Daiichi Sankyo exited the US pain market to bet everything on oncology

What was changed

In November 2019, Daiichi Sankyo's newly minted CEO Sunao Manabe told investors the company had handed the opioid-induced constipation drug Movantik back to AstraZeneca as of October and told Inspirion Delivery Sciences to cancel their licensing agreement covering abuse-deterrent opioids MorphaBond and RoxyBond. 'With these actions, [Daiichi Sankyo's U.S. operation] exited the pain treatment business and focused on oncology and [the] injectable iron business,' he said. A WARN notice had already flagged 68 New Jersey layoffs effective October 7 — the Daiichi-employed US pain sales force.

The pain adventure had been expensive. In 2014 Daiichi agreed to pay up to $650 million for hydrocodone combination medications from Charleston Laboratories; the FDA shot down the lead project CL-108 in 2017, forcing a $250 million impairment. It had also paid AstraZeneca $200 million upfront in 2015 for Movantik co-marketing rights — and the drug managed just $70 million of US sales in its first three quarters, down 14% year over year.

The pivot had a counterweight: AstraZeneca was betting $6.9 billion on Daiichi's lead antibody-drug conjugate [fam-] trastuzumab deruxtecan (DS-8201), with a metastatic breast cancer application under FDA priority review expected to conclude in Q2 2020. Daiichi had just won its first US cancer approval since 2011 (Turalio) and planned to invest JPY 100 billion ($920 million) or more in manufacturing for the ADC franchise. The exit landed as Johnson & Johnson, Teva and Purdue Pharma offered multibillion-dollar opioid settlements.

Why it worked

The opioid crisis had turned US pain into legal quicksand, with J&J, Teva and Purdue negotiating multibillion-dollar settlements.

The pain franchise never performed: Movantik sales fell 14% and the Charleston Labs lead drug died at the FDA, costing a $250 million impairment.

Manabe was steering the company toward its 2025 goal of becoming a 'global pharma innovator with competitive advantage in oncology.'

AstraZeneca's $6.9 billion oncology deal made cancer the demonstrably higher-value home for Daiichi's capital.

What can be applied

When a category turns toxic, exit speed is strategy: Daiichi surrendered a half-built pain franchise to concentrate on the pipeline rivals were paying billions to access.

Aftermath

The exit completed with the pain sales force cut by October 2019, while the AstraZeneca oncology alliance and a JPY 100 billion manufacturing expansion carried the pivot. Daiichi kept its pain business at home in Japan, launching Tarlige for peripheral neuropathic pain and a new oxycodone generic for cancer pain there.