The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Hidemaru Yamaguchi - Citi Infrastructure Investments LLC - Analyst
: (interpreted) This is Yamaguchi of Citi. Can you hear me? This is Yamaguchi of Citi. Let me ask you my first question, and this is about the
first half results, especially limiting to Q2 only. As you have explained, the gross profit in relation to vaccine and also manufacturing-related
matters, there was the increase of the cost.
And also SG&A, there's an increase excluding the co-promotion related matters. And there are some specific and also very special increase,
excuse me, and core versus the sales, there are a series of costs. And then, was that -- is it because that there is something which is
unexpected? Or is it kind of the onetime issue and your main business is going fine or not? That is my first question.
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OCTOBER 31, 2025 / 6:30AM, 4568.T - Q2 2026 Daiichi Sankyo Co Ltd Earnings Presentation
Koji Ogawa - Daiichi Sankyo Co Ltd - Senior Managing Executive Officer, Chief Financial Officer, Head of Global Corporate Planning and
Management
(interpreted) Thank you very much for your question. This is Ogawa speaking. Yes. Our main business is doing really fine. ENHERTU,
DATROWAY, and our major products are doing very nicely. And as to SG&A and for Q2 and profit share part naturally due to the ENHERTU
and DATROWAY in relation to the profit share, that will be reflected and there is no change at all.
In other parts of the SG&A and we call that is others, but you may see this is large. But if you look at the whole year for FY25, we also reflect
the impact by the foreign exchange. So at the end of the year, we expect the JPY30 billion increase. And we have JPY19 billion. Therefore,
that would be about JPY11 billion.
So it is a slight increase. Therefore, SG&A, as we did before, oncology business to be supported, we need the infrastructure for that and
also investment to the organization and the human resources continue to be incurred.
And I also would like to give some additional comment about our costs. And please refer to the supplemental material, and there is some
adjustment table, and that is the translation from the core to the non-core. This time, well, we normally do not have an opportunity to ask
you to refer to this document. So I would like to ask you to refer to that table, taking this opportunity. And I would like to explain based on
that table.
And we have onetime cost this time, JPY18.5 billion on a core base in our core operating profit. That was a onetime cost, JPY18.5 billion
was booked. And then this time on the bottom, especially in this -- the material, in the mid, we have some notes here. And to show our
current profitability, core operating profit is disclosed. And this time, especially based on the definition, the onetime, but the large amount
of the profit and loss is included.
And there is something which applies to this criteria, for example, and in this adjustment table, for example, there is a compensation to CMO
loss, and that has been already -- that wasn't explained in the presentation. And this compensation was JPY12.7 billion.
And in addition to that, this compensation, especially for the HER3 study result based the changes and the strategies happened were made.
And therefore, DATROWAY and HER3 inventory, the impairment or the loss is really due to these changes in strategies. And therefore,
those are all regarded as the onetime changes or the repayment. Therefore, we have JPY17 billion. That is the largest one. And such a
onetime amount registered here.
Therefore, the full base adjustment took place. And that was the SG&A, and we have JPY29.6 billion. This is a huge amount. And this is
prior to the cost sharing with the partner. And adjustment after the cost sharing is reflected in that JPY12 billion or so, and we have increase
and decreases and the full base and core base adjustment. There are some -- the adjustment -- major amount of the adjustment made. So
that may be a little bit difficult to understand, but this is what we did.
And in the core base in the second quarter, DAICHIRONA and ENHERTU, in the case of ENHERTU, especially, in the manufacturing lots,
there are a series of the unqualified lots generated and those are going to be disposed as from our inventory. Those are included in the
non-core area.
And to ENHERTU, the cause identified and also the countermeasure has been already taken. So this will not give any impact to the plan of
the supply. And for DAICHIRONA, and there is a major reduction of the demand. Therefore, we have booked the inventory loss, and this
has been the lengthy explanation, but that was the thing.
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OCTOBER 31, 2025 / 6:30AM, 4568.T - Q2 2026 Daiichi Sankyo Co Ltd Earnings Presentation
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