjee

Takeda (4502 JP)– Avoid

A potentially disappointing $6bn acquisition, high pipeline dropout, and limited probability of upside surprises sums up our analysis of expensive...

daaimon

Otsuka reports 27% revenue growth in Rexulti in 1H24. The company raised 2024 sales and business profit guidance. Acquisition of Jnana...