Clinical trial setbacks have limited the near-term opportunities for some of Daiichi Sankyo’s ADCs but the drug developer is betting near-term readouts will catapult it into the top tier of oncology companies in the coming years.
Daiichi Sankyo was flying high in October 2023. The clinical and commercial success of the antibody-drug conjugate Enhertu had established the Japanese pharma as a major player in a red-hot modality, persuading Merck to pay a nearly unprecedented $4 billion upfront for the rights to three drug candidates. Thirty months later, the Japanese drugmaker is reeling from a recent demand reassessment.
Daiichi reported that forecast demand for its antibody-drug conjugates (ADCs) is below the minimum purchase requirements of deals with contract manufacturing organizations (CMOs), triggering about $850 million in charges linked to outsourcing activities and a retreat from a planned facility expansion.
Daiichi agreed to the CMO deals as Enhertu was resetting expectations for its ADC business. The HER2-directed ADC that Daiichi developed with AstraZeneca remains a powerhouse product, with sales rising 26% to 561.1 billion Japanese yen ($4.4 billion) last year and forecast to jump again in 2026. But the company’s pipeline of next-generation candidates stuttered, hurting efforts to add new growth drivers.
A series of setbacks
The honeymoon period for the Merck deal was short-lived. In June 2024, the FDA rejected Merck and Daiichi’s HER3-directed ADC patritumab deruxtecan on manufacturing grounds. The temporary setback preceded a permanent problem, with the partners withdrawing a filing for approval in May 2025 after the drug candidate failed to significantly improve overall survival in a Phase 3 lung cancer trial.
Daiichi “pushed the boundaries” with the HER3-directed ADC, John Tsai, the company’s global head of R&D, said on an earnings call in May. However, the asset “did not demonstrate positive results in the EGFR-mutated lung cancer area,” he said, delaying the treatment’s anticipated launch.
Merck started a Phase 3 study of the ADC in breast cancer last year, setting an anticipated completion date in 2033. Daiichi recently left patritumab deruxtecan off its five-year plan for growing oncology sales to 2.3 trillion Japanese yen ($14.6 billion) by 2030. The company took a write-down on inventories of the drug candidate for the 2025 financial year.
The patritumab deruxtecan saga played out in parallel to setbacks to Daiichi and AstraZeneca’s TROP2-directed ADC. The companies withdrew a filing for approval of datopotamab deruxtecan in November 2024 and refiled in another indication. The switch followed the failure of the drug candidate to improve overall survival in Phase 3 breast and lung cancer trials.
The FDA approved the ADC, now sold as Datroway, for breast cancer in January 2025 and expanded the label to include lung cancer five months later. However, the lung cancer approval, the big opportunity for Datroway, covers a smaller population than AstraZeneca and Daiichi originally targeted. Daiichi took two write-downs on inventories of the ADC in the 2025 financial year.
Data from a Phase 3 first-line lung cancer study were due last year but have slipped to the back half of 2026. The trial is part of a push to move Datroway into earlier lines of therapy in breast and lung cancer while expanding into other tumor types. Success could fuel growth of a product that generated sales of 47.6 billion Japanese yen ($300 million) in Daiichi’s 2025 financial year.
Becoming a top 5 cancer player
With Daiichi forecasting 111.4 billion Japanese yen ($710 million) in Datroway sales for this financial year, the TROP2 ADC could start to lessen the company’s reliance on Enhertu. But the path to the 2030 sales target also relies on contributions from two other ADCs: Merck-partnered candidates against B7-H3 and CDH6.
The FDA is reviewing the B7-H3-targeted ADC, ifinatamab deruxtecan, in small cell lung cancer and could approve the treatment this year. In December 2025, the regulator put a Phase 3 trial of the drug candidate on partial hold in response to deaths from interstitial lung disease (ILD)—a known adverse event associated with ADCs—but the agency lifted the restrictions the following month.
Daiichi has reported ILD cases in recipients of the CDH6-directed ADC, raludotatug deruxtecan, but most events as of the October 2025 readout were low grade. The 50.5% response rate in people with platinum-resistant ovarian cancer suggests the ADC is more effective than standard-of-care chemotherapy, offering Daiichi and Merck encouragement as they advance toward Phase 3 data in this patient population.
The study is one of five pivotal trials of Daiichi ADCs that are scheduled to deliver data in the company’s 2027 financial year. Daiichi forecasts the drugs to be worth $2 billion to $6 billion in peak sales. With Daiichi making the same forecast for drugs with readouts in each of the next five years, the company has multiple shots on goal to regain momentum by establishing its ADCs in more populations.
Daiichi has other candidates in development, with patritumab deruxtecan and the early-phase programs DS-3939 and DS3790 contributing to the company’s belief that it can become a top-five player in cancer by 2035. But the near-term recovery rests on Enhertu, Datroway and the B7-H3 and CDH6 ADCs, assets that fueled Daiichi’s emergence as an ADC leader and later its struggles to capitalize on that position.
