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Investing.com -- Daiichi Sankyo Co., Ltd. (TSE:4568) shares surged 6.2% after the pharmaceutical company announced robust fourth-quarter earnings that surpassed expectations, coupled with a significant share buyback program.
The company’s fourth-quarter income grew by 21% YoY to ¥519 billion, which was 7% higher than the FactSet consensus, primarily fueled by a substantial Enhertu sales milestone. Additionally, fourth-quarter core operating profit expanded more than twofold to ¥83 billion, outperforming consensus by 91%.
The company’s guidance for the fiscal year ending March 2026 (FY3/26) forecasts a 6% increase in sales to ¥2 trillion, which is slightly below the consensus by 5%. However, the anticipated 12% growth in core operating profit to ¥350 billion is 5% above consensus estimates.
Daiichi Sankyo’s optimism is driven by the strong performance of Enhertu, with related revenue soaring by 45% YoY to ¥651 billion, accounting for the majority of the company’s overall revenue increase.
Enhertu’s robust sales, which include Daiichi Sankyo’s product sales in major markets, as well as revenues from collaborations with AstraZeneca (NASDAQ:AZN) in smaller markets and milestone payments, have been the primary growth driver. The anticoagulant Edoxaban also contributed significantly, with sales increasing by 20% YoY to ¥344 billion. Additionally, upfront payments from Merck (NSE:PROR), related to three antibody-drug conjugates under development, saw a YoY increase of ¥29 billion.
Despite the positive results, the company has issued cautious guidance for Datroway product sales, projecting only a modest increase from ¥1.4 billion in FY3/25 to ¥4.7 billion in FY3/26. Furthermore, the company’s forecast does not include any sales revenue from the HER3 product.
On the margins front, Daiichi Sankyo expects gross profit margin (GPM) to rise slightly from 78.0% in FY3/25 to 78.5% in FY3/26. The company also anticipates modest increases in research and development (R&D) and selling, general, and administrative (SG&A) expenses.
As a result, core operating profit margin (OPM) is projected to improve from 16.6% to 17.5%. Income from the Merck alliance is also expected to increase, as detailed on page 60 of the company’s presentation, from ¥41.8 billion in FY3/25 to ¥51.9 billion in FY3/26.
The announcement of a ¥200 billion buyback plan further bolstered investor confidence, contributing to the stock’s upward movement during the trading session on Friday.
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