Accounting Error Impact
Daiichi Sankyo Shares Drop 11% After Accounting Error, Despite Strong Revenue Growth
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Key Points
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Q1 FY2026 operating profit declined 12% year-over-year to 85.1 billion yen, with the drop attributed primarily to restructuring expenses tied to the EU Specialty Business operations.
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An accounting error in FY2025 SG&A resulted in 29 billion yen understated expenses, stemming from 'individual processing errors' in supplier accounts payable, according to CFO Tomohiro Kodama, who stressed that it would not undermine internal controls.
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FY2025 operating profit was revised upward from 229.1 billion yen to 258.0 billion yen, with management noting the corrections apply to previously disclosed materials and the Five-Year Business Plan, and that the revisions do not affect the 2026 consolidated results.
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First-quarter FY2026 revenue rose about 21% year over year to roughly 575 billion yen, with the ASCA region contributing 68.7 billion yen and the EU Specialty segment at 74.7 billion yen, led by oncology-focused products like Enhertu and Datroway.
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The stock reacted negatively to the accounting disclosure, with shares dropping around 11% on the news, as investors weighed the strong revenue beat against the modest growth in operating profit.
Daiichi Sankyo posted a strong revenue quarter but stumbled on two fronts: a modest earnings miss and a bombshell accounting error. Fierce Pharma reported that shares fell 11.1% after the company revealed it had understated fiscal year 2025 operating expenses by 29 billion yen — roughly $182 million. The news overshadowed a 21% jump in first-quarter revenue.
Despite the turbulence, Daiichi raised its full-year outlook. Market Screener reported the company now expects global revenue between 2.28 and 2.34 trillion yen for fiscal 2026, driven by its cancer drug lineup. The stock selloff, however, showed investors are not ready to look past the accounting problem.
Revenue Surges 21% but Operating Profit Falls Short
Daiichi's first-quarter fiscal 2026 revenue climbed to roughly 575 billion yen. That is a 21% jump compared to the same period last year. The growth was powered by oncology drugs like Enhertu and Datroway. The ASCA region contributed 68.7 billion yen. The EU Specialty segment added 74.7 billion yen.
But operating profit told a different story. It dropped 12% year over year to 85.1 billion yen. The company blamed restructuring costs tied to its EU Specialty Business. On earnings per share, Daiichi posted 0.24 against an expected 0.26 — a small but noted miss, according to Watchlist News.
Accounting Error Erases 29 Billion Yen in Expenses
The bigger shock came from the books. Fierce Pharma reported that Daiichi discovered it had missed 29 billion yen in selling, general, and administrative expenses in fiscal year 2025. The error came from what CFO Tomohiro Kodama called "individual processing errors" in supplier accounts payable. That is a bookkeeping mistake, not a fraud claim.
The correction flipped the fiscal 2025 operating profit figure upward — from 229.1 billion yen to 258.0 billion yen. That sounds like good news, but investors saw it differently. A surprise restatement raises questions about financial controls. Kodama insisted the error "would not undermine internal controls," according to London Insider.
Full-Year Guidance Raised Despite the Market Selloff
Daiichi reaffirmed its fiscal 2026 EPS guidance at 0.870, according to Watchlist News. It also raised its global revenue forecast. The company said the accounting corrections do not affect the 2026 consolidated results. Management pointed to strong momentum in its Five-Year Business Plan as the reason for confidence.
Market Screener noted the higher revenue forecast reflects stronger sales in key markets. Enhertu, Daiichi's flagship antibody-drug conjugate — a type of targeted cancer therapy — remains the core growth engine. Still, the 11% single-day stock drop showed the market is watching governance just as closely as growth.
Investor Scrutiny Likely to Persist Into Next Quarter
The fallout may not end here. Guru Focus noted that a separate earnings presentation for Q1 fiscal 2027 has already been flagged, suggesting analysts and investors are closely tracking how Daiichi handles the next reporting cycle. Governance concerns tend to linger after a restatement, even a small one.
The core business remains strong. Cancer drug sales are growing fast. But the accounting error gave investors a reason to pause. The next quarter's results will need to be clean — both in numbers and in process — to fully restore confidence.
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