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After Daiichi Sankyo’s ADC Misstep

May 13,2026

Japan’s pharmaceutical giant Daiichi Sankyo has yet to recover from a 10% plunge in its share price.

On April 24, instead of receiving the annual report, investors got a statement announcing its delay. The company cited “a review of the oncology product portfolio and supply plans for the R&D pipeline amid a rapidly changing business environment” and “a reasonable estimate of loss provisions related to contract manufacturers.”

The secondary market reacted sharply, driving the stock to a four-year low and wiping out approximately 551.1 billion yen (about $3.5 billion) in market value.

Half a month later, the truth emerged: Daiichi Sankyo recorded an extraordinary loss of 149.4 billion yen (about $9.5 billion) due to overestimating demand for its ADC portfolio, while slashing its fiscal 2025 operating profit forecast by 106 billion yen.

The loss comprised two parts: 75.7 billion yen in compensation payments to CDMOs and 19.3 billion yen in impairment charges from abandoning the expansion of ADC production capacity at its own Odawara plant.

It is a classic tale of over-optimism. Initially, Daiichi Sankyo claimed ADC demand “far exceeded plans,” so it bet on maximum capacity without risk adjustment to ensure “stable supply for all patients,” signing long-term minimum-purchase contracts with CDMOs. However, weaker-than-expected clinical trial results shrank the target patient population, and multiple drug launches were delayed. The previously locked-in capacity soon became a heavy burden.

This incident has served as a sobering shot for the red-hot ADC track. Amid multi-billion-dollar deals and frequent launch successes among global pharmaceutical firms, structural industry risks have quietly accumulated. As the sector begins to pay for its past euphoria, a profound reshuffle centered on supply-demand rebalancing and technological generational shifts is unfolding.

Cracks Emerging

On the surface, antibody-drug conjugates (ADCs) are undoubtedly one of the most successful drug classes in oncology today.

Since late 2019, when Daiichi Sankyo and AstraZeneca’s Enhertu received FDA approval, over ten ADCs have launched globally, covering breast, lung, gastric, bladder, and hematological cancers. Enhertu has become a “blockbuster” with annual multi-billion-dollar sales, driven by breakthrough efficacy in HER2-low breast cancer.

Fueled by such blockbusters, Chinese pharmaceutical companies have surged into the space, with dozens of out-licensing deals catapulting domestic ADCs onto the global stage and setting record transaction values.

Daiichi Sankyo’s predicament amplifies common challenges in ADC development.

Take Datroway (TROP2), the second ADC co-developed with AstraZeneca, as an example. Its approval path was fraught with twists.

Initially targeted at non-squamous non-small cell lung cancer (nsNSCLC), the indication was revised in November 2024 to EGFR-mutant NSCLC—a far smaller patient segment. The reason was clear: Datroway’s efficacy edge was undefined in the broad second-line nsNSCLC population.

In 2025, Datroway gained regulatory approval for the niche indication. Further adjustments followed: the companies amended the primary endpoint of the Phase III Avanzar trial (first-line NSCLC) to an AI-powered TROP2-related biomarker analysis, hoping to identify patient subsets most likely to benefit through precise stratification.

Daiichi Sankyo’s HER3 ADC, patritumab deruxtecan (co-developed with Merck), faced an even more turbulent journey.

Rejected by the FDA in June 2024 due to third-party manufacturing issues, it withdrew its U.S. BLA in May 2025 after missing the overall survival endpoint in a Phase III trial. Its future remains uncertain.

Another candidate, ifinatamab deruxtecan (targeting B7-H3), is under FDA review with a decision expected in October 2026—but competition in this space is fierce.

Daiichi Sankyo’s capacity glut is a ripple effect of successive setbacks in clinical and regulatory filings. Capacity locked-in to “meet maximum demand” became a profit-draining burden when demand contracted sharply.

What’s Next for ADCs?

Against the backdrop of the Trump administration’s push for U.S. manufacturing reshoring and frequent tariff hikes, Daiichi Sankyo has suspended ADC capacity expansion at its Odawara plant in Japan. Instead, it plans to invest up to 56 billion yen (approximately $3.51 billion) in a new production line at its Ohio facility in the U.S.

Notably, the company has taken an ambiguous stance on its contracts with CDMOs. When asked whether it would share the massive compensation costs with partners Merck and AstraZeneca, Daiichi Sankyo remained silent. Jefferies analysts noted the lack of clarification in a report, stoking investor concerns over accountability in collaborative structures. As the tide recedes, the question of who will foot the bill for excess capacity has become a thorny issue for all parties.

Meanwhile, forward-thinking multinationals (MNCs) are setting their sights on ADC’s next evolution: Degrader-Antibody Conjugates (DACs). Unlike traditional ADCs, which use cytotoxic drugs as payloads, DACs deliver small molecules that hijack the cell’s protein degradation machinery. Upon entering target cells, these degraders mark specific proteins for elimination (not just inhibition), theoretically enabling longer-lasting, less toxic therapies—even for traditionally “undruggable” targets.

This novel concept is attracting heavy investment from pharmaceutical giants.

Roche expanded its long-term collaboration with C4 Therapeutics (C4T) to focus exclusively on DACs. Under the deal, C4T uses its TORPEDO platform to design degrader payloads, while Roche handles antibody design, conjugation, and clinical/commercialization. The platform integrates DNA-encoded libraries, CRBN E3 ligase toolkits, AI-driven ternary complex modeling, and proteomics to systematically optimize degrader payloads.
Bristol Myers Squibb (BMS) took a more direct approach. In 2023, it paid a $100 million upfront fee to acquire a CD33-targeted GSPT1 degrader conjugate (now BMS-986497) from South Korea’s Orum Therapeutics. The candidate is in Phase I for acute myeloid leukemia (AML) and myelodysplastic syndromes (MDS). Orum has since gained prominence, securing another ~$100 million financing to advance its lead candidate ORM-1153.
Pfizer entered the space indirectly via its acquisition of Seagen, retaining Seagen’s DAC collaboration with Nurix Therapeutics. Nurix’s pipeline includes two DACs for oncology and autoimmune diseases.
Merck, while terminating its over $600 million early DAC collaboration with C4T in late 2025, had previously demonstrated strong interest in the field.

Far from Mature

In the era of ADC globalization, Chinese pharmaceutical companies have emerged as a formidable force.

Kelun-Biotech struck a multi-billion-dollar deal with Merck.
RemeGen’s disitamab vedotin was licensed to Seagen (now Pfizer) for a huge sum.
Hengrui Medicine, CSPC Pharmaceutical Group, ImmunoGen, and Bailian Hengfeng have also signed major deals.

Leveraging their R&D expertise, clinical agility, and cost advantages, Chinese ADCs are rising globally.

Chinese firms are also actively shaping the next wave of innovation.

DACs

In January, Hezheng Pharmaceutical announced a global DAC collaboration with a U.S. biotech, marking China’s first overseas DAC deal. It retains Greater China rights.
In April, Nuance Pharma disclosed a patent for CD33/HER2 antibody-GSPT1 molecular glue degraders.

Antibody-Oligonucleotide Conjugates (AOCs)

Beyond DACs, Antibody-Oligonucleotide Conjugates (AOCs) are gaining traction. These fuse antibodies with gene-regulating oligonucleotides for precise delivery (including to the central nervous system).

In 2025, Novartis acquired Avidity Biosciences for $12 billion, igniting the AOC space. Avidity and Dyne Therapeutics use transferrin receptor 1 (TfR1) to deliver antisense drugs to muscle, with candidates in late-stage trials for muscular dystrophy. Novartis plans two AOC filings in 2027–2028, targeting multi-billion-dollar revenues by 2030. To overcome TfR1’s tissue limitations, firms are exploring novel receptors and peptide carriers.
Domestically, Jiajin Biotech leads with an AOC platform for extrahepatic oligonucleotide delivery. Its lead candidate, CGB1001 (an antibody-siRNA conjugate for myotonic dystrophy type 1, DM1), is in clinical trials. Youjia Bio and Kangfang Bio are also in early-stage AOC R&D.

Challenges for Next-Gen Conjugates

Both DACs and AOCs remain immature.

DACs: Progress hinges on payload size/stability, linker design, and intracellular release efficiency. Degraders are trending toward smaller, drug-like structures. Near-term DACs will target tumor antigens (like ADCs), with long-term potential in autoimmune diseases.
AOCs: Extrahepatic delivery of siRNA/antisense oligonucleotides is unproven, with vast scope for tissue-specific carrier development.

If these modalities deliver clinical value—enabling selective protein/gene regulation in specific cell populations—they will achieve what traditional drugs cannot. Success depends on identifying the right surface targets and establishing efficient, reproducible intracellular delivery.

Having demonstrated strong engineering and clinical capabilities in the ADC era, Chinese pharmaceutical firms are poised to lead in DACs and AOCs—worth watching.

References

Nuance Pharma: Building a DAC Technology Platform; Pharma Notes
When ADCs Meet PROTACs: The Rise of Degrader-Antibody Conjugates; Tongxieyi
Daiichi Sankyo Takes $6.1B Profit Hit Linked to ADC Manufacturing Overbuild; FiercePharma
When ADCs Meet Targeted Protein Degraders: The Emerging Field of Degrader-Antibody Conjugates; Labiotech

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